Michael Testorf, is the Managing Director and Portfolio Manager of ClearBridge Investments. Mr. Testorf is a portfolio manager on the Global Growth Equity investment team and co-manages numerous global and international growth strategies. He joined ClearBridge Investments in 2015 and has 30 years of investment industry experience. Prior to joining ClearBridge, Mr. Testorf served as a senior portfolio manager and Senior Partner at R Squared Capital Management. For many years, he worked at Artio Global Management — formerly Julius Baer — where he was most recently a senior portfolio manager for international equities.
His funds follow a distinct philosophy. “…We focus on high-quality companies that trade at a discount to their intrinsic value. You can even call it a valuation approach to growth. We take a deep dive into the fundamentals of a company and the sector in order to determine the upside. The degree of conviction and liquidity determines the position size within a portfolio, and we have a fairly concentrated portfolio, between 50 and 70 names. We are targeting good risk-adjusted returns. The turnover normally averages between 30% and 40% per year.”
The trades are unique and based on strong quantitative values. “We are differentiated from other growth funds in two primary ways. One is how we define growth in three different categories that are normally mirroring the life cycle of a company. At the beginning is our emerging growth bucket. These are innovative and disruptive companies that have new business models and normally a very large addressable market. These companies grow very fast, but earnings are normally low because they put every single cent into the upcoming growth.
The second one, our largest and the one that brings the most performance to our overall portfolio, is the secular growth bucket. We consider these companies to have a superior business model, sustainable long-term growth opportunities and the ability to compound above-market returns year by year. Normally, this category gives us a good stability of returns in the portfolio.
Last is our structural growth bucket.”
Temenos, particularly here in the U.S., has just started to land its first big wins, and the pipeline is very, very promising…The company could ultimately go down two avenues: pursue strong growth opportunities, particularly in the U.S., or being open to be acquired by large software companies like Oracle (NYSE: ORCL) or SAP (NYSE: SAP). The current market capitalization of the company is palatable at $8 billion.”
To see more top picks from Micheal Testorf from ClearBridge and his investing rationale, read the entire interview at the Wall Street Transcript.