The Business Brew

Arnaud Cosserat, CEO of Comgest, and Rick Mercado, PM at Comgest stop by The Business Brew to discuss quality growth investing.  Comgest is an independent, international asset management group, which since its creation in 1985, has pursued a long-term ‘Quality Growth’ and responsible investment style.

Big shoutout to @mathewpassy and the team at The Podcast Consultant.

Detailed Show Notes:

4:10 - Comgest's philosophy and focus on culture

8:10 - Fighting the ABCs (arrogance, bureaucracy, and complacency) of decay

12:05 - How to appraise culture

18:48 - Handicapping quality among high quality companies

24:05 - How does Comgest consider valuation risk of the portfolio?

33:35 - Comgest's 80/20 rule and how they hold companies with higher valuations

39:20 - Why recessions are great from an investment perspective

46:20 - What inflation might do to quality companies

53:30 - When to exit an investment (and how to stay in)

1:00:00 - How macro events impact Comgest's analysis

Randy Baron, lead Portfolio Manager for Pinnacle Associates Ltd's various international products, joins The Business Brew to discuss his investing philosophy.  Randy is best known for international value investing and for publicly discussing Amyris.  Amyris is an unprofitable company with a CEO that has a controversial reputation.  But, it is a very interesting company backed by some very real investors.

Whit Clay stops by The Business Brew to discuss his role in the financial ecosystem.  Whit sits at the intersection of investor relations and public relations.  He works with a wide variety of companies.  We hope you enjoy the conversation!

2:45  - What is Sloane & Company?

4:04 – How much does narrative matter over the intermediate term?

6:30 – How management teams can create value through messaging

13:15 – How 5 year projections can cause value destruction

20:00 – What is Whit’s role in the financial ecosystem

22:20 – Whit’s background

29:08 – Whit takes some career risk in the late 90s

37:30 – What happened to Sloan’s client mix in 07-08

40:18 – Do CEOs know when bubbles are occurring or do they get just as caught up as the rest of us?  And, what traits make CEOs good at navigating bubbles?

50:30 – Which clients are good matches for Slone & Company

56:00 – How has social media influenced corporate communications?

1:06:00 – How has being exposed to CEOs rubbed off on Whit as a leader?

1:10:00 – Sloane & Company’s values

Will Thomson stops by The Business Brew to discuss his approach to real asset investing.  Will focuses on companies that happen to produce commodities and/or real assets.  That said, he is looking to exploit company/project specific opportunities rather than making commodity calls.  In this episode, he describes hi s process and explains how an investor could use publicly disclosed information to see a company's business plan (See: a 4301 document in Canada). 

Will is the Founder and Managing Partner of Massif Capital, LLC.

He has experience in private equity and credit/political risk insurance, in addition to having served as a strategic and economic adviser to NATO/ISAF in Afghanistan. Before starting Massif Capital, Will worked in the New York office of Chaucer, a Lloyd’s of London insurance syndicate, serving as the co-portfolio manager for a $750 million portfolio of credit and political risk insurance policies. He is a Graduate of Trinity College and holds a Masters in Government from Harvard University.

This episode is sponsored by Stratosphere.io.

Stratosphere.io is a web based terminal that has financial data, KPIs, links to filings, hedge fund letters, etc.

A key differentiator is Stratosphere.io’s segment data and KPIs, which are triple checked for accuracy.

Stratosphere saves users time, enables easy comparisons between companies, and offers company specific metrics such as subscriber counts, numbers of locations, etc. Head over to Stratosphere.io for a free trial.

Should you want to sign up for a paid offering please use the promo code BREW for 15% off.

Detailed Show Notes:

5:00 - Will's take on oil

8:00 - What is the Lassonde Curve 

11:38 - How a filing can help an investor underwrite mining companies.

14:00 - How Will thinks of comparing his DCF to market prices 

15:00 - Will discusses how he thinks about investing

19:50 - How will thinks about placing commodity bets on equities

22:00 - The risk reward of majors vs minors in mining

27:50 - "Are you buying well or are you buying good things?"

31:00 - A discussion about Lithium Americas

36:10 - Don't fall in love with the assets

40:33 - The difference between processed commodities and depleting commodities and what it means for margins

45:14 - Some Inflation Reduction Act discussion

51:00 - Sometimes change creates opportunities in the things that don't change

1:05:00 - Chesterson's fence and then discussion

Thomas Ricketts, CFA, joins the pod to discuss his investment philosophy.  This episode focuses on an investment style that, according to Bill's perception, seeks to identify change and innovation before the market identifies it.  Bill was initially a little skeptical of doing an "innovation episode" given how the term has been used in the financial community.  However, after diligencing Tom, Bill felt comfortable having Tom on the pod.  This conversation adds value to The Business Brew library.  Thank you to Tom for joining the show!

Detailed Show Notes

The paper Tom mentions can be found here.

5:00 - Background

13:00 - Valuation as part of the process

18:00 - 2022's biotech opportunity

20:50 - Maintenance vs. growth spend

29:20 - nCino as an example

34:00 - Why Salesforce has an incentive not to push too hard with Force.com

39:00 - Ingredients of a successful investment

52:20 - Avoiding hype

59:30 - Risk Reducers

1:13:50 - Why to exit before maturity

1:18:52 - Lessons from Frank Sands (bet best ideas, quality will out itself eventually, invest in solutions, think long term, look for long term growth in earnings power)

Henry Reardon, aka @integrity4mkts on Twitter, joins the podcast to discuss his investment philosophy. The conversation starts by discussing his Carvana short thesis then goes into his general investing philosophy. The conversation is a bit shorter than normal but packs a punch.

Jake Taylor stops by The Business Brew to discuss his new product Journalytic.  Journalytic is a software designed to help investors improve their process and decision making.  Clear thinking and decision making has been a passion of Jake’s for a very long time.  Now, he is releasing the culmination of years of hard work to us, the public, FOR FREE.  You can sign up at https://journalytic.com/.

John McClain, CFA stops by The Business Brew for a discussion about credit. John serves as a portfolio manager for the Brandywine Global’s High Yield and Corporate Credit Strategies. In this episode John makes the case for why high yield credit is a good bet after a bad year, discusses how corporate finance departments are more professional now (vs pre GFC), talks about companies adding value by buying back debt, and much more.  

Before joining Brandywine Global, John was a Senior Vice President - Credit at Standard Life Investments from 2010 to 2014. From 2007 to 2010, he was with Nationwide Mutual Insurance as a Management Associate in the Financial Leadership Rotation Program and then an Investment Analyst in Distressed Debt. John is a CFA charterholder and earned a Master of Business Administration from Carnegie Mellon University and has a Bachelor of Science in Business Economics from University of Kentucky (magna cum laude).

BrandywineGlobal’s High Yield Fund has earned a 5 star rating from Morningstar. Morningstar gives the fund above average ratings for Process and People. In the words of Morningstar, “the strategy’s distinctive, value-oriented approach exploits price inefficiencies that often materialize across smaller high-yield issuers. It earns an Above Average Process rating…Comanagers Bill Zox and John McClain execute a disciplined value approach: They buy issues when their market prices are lower than the team's estimate of intrinsic business value and sell them when their initial thesis has played out or when there are better opportunities in the market.”

This episode is sponsored by Stratosphere.io.  Stratosphere.io is a web based terminal that has financial data, KPIs, links to filings, hedge fund letters, etc. Stratosphere.io provides clean data for segment data and KPIs, which are triple checked for accuracy. Stratosphere saves users time, enables easy comparisons between companies, and offers company specific metrics such as subscriber counts, numbers of locations, etc.

Head over to Stratosphere.io for a free trial. Should you want to sign up for a paid offering please use the promo code BREW for 15% off.

NOTE: Investing carries the risk of loss. Brandywine Global’s past performance is not indicative of future results.

Detailed Show Notes

5:32 – How to think about credit generally

7:18 – What is a bond shell?

8:13 – The case for active management with credit

11:55 – How liquidity creates a cost of capital advantage for some companies

13:00 – Why high yield is no longer “junk”

15:45 – Company finance departments are better run than they were pre GFC

20:00 - Borrowing against assets and how professional it has gotten

22:35 - What The Fed cares about

27:30 - How retiring debt can help EV

30:00 - Some of the best capital allocators are in high yield

33:55 - How companies can manage our deleveraging cycle

34:50 - Why high yield hasn’t had back to back down years

38:00 - How the improvement in energy has benefitted high yield

41:45 - How Brandywine manages the quality of portfolio companies.

45:00 - How 2020/2021’s tech darlings can take advantage of today’s debt markets

46:30 - John’s take on private credit

49:30 - How tech could hurt private credit returns

54:30 - Long CEOs/short politicians

58:30 - How Brandywine manages their liquidity while running a open end fund

1:01:17 - How ETF transparency can create opportunities

1:03:00 - What type of investor is right for high yield

1:11:00 - How transparency can hurt liquidity

1:15:00 - Illiquidity and what it’s doing to the market

Bob stops by The Business Brew to discuss his early career, what he has learned over his career, investing in cyclical businesses/industries, and his biggest investment "loser."  This conversation is filled with good lessons and we hope you enjoy.

Robert Robotti is the President and Chief Investment Officer of Robotti & Company. Prior to forming Robotti & Company, Incorporated in 1983, Bob was a vice president and shareholder of Gabelli & Company, Inc. He worked in public accounting before coming to Wall Street and is currently an inactive CPA. Bob holds a BS from Bucknell University and an MBA in Accounting from Pace University. Some of Bob's areas of coverage include Special Situations, Energy Industry and Home Building. Bob is the principal of the managing member or general partner of several investment vehicles.

Bob currently serves on the Board of Directors of a NYSE-listed real estate company, AMREP Corporation, located in Germantown, PA; as Chairman of the Board of Directors of Pulse Seismic Inc., a seismic data licensing business located in Calgary, Alberta; as an Independent Director of PrairieSky Royalty, a Toronto Stock Exchange listed company located in Calgary, Alberta, having one of the largest portfolios of sub-surface mineral rights in western Canada; as a recently elected Director of NYSE-listed Tidewater, Inc. which owns and operates one of the largest fleets of OSVs (Offshore Support Vessels) in the industry; and was previously on the Board of Directors of BMC Building Materials Holding Corporation, prior to the completion of its merger with Stock Building Supply Holdings, Inc. on December 1, 2015; and Bob had served on the Board of Panhandle Oil & Gas Company, a NYSE-listed diversified mineral company located in Oklahoma City through May 1, 2020.

In addition, he serves on the Boards of many non-profit organizations where he generously donates his time and expertise. Previously, Bob was a member of the Securities and Exchange Commission's Advisory Committee on Smaller Public Companies, established to examine the impact of Sarbanes-Oxley Act and other aspects of the federal securities law.

This episode is sponsored by Stratosphere.io.  Stratosphere.io is a fantastic web based research terminal for company specific metrics like KPIs and segment revenues.  Head over to Stratosphere.io to try the product for free OR use the promo code BREW for 15% off Stratosphere's premium product.

Detailed Show Notes Below:

3:20 - Bob’s early career

6:35 - How Bob ended up as CFO of Gabelli and Company

10:25 - Bob’s evolution as an investor

14:25 - How tough times create better businesses and Builder’s FirstSource discussion

18:20 - Holding equities and Bob’s biggest loser

29:50 - Why earnings drive liquidity

31:20 - How Bob implements his takeaways from his biggest loser

33:20 - Why Bob got excited about the Revenge of the Old Economy in 2020

35:20 - The case for Olin Corp

43:50 - How Bob’s “margin of safety” comes from his portfolio company’s asset bases

45:50 - Bob’s energy outlook; this is an around the world oil discussion that lasts ~11 minutes

1:02:20 - Why reshoring makes sense

1:04:30 - Did Volker really succeed?

1:05:20 - Why China is no longer deflationary

1:09:20 - The nuance of selling

1:11:20 - The potential perils of linear thinking

Cullen Roche is the Founder of Discipline Funds. Discipline Funds is a low fee financial advisory and asset management firm. Prior to establishing his own business, Mr. Roche founded his own investment partnership in 2005 after working at Merrill Lynch Global Wealth Management where he helped oversee $500MM+ in assets under management. During the the 7 years running the partnership he was able to guide the small business to high risk adjusted returns with no negative full year returns during one of the most turbulent periods in stock market history.