Ms. White: FinArc was founded back in 1990 with the intention of serving a combination of both individual investors and smaller institutions that might include corporate pension plans, endowments or foundations. Here we are, 19 years later, and we do all of those types of accounts. One of our major themes is that we are value investors, so we are looking for cheap stocks, and that can be because the company is not recognized, it hasn't had a lot of analysis done, and yet its goods and services are attractive. Another reason the stock can be a value is because of bad news about one of their direct competitors. The stock we are investigating is said to be "down on sympathy", even though the bad news may very well not apply to them. There are companies that do have disappointing earnings or some kind of negative report, but the stock falls far more than is really warranted despite whatever negative news there is. That's really what our analysts are focusing on finding.
TWST: Are you also a socially responsible investing firm?
Ms. White: We do socially responsible investing also known as environmental,
social and governance (ESG) investing. About two-thirds of our clients ask us to
use ESG for their portfolios, whereas one-third ask us to only take the
company's financials into consideration. Socially responsible investing is a
very important part of what we do, and I was fortunate enough to be introduced
to it back in 1980, when I started in the mutual fund business at Pioneer Group.
It's changed over the years, and has really developed, and there is better
information out there, and certainly lots of companies that we can get
information from. You can go directly to some websites, such as the
Environmental Protection Agency website where we can get a very detailed view at
what companies might have had a pollution problem and to learn what was the
cause. Sometimes it's nothing to do with the company's practices, it was just
an accident.
We're trying to parse everything out, and a poor environmental record can have a
very large effect on the firm's profitability. It also says something about the
management of a firm. If they have a problem, whether it's a social problem, an
environmental issue, or governance problems, how do they respond? Do they say
"we need to tighten up our procedures here? Are they willing to be forward-
thinking on those types of issues?"
Tickers included in this excerpt: AMGN, CXW, JNJ, PG, TYC
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