“What differentiates you from everyone else who says they’re a value investor?”
This is a question I get all the time. So, what’s the difference? There are key elements of the Trimark discipline that separate us, and an important one for me on the global side is travel.
We are, by far, one of the most well-travelled global equity teams on the street.
For us, travelling is much more than simply getting off the plane, taking a taxi to a hotel and attending a conference. Sure, we go to conferences, it’s part of the business. But I want to see the inside of companies, not just hotels.
The last trip I took was with my colleague Jeff Feng. We went to Shanghai, Singapore and Jakarta. The Friday before we left Jeff walked into my office and said, “Just so you know, there are significant riots and protests outside the American Embassy in Jakarta. We’re monitoring it.” I’m thinking, “I’m six-foot-five, I stand out. Nobody’s going to care if I have a little Canadian flag on the middle of my backpack!” I admit, I didn’t pass that detail on to my wife as I left for the trip. When she married a math major, she probably didn’t envision me wading through riots in Jakarta!
I certainly don’t mean to give you the idea that I want any chance of personal harm on these trips, but you do need a degree of, let’s say adventurism, if you want to dig in to understand a company – particularly when going to emerging markets countries.
One question that comes up now in the era of Skype and other technologies is, “Why do we need to travel?” If you manage concentrated portfolios as we do, it comes down to the need to fully understand the people you’re investing with. Trimark Fund holds 41 companies in the portfolio. Trimark Europlus Fund has 26 companies in the portfolio (as at September 30, 2012).
Consider that a company with a dividend payout of 30% is holding on to 70 cents of every dollar to reinvest back into the business. The only way to truly understand the potential for return on that capital over the long term is to know and understand the people making the decisions on how to deploy it. These are the CEOs, the CFOs and the senior management team.
We can examine historical track records for companies that have had consistent management teams in place ten or 12 years. But the tenure of many CEOs ranges from three to six years, so in some cases you just won’t have that track record to refer to.
That’s when we need to go meet and have discussions with them. That’s why the global travel is such a key component of what we do.
In my experience, being on-the-ground allows you to uncover new investment ideas. For example, I once visited a company in Northern Italy that wasn’t seriously on my radar. I learned a number of things about the company that I wouldn’t have gleaned from research at my desk and I had a sort of epiphany in the middle of the meeting. After extensive due diligence, that unexpected meeting ultimately led to an investment for Trimark Global Fundamental Equity Fund.
However, we’ve had other times when the in-office research leads to a positive conclusion, but it quickly changed after ten minutes in a meeting with management whereby it’s clear this is not a situation we want anything to do with.
That’s why these meetings are so valuable and why global travel is a big part of what differentiates our team.
Learn more about the Trimark Investments team.