Joshua Honeycutt is a Partner at Mar Vista Investment Partners. He has 20 years of investment experience. He is a portfolio manager/analyst and is a member of the investment team.
Before joining Mar Vista Investment Partners in January 2009, he spent seven years as an analyst at Roxbury Capital Management with a special emphasis in covering consumer discretionary and retail stocks.
Mr. Honeycutt was also an analyst with Harvey & Company, covering mergers and acquisitions, and an associate in forensic accounting at Tucker Alan.
Jeffrey Prestine is a Partner at Mar Vista Investment Partners. He has 21 years of investment experience. He is a portfolio manager/analyst and is a member of the investment team.
Before joining Mar Vista Investment Partners in January 2009, he was an analyst covering technology and energy stocks at Roxbury Capital Management. Mr. Prestine joined Roxbury from Seneca Capital Management, where he was a technology and energy analyst for more than five years.
He began his career in finance at Prudential Securities as an associate analyst covering enterprise software companies.
In this 2,913 word interview, exclusively in the Wall Street Transcript, these two investment professionals reveal the current top stocks in their portfolio.
“…The firm currently manages around $5 billion in assets under advisement across our three strategies. The client base is a mix of endowments, foundations, public and private pension funds, and high net worth individuals.
We provide our clients a variety of investment vehicles, including separately managed accounts, subadvised portfolios, unified managed accounts — UMA — as well as a global comingled investment trust.
In terms of structure, the four members of our investment team, along with our Chief Operating Officer, own 100% of Mar Vista. As you probably know, a common attribute of successful multigenerational investment firms is equity ownership by the investment team.
For us, this incentive structure better aligns our decision-making with the objectives of our investors. Having our entire compensation based on the value we create for our clients is critical to the culture of the firm, the consistency of the team and the long-term alpha generation of our products.
TWST: And when you look at what to include in the portfolio, are there any overarching investment philosophies?
Mr. Prestine: Yes, absolutely.
Mar Vista invests exclusively in wide-moat businesses that compound free cash flow, possess the opportunity to produce high returns on invested capital and trade at a discount to our estimate of their intrinsic value.”
Some examples from the Mar Vista portfolio include:
“The first one to talk about is Adidas (OTCMKTS:ADDYY). This is a business that owns a 70-year-old global portfolio of branded, innovative athletic products. The company has built its economic moat around their iconic brands and tremendous scale.
As one of only two athletic brands with direct-to-consumer capabilities, referred to as DTC, Adidas is well-positioned to increase its competitive advantages in an evolving consumer marketplace. These DTC initiatives really capture an increasing portion of the retail value chain by creating direct connections with consumers. With direct selling, Adidas eliminates the middleman from the industry profit pool and earns higher returns on invested capital.
These types of business model transitions require strategic vision and sound execution. We think Adidas’ CEO, Kasper Rorsted, possesses both of those requirements. Adidas was successful in attracting Rorsted away from his successful tenure at Henkel (OTCMKTS:HENKY) years ago. Under his leadership, Adidas’ global supply chain and its underperforming U.S. business has been transformed.
Adidas is roughly one-third the size of Nike’s (NYSE:NKE) U.S. business. Therefore, there’s meaningful market share and profit opportunity in the world’s largest consumer market. We think as Adidas continues to gain U.S. market share, the company’s operating margins and cash flows will converge with those of industry-leader Nike.
We expect our investment returns in Adidas to shadow the company’s long-term business opportunity and 13% to 15% intrinsic value growth. ”
Get the complete analysis of Adidas vs. Nike as a portfolio investment by reading the entire 2,913 word interview, exclusively in the Wall Street Transcript
Emile Haddad is Chairman and Chief Executive Officer of Five Point Holdings, LLC. Five Point, the largest developer of mixed-use communities in coastal California, owns and manages Great Park Neighborhoods in Irvine, Newhall Ranch in Los Angeles County and The San Francisco Shipyard and Candlestick Point in San Francisco.
Combined, these four mixed-used communities will include approximately 40,000 residential homes and 23 million square feet of commercial space. All total, these developments will generate approximately 288,000 jobs during construction and $54 billion in activity for the California economy.
Prior to founding Five Point, Mr. Haddad was the Chief Investment Officer of Lennar Corporation, one of the nation’s leading homebuilders, where he was in charge of the company’s real estate investments and asset management.
In this 5,964 word interview, exclusively in the Wall Street Transcript, Mr. Haddad explores his company’s strategy to continue its real estate development in the midst of the COVID 19 global pandemic.
Mr. Haddad has a unique perspective on economic adversity:
“I grew up in Beirut, Lebanon, and went to the American University of Beirut and studied civil engineering. And as we are witnessing right now, once in a while in life you get thrown a curveball, and that curveball actually takes you to a place that changes perspective and allows you to start looking at things differently.
So that shift happened in my life in 1975 when I was 17, when the civil war in Lebanon started.
We lived 11 years in the civil war, which created conditions very different than the rest of the world. There was no water and no electricity, no gas and, a lot of times, no food. That’s how life was.
I went through high school and then school of engineering and studied by candlelight.
During the war, I saw a lot of unfortunate people who didn’t make it, but I also saw people who are like me, who were lucky enough to come out and gain perspective.”
His life in America has been the result of hard work and perseverance:
“At that point, we became a very familiar story of a family in pursuit of the American dream, and we lived together in a small place for five years, and I started working my first job.
After looking for a job for six months, I found a job that was about 75 miles away from my home. They paid me $10 an hour as a junior engineer, and I was so excited to get it because it gave me a job and allowed me to start helping and support the family.
About a year later, I had an offer to work for a client, at that time was a homebuilding company in West L.A., and I took that because I wanted to be on the development side and I was doing some tenant improvements on the side to make more money.
So my days used to be like, I hit the road at 4:45 in the morning, and I’d be back about 9:30 or 10 o’clock at night and do it all over again. On the weekends I was studying to get my licenses in engineering and contracting.
Then, my career path started getting a little bit more clarity. People started realizing that I can do more, and I started getting promotions.”
The company’s financial strength is lower leverage and a conservative financial outlook:
“The company’s approach has always been a balance-sheet-first approach. We are not the company that is looking for growth just for the sake of growth.
We have a lot of assets, and our assets are honestly irreplaceable, and we have a lot of value creation out of them. So again, our focus is on cash flow and the balance sheet.
We have 24% debt to cap. That’s all in bonds that are maturing five years from now. We are sitting with a lot of liquidity, very little debt; none of these assets are encumbered with any project financing except an office complex that we own.
We are very well-positioned for this crisis and, in some ways, have been preparing for this for a long time.”
Read the rest of this 5,964 word interview, exclusively in the Wall Street Transcript, and get the rest of the outlook on Mr. Haddad’s real estate development company.
Kevin Mitchell is Senior Vice President at HCI Group, Inc. He is also President of TypTap Insurance Company, a subsidiary of HCI Group. Earlier, he worked at Arthur J. Gallagher & Co. He is a graduate of Bowling Green State University.
In his 2,307 word interview, exclusively with the Wall Street Transcript, Mr. Mitchell gives detailed background on how his insurance company started up and expanded.
“The benefit of this approach is that we’re able to pre-underwrite the state of Florida and determine which policies we do or don’t want before homeowners even approach us for a quote, and it’s allowed us to truly manage exposure and to understand where are areas around the state to focus on for driving profitable results.
And with the profitable results, we’re able to maintain continuity in terms and conditions, to have consistency from a rating standpoint and to allow our agent partners to build a long-term, stable book of business. Even though it’s an insurtech company, we do work with agent partners.
That brings us to the current day. HCI Group is the corporate umbrella. We have these four main divisions that we feel are diverse yet complementary.
And now, we march into 2020. Homeowners Choice, our first insurance division, had a transaction in February of this year, acquiring a book of business from a company called Anchor Property & Casualty. We’ve assumed that book of business, and that continues to be folded into Homeowners Choice.
TypTap continues to grow its homeowners and flood insurance book of business. Greenleaf is constantly evaluating different opportunities from a real estate standpoint.
The Exzeo technology division is constantly trying to improve and refine, whether it’s underwriting and data or user features and functions from the insurance agent side. And then, we have Claddaugh, which is there to give a helping hand and in case we need it from a reinsurance perspective.”
Even the global pandemic has not slowed the company down:
“In our headquarters city of Tampa, Florida, everyone has been working from home since early March. But because of the technology and systems that we built, our agents and policyholders haven’t noticed the difference from a customer service claims communication standpoint.”
This will support the investors in HCI:
“…make sure that our shareholders understand that we’re working to see that the dividend remains safe and in a strong position, tied to solid cash flow. And since we just did the acquisition and a transition of policies in February, that was our big portion of growth for the year..”
Get the full detail by reading the entire 2,307 word interview, exclusively with the Wall Street Transcript.
Tom MacKinnon is an Equity Analyst at BMO Capital Markets. He began working at BMO Capital Markets Equity Research in April 2010. Earlier, he had 12 years’ experience covering insurance stocks in equity research at Scotia Capital in Toronto.
Before working at Scotia Capital in 1998, Mr. MacKinnon spent six years at Tillinghast-Towers Perrin, an actuarial consulting firm, in the firm’s Toronto and New York offices. Prior to that, he worked at Canada Life as an actuary.
In the 2019 Brendan Wood International survey, Mr. MacKinnon was once ranked a top gun analyst in insurance and was ranked a top gun analyst in the Brendan Wood International Survey from 1999 through 2019.
In this 3,109 word interview, exclusively in the Wall Street Transcript, Mr. MacKinnon details his top Canadian insurance company picks, many of which are paying high single digit dividend yields.
“One thing we’ve noticed with respect to the life companies is that their capital positions were strong going into this crisis, and their capital positions are relatively insensitive to swings in interest rates in equity markets. And if anything, the widening corporate spreads, these probably end up helping a little bit of their capital structure as well.
What we found is that their LICAT ratios — that’s life insurance capital adequacy testing; that’s a regulatory capital framework — those ratios actually went up between the fourth quarter of 2019 and the first quarter of 2020.
I’m not sure if everybody was expecting them to go up and go up that degree — sure, tougher equity markets have hurt those ratios — but they’ve got a lot of excess capital, and that’s largely in bonds, and that’s at mark to market, and that helps that capital. And in fact, the book values have gone up a little bit as well.
We didn’t see any kind of significant hits to capital. And I think that’s the first thing that investors wanted to see: Are the capital positions good?
And this is totally unlike they were in 2008. ”
One his top picks is paying 7% currently:
“I think one that’s interesting here that trades under seven times — and that’s even after we’ve taken our numbers down as a result of potential disruptions over COVID-19 — is Manulife Financial. I think one of the things is 35% or 40% of its earnings come out of Asia.
You’ve got a rapidly growing middle class there, at least 60% of the world’s middle class will be in Asia by 2025. I think insurance products are very underpenetrated there. A large portion of the middle class is underinsured. And so it’s a company, the number-three player in Asia behind AIA (OTCMKTS:AAIGF) and Pru UK, and I think it’s well-positioned there.
It’s also well-positioned in terms of its strong balance sheet. Its LICAT ratio sensitivity from interest rates and equity markets are running at a fraction of what it used to be. And thirdly, it’s been a very good grower. From 2013 to 2018, it grew its core EPS in excess of 12% or 13%. It’s been a good grower. It’s a proven grower, got a good platform in Asia.
It’s got a strong balance sheet.”
Get the full detail on this and many other picks, only be reading the entire 3,109 word interview, exclusively in the Wall Street Transcript.
Yousuf Hafuda is an Equity Analyst covering the real estate space on the financial services team at Morningstar. His coverage list includes office, industrial and self-storage REITs as well as real estate services companies. Before assuming his current role, Mr. Hafuda was an associate equity analyst on the basic materials team at Morningstar. Mr. Hafuda holds a bachelor’s degree in political science from Grinnell College. He is an active member of the Urban Land Institute — ULI.
Kevin Brown is an Equity Analyst in the Finance Team for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers health care, hotel, residential, retail and triple net REITs in the U.S. Before joining Morningstar in 2018, Mr. Brown worked for the securities group in a global real-estate-focused asset management company, spending nine years covering health care and hotel REITs. Mr. Brown holds a bachelor’s degree in economics after graduating from Dartmouth College in 2005.
In the extensive 6,467 word review of the Real Estate sector for investors, these two expert analysts pick some investment highlights and demonstrate the ability “to hit them where they ain’t”.
The bad news is in several real estate sectors and Mr. Brown notes the devastation in the hotel industry:
“The hotel industry is probably not going to be looking at any sort of positive EBITDA or cash flows for any time in the near future, and when people do start traveling again, it’s going to take a while for them to come back online fully to the prior levels of travel, where they had been.
So we could be looking at maybe two, three years of negative cash flows for the hotel REITs.”
Mr. Hafuda identifies what could be a bright spot in real estate:
“Now to move on to the office REITs, which I think has definitely gotten a lot of attention and press, we’re not as concerned from a long-term perspective. The two subsectors that I just mentioned to you are very transactional in nature.
Office real estate leases are done by contract, and the contracts run around seven to 10 years long. It’s one of the longer lease lengths among the subsectors in commercial real estate…there is some legal indication, at least based on some of the research that I’ve seen, that even if you’re a multinational corporation, and you’re not able to use any of your corporate space that you’re currently leasing, that you won’t be able to get out of that lease.
From that perspective, if you’re the office REIT, then you’re going to continue to collect cash and perhaps even in certain instances that you were previously performing services that you’re no longer performing, there might be a slight benefit from a cost perspective.”
Another bright spot in real estate:
“One that’s been a little overlooked, at least in terms of the headlines, that I think is interesting is the self-storage space.
That is probably going to be pretty resilient because anyone who currently has self-storage space probably is going to be really hesitant to go in and move their stuff. In this kind of environment, the last thing that people want to do is move unnecessarily.”
Mr. Brown sees the value in some of the most depressed stocks:
“Disruption does impact our fair-value estimates. But we’d like to think that as long as these companies are going to make it through, pretty much every name that is under my coverage is currently trading below their fair-value estimate.
The ones that have been hit the hardest because they have the most short-term disruption are the ones that are the most attractive. While I have brought down my fair-value estimates the most for those companies, I didn’t bring them down nearly as much as the market has dropped them in the past month and a half.
I’m currently seeing some really attractive opportunities among some of the best-quality and biggest names in the malls. I really like Simon Property Group (NYSE:SPG), who owns half of the top 100 malls in America.
I really like Welltower (NYSE:WELL), who is the biggest health care REIT, who has a really fantastic management team and just the high-quality properties. Those are some of my best top ideas right now. And they are some of the names that have been beaten up the most.”
Mr. Hafuda also identifies some interesting names:
“One of the names that I think is attractive on my list is SL Green (NYSE:SLG). SL Green owns high-quality office properties in New York City, specifically in Manhattan, in the Midtown neighborhood.
And so I think any investor who’s looking at that gets extremely concerned because there are potentially impacts in terms of the reputation of New York City following this and then also what’s going on on the ground, and then add to that the fact that investors were already concerned about the prospects of office real estate to begin with.
It’s areas like that where we see the most opportunity for some investors who are willing to hold their nerve and be OK with the prevailing level of volatility with the realization that, at some point, humanity is going to have to return back to normal.”
Russell A. Colombo is President and Chief Executive Officer of Bank of Marin Bancorp. He is a lifelong resident of Marin County in the San Francisco Bay Area. He received a Bachelor of Science degree in agricultural economics and business management from the University of California, Davis and his Master of Business Administration in banking and finance from Golden Gate University. Mr. Colombo joined Bank of Marin in 2004 as Executive Vice President and Branch Administrator after 29 years in banking at Comerica Bank, Security Pacific and Union Bank in San Francisco.
In this 1,474 word interview, exclusively with the Wall Street Transcript, Mr. Colombo builds on his 3,326 word February 4th interview of this year for an interesting update.
Operationally, the Bank of Marin has swiftly adapted to the new situation:
“As an essential business, we’re still conducting our day-to-day operations and haven’t laid a single person off. Approximately 80 to 100 of our 300 employees are working from home, including me.
Those who are working at one of our 21 branches are practicing social distancing, and we don’t allow more than two customers at a time in a branch.
At our headquarters, within our operations group, we have separated the people who have equivalent jobs. In other words, if there are two people in wire transfers, one is working at our disaster recovery location, which is off-site, and one is in our headquarters.
This practice ensures that if anybody gets sick, we still have a backup person. We’ve done that in many essential jobs just to make sure that if we have an outbreak, we can continue to service our clients. We’re fortunate in that respect.”
The CEO states that his loan portfolio has been weathering the COVID 19 storm:
“We also do a lot of commercial real estate where we are providing loans to investors to purchase commercial real estate. That’s a mixed bag in this pandemic environment, depending on what type of commercial real estate you’re financing.
We don’t have a lot of hospitality; we have a few hotels, and frankly, all of them are empty right now. But in most cases, we have guarantors with liquidity.
Wine business is suffering certainly because people aren’t visiting wineries, but they are selling a lot of wine wholesale, in the grocery stores. Overall, the loan portfolio is in solid shape…”
The PPP Loans are also a bright spot for this community bank:
“It’s only 1% interest. Now, we anticipate it’s only going to be seven or eight weeks that they have this money, and then the SBA would forgive the loans, so we should get paid out at the end of two months.
So it’s not a big problem in terms of returns. We also get a 5% fee up to $350,000, $350,000 to a million is 3%, and over a million is 1%. Our average is running about $215,000 request for loans.
We are all learning as we go because nobody knew exactly how this program was going to work, including the Treasury.”
The CEO declares that he dividend is safe for his investors:
“It’s definitely safe. We have been pretty consistent about that. The way we’ve operated historically is we define our bank three ways: We’re relationship bankers, we have a commitment to the communities we serve, and we are disciplined. And the discipline really shows itself in difficult times.”
Get the complete picture by reading the entire 1,474 word update, exclusively in the Wall Street Transcript.
Paul D. Tobias is Chairman of mBank and Chairman and CEO of Mackinac Financial Corporation. Mr. Tobias has nearly 42 years of experience in the financial services and banking industries.
He was appointed as Chairman of mBank and Chairman and CEO of Mackinac Financial Corporation in December 2004 after structuring and leading the successful $30 million recapitalization of the company when it was known as North Country Bank and Trust. He also served as CEO of mBank from July 2005 until November 2006.
Kelly W. George is President and Chief Executive Officer of mBank and President of Mackinac Financial Corporation. Mr. George has over 25 years of experience in the banking industry.
He joined mBank in 2003 as the Executive Vice President and Chief Lending Officer in charge of the regulatory and lending administration turnaround of the previously known North Country Bank and Trust.
After the successful rehabilitation of the bank and $30 million recapitalization, he was promoted to President and CEO of mBank and President of Mackinac Financial Corporation in 2006.
In this 2,682 word interview, these two highly experienced community bankers with 67 years of financial institution experience between them, explain how they intend to activate the advantages of being a community bank.
Mr. George explains his bank’s position:
“…We are primarily a small- and midsize business bank, and our footprint in northern Wisconsin, northern Michigan and the UP mainly lends to local small businesses of various industries, including some tourism, hospitality and vacation properties.
We have some C&I lending down in Birmingham in the southeast Michigan area and through our asset-based lending division too. But as Paul said, we are predominately small-business lenders, and we also do a lot of mortgage lending throughout all of our markets as well.
Being a community bank, mortgage lending is a big piece of our business as it is at the root of our relationship-based consumer activities in the communities where we are very active corporate citizens.”
Mr. Tobias relates the PPP lending that has resulted from the recent government actions:
“The massiveness of this program has overwhelmed the SBA at times, but I think Kelly and I both give them high marks in terms of the overall speed to market with this program in spite of the glitches.
A lot of the glitches initially with the big banks came because they tried to create programming to handle their much larger volumes, whereby the programming is directly interfacing with the SBA. And as a result, they have not been up to speed.
The big banks haven’t been processing applications, and that put customers on hold. We know this because a lot of those customers have come and found us after experiencing those problems, and some of them have applied through our bank.”
Get the complete 2,682 word intervew, exclusively in the Wall Street Transcript, and get all the details on how community banking has responded to the coronavirus crisis.
Paul D. Tobias, Chairman & CEO
Kelly W. George, President
Mackinac Financial Corporation
130 S. Cedar St.
Manistique, MI 49854
Robert Gillam, CFA, is Chief Executive Officer and Chief Investment Officer at McKinley Capital Management, LLC. He is responsible for all investment functions and personnel for traditional and alternative portfolios.
He guides the firm’s quantitative research, portfolio management, trading, risk management, and portfolio operations functions. Prior to becoming CIO, he worked as a Portfolio Manager with a specialty in non-U.S. and global strategies. Mr. Gillam is on McKinley Capital’s Executive Management Committee, where he is actively involved in defining and developing the firm’s strategy and corporate policies. He is also a member of the firm’s Board of Directors.
He is a graduate of the Wharton School at the University of Pennsylvania.
In this 3,538 word interview, exclusively in the Wall Street Transcript, Mr. Gillam explains the source of his assets under management and how his portfolio construction for his clients is developed:
“McKinley Capital is a systematic growth investor based in Alaska with offices in Chicago, New York and Abu Dhabi, United Arab Emirates. We manage money for large institutions — obviously, a portion of their equity investments, the growth-oriented portion.”
This hunt for growth led to a fortuitous decision in 2019:
“…We run a large global health care transformation portfolio anchored by a large public pension plan in the United States. And its focus is on, for lack of a better term, health care technology, so the tools and the technologies that make health care delivery better, faster, cheaper.
We believed when we launched it at about this time last year, so a year ago, we believed that there was a large theme coming to health care because the cost of health care and the delivery of health care was so difficult, cost was high, and delivery was difficult.
Clearly, coronavirus has proven that thesis. And technology, speed to development, taking care of people remotely, telemedicine, artificial intelligence and machine-learning-based strategies and diagnostic tools are clearly coming to the forefront.
This is one of the really exciting areas that we’ve been working on, and again, this is a dedicated strategy that we launched in 2019.”
He identifies several of the companies that develop this investing thesis:
“Apple (NASDAQ:AAPL), of course, with Apple Watch now is FDA-approved for heart monitoring. Google (NASDAQ:GOOG) has a whole health care division, separate company within Google that’s focusing on their health care.
Amazon (NASDAQ:AMZN), of course, bought PillPack a few years ago.
Some of the leaders in this space are Chinese companies, the Good Doctor, which is owned by Ping An Insurance (OTCMKTS:PNGAY), or Alibaba Health, of course owned by Alibaba (NYSE:BABA). Now, those are some real leaders in that sort of analytical space. And there are some in the U.S. too.”
Get the complete picture and stock pickes from Mr. Gillam in this 3,538 word interview, exclusively in the Wall Street Transcript.
Stefan Ioannou, Ph.D., is Analyst of Cormark Securities Inc. Dr. Ioannou is a mining engineer and holds a Ph.D. in economic geology from the University of Toronto. He joined Cormark in December 2016, working in equity research for 13 years with Haywood Securities — base metals analyst since 2006. Prior to that, Dr. Ioannou worked as an exploration geologist in Nevada and throughout the Canadian Shield.
“…Worth mentioning is that while we have seen base metal prices fall drastically in the wake of COVID-19, which has prompted investors to focus on said weakness, operating cost factors, in particular energy — fuel — and foreign exchange rate considerations are working in the favor of most miners.
So if you’re operating a mine anywhere outside the U.S. right now, any costs you’re incurring in local currency, namely labor, have recently dropped significantly in U.S. dollar terms. In Brazil, FX rate considerations are meaningfully offsetting the impact of copper price weakness.
With regard to fuel costs, which can account for 7% to 10% of a mine’s total operating cost, low oil prices are helping producers weather the pandemic for now. To put that into context, we talked about the AISC for the 90th centile of the copper curve being about $2.25 per pound right now.
In 2019, it was closer to $2.50 per pound, and again, that was on the back of higher fuel costs, stronger foreign currencies and other factors.”
Dr. Ioannou identifies his top investment danger for the current market:
“Balance sheet liquidity is key right now, as it positions a company to weather the storm.
If we look at copper right now, the metal’s price is testing the 90th centile of the industry’s AISC cost curve right now, which is about $2.25 per pound, which means 10% of the world’s copper mines are not economic right now and are essentially bleeding cash. In lieu of balance sheet strength, said producers face potential bankruptcy. ”
The global mining expert identifies his pick for current investment:
“A great example would be Lundin Mining (OTCMKTS:LUNMF), which has five mines. They’re all operating well in safe jurisdictions throughout the world, and they all have some sort of a modest near- to medium-term organic growth component to them.
The company has also demonstrated really good ability to prudently use its balance sheet…”
Get the complete picture by reading both recent interviews from Dr. Ioannou, exclusively in the Wall Street Transcript.
Eric Cinnamond, CFA, is Co-CEO and Portfolio Manager at Palm Valley Capital Management. He worked for First Union National Bank after entering the investment industry in 1993.
He joined the Evergreen Funds in 1996 as an analyst and co-manager of the Evergreen Small Cap Equity Income Fund. From 1998 to 2010, Mr. Cinnamond oversaw small-cap portfolios for Intrepid Capital Management.
From 2010 to 2016, Mr. Cinnamond managed the River Road Independent Value Fund. Mr. Cinnamond graduated from Stetson University in 1993 and received an MBA from the University of Florida.
Jayme C. Wiggins, CFA, is Co-CEO and Portfolio Manager at Palm Valley Capital Management. Mr. Wiggins is the former Chief Investment Officer and Portfolio Manager at Intrepid Capital Management.
He joined Intrepid in 2002 and managed the firm’s high yield portfolios and the Intrepid Income Fund from 2005 to 2008.
From 2010 to September 2018, Mr. Wiggins focused on the research and valuation of small-cap equity securities while managing the Intrepid Small Cap Fund — later renamed the Intrepid Endurance Fund.
He graduated summa cum laude from Stetson University, where he earned a BBA in finance. He earned his MBA, summa cum laude, from Columbia Business School in 2010.
In this 4,493 word interview, exclusively with the Wall Street Transcript, the two portfolio managers share their current market outlook and top stock picks.
“With relative-return investing, you could be down, you could lose half your money in a fund, where they could be down 45% and the market could be down 50%, and that’s a victory in their eyes.
But for private clients or a family office or advisers who sell to those types of individuals, it’s unacceptable. By refusing to overpay, we are attempting to protect capital when valuations are extremely expensive, which they have been since we launched in April 2019.
And I think as of last disclosure, we were in 94% cash.”
That leads to some interesting valuation opportunities for this portfolio managing duo:
“Spending extra on roads, bridges — toward infrastructure — has been below what is needed to maintain safe roads and bridges. And Gencor would definitely benefit from any stimulus package that includes infrastructure spending. And 95% of roads in the U.S. are paved with asphalt, and we don’t see that going away.
So it’s a very established business. And this is another thing we do: focus on companies that have been around a long time and have made it through many business cycles.”
Another interesting example is in the precious metals sector:
“So another name that we owned as of the last disclosure was A-Mark Precious Metals (NASDAQ:AMRK). They are the leading full-service precious metal company. They trade, they finance it, they store it, transport it.
They even fabricate gold and silver bullion and similar products. It’s a sub $60 million-market-cap firm. The float’s even smaller. So it’s not something most institutional investors can buy. A-Mark is one of the handful — and probably the largest authorized purchaser of coins from the U.S. Mint, which means they get mint-issued coins for the lowest premium and resell them to coin dealers and collectors, and they also have relationships with all the other major sovereign mints like Canadian, U.K., Australia, even China.
Interestingly, they have a 20%-plus equity stake in JM Bullion, which is one of the largest online precious metal retailers. I’m a customer at JM Bullion. They just sent out an email late last week saying they were having their biggest sales day ever, and maybe even for two days in a row. So a lot of renewed interest in physical precious metals the last week or so…”
To get the full detail on these picks and many more, read the entire 4,493 word interview, exclusive in the Wall Street Transcript.