Mason King Researches the World for His Top Picks for Luther King Capital Management

November 10, 2020

Mason D. King, CFA, is a Principal of Luther King Capital Management. He joined the firm in 2004 and serves as a Portfolio Manager and Equity Analyst.

Prior to joining LKCM, Mr. King was an equity analyst at Hester Capital Management and a private equity investment analyst at Pacesetter Capital Group and Crates Thompson Capital. Mr. King graduated with a Bachelor of Arts in English literature from Princeton University and a Master of Business Administration from the University of Texas at Austin and also completed the TCU Ranch Management Program.

In this 3,788 word interview, exclusively with the Wall Street Transcript, Mr. King details his current top picks.

“The investment philosophy has been very consistent throughout the many decades of our existence, and really, it comes from fundamental bottom-up research into each company and industry.

Our analysts look for competitively advantaged companies with strong managements, with better-than-industry and better-than-broader-market growth prospects, with investment capital returns that also exceed not only our cost of capital but also their peers.

With strong managements, they can allocate the internal shareholders’ capital generated through earnings back into growth at these attractive rates of return.

It’s a pretty basic approach from that standpoint — invest in the company and invest in the management. Then, let them compound the capital with lowest frictional costs incurred with taxes by effective capital allocation and compounding in attractive marketplaces.”

One example of the global research by Luther King Capital Management:

“One that’s pretty interesting, and we’ve been invested in for a little over a year now, is Fluidra (BME:FDR). It’s a Spanish company.

It is a small-cap name and is the smallest name in our portfolio but is one that we’ve been particularly excited about. It has been well-positioned from a growth-in-a-cycle standpoint in this environment, and that’s because they are one of the largest providers of pool equipment and chemicals into the global market.

The company went through a merger with Zodiac in 2018. It was a Spanish company, and Zodiac was a U.S. company.

This created a global leader in pool supplies. Some of the brands they have are Jandy and Polaris. And this puts them in a great position to capitalize on what we’re seeing in the pool industry today.”

Another example illustrates the value based, bottom up research of Mason King:

“Another one is CSL (ASX:CSL), and it is a blood plasma and fractionation company that is based in Australia. This is a little bit different in that it is actually an oligopoly.

During a rationalization of the industry that occurred about 20 years ago, many of the blood collection and even fractionation companies failed. Correspondingly, there was a global consolidation within the industry to three remaining companies that control nearly 100% of the capacity.

With that discipline came better visibility and consistency in returns.

They manage their supply through both company-owned donation sites as well as sourcing blood plasma from external sites in order to have some diversification in their sourcing.

They bring that blood in and basically fractionate the blood, separating out all the proteins and effectively marketing those proteins to health care needs throughout the world. Albumin is a big product that comes out of that; that market continues to grow. CSL is dominant in that refined product.

There are many treatments and vaccines that are dependent upon these blood proteins. As long as we continue to suffer certain ailments and as long as we continue to treat them with existing blood proteins, then they’ll continue to have a market.

CSL has been a consistent grower through the years. They also have a lot of revenues within the United States as well as tapping into a growing Chinese market.

There are no domestic Chinese competitors at this point in time, principally due to the health standards and safety standards of CSL and the other two competitors, which are significantly higher than what exists in China today. Not to say that they can’t get there, but there’s higher confidence in the existing participants right now.”

Get all the details on this pick and many others by reading the entire 3,788 word interview with Mason King, exclusively in the Wall Street Transcript.