MacKenzie Davis, Managing Partner, SailingStone Capital Partners

MacKenzie Davis, Managing Partner, SailingStone Capital Partners

MacKenzie Davis, CFA, is a Managing Partner of SailingStone Capital Partners LLC, where he is an investment analyst and portfolio manager.

Prior to founding SailingStone in 2014, Mr. Davis was an investment analyst at RS Investments and co-manager of the RS Global Natural Resource and Value strategies.

Previously, he was a high yield analyst at Fidelity Management & Research Company, where he focused on distressed investment opportunities in the telecommunications, power and energy sectors.

He started his career as an analyst at Goldman Sachs (GS). Mr. Davis holds B.A.s in mathematical economics and modern American history from Brown University and is a CFA charterholder.

In this 4,606 word interview, exclusively in the Wall Street Transcript, MacKenzie Davis breaks down how to view the coming transformation of the world’s energy supply.

“Really, what defines what is in each of the strategies is in large part a function of the different institutions’ mandates.

Some institutions can invest wherever they want within the broad natural resources and infrastructure space.

Others have policy considerations and constraints that keep them from investing in things like oil, for instance, or hydrocarbons or mining. So, we end up customizing a lot of our strategies.

But the overarching theme for us as it relates to the energy transition is, first, to define it.

It’s a phrase that has become ubiquitous, and it’s often fit for purpose; people use it for whatever is convenient for them.

Because we don’t have a specific mandate from an industry standpoint or a commodity standpoint, and we don’t run an energy fund or a mining fund or a precious metals fund, we felt like it was important to start with first principles — which is, what exactly is the energy transition — before we start thinking about how to invest around it.

We define the “energy transition” as efforts to address two different but very important and highly related objectives. The first, of course from a Western perspective, is to decarbonize the world’s energy systems.

The second, and equally important and often overlooked in the West, is the need to address all of the challenges related to global energy poverty.

The reality is that the majority of the world’s population exists at or below that energy poverty line, and the areas with the fastest forecasted population growth are the areas with the lowest per capita energy consumption.

As we move forward it’s not sufficient enough for the West to decarbonize — we need to decarbonize globally, recognizing that emerging populations and growing economies absolutely need access to more energy, not less. And so, if we’re going to be successful on either front, they need to be addressed together.”

The global energy transformation has real world implications.

“Uniquely in North America, and particularly the United States, we have a large quantity of globally very competitive natural gas projects.

And as we look out at the world and think about trying to address these dual objectives of decarbonizing energy systems while also addressing this global energy poverty challenge, natural gas plays a really key role in that.

So we think demand for gas will grow, and we have some really wonderfully economic assets right in our backyard.

The second area would be around the metals industry.

We look forward and try to understand what the material intensity of the energy transition is or is likely to be.

It is very hard to forecast, and we should be careful about speaking in specifics, because I don’t think anybody knows what the future looks like.

But as we look at the forecasts and the scenarios and the underlying assumptions around material intensity, it is apparent to us that, in many respects, the energy transition will run through the mining industry, and that owning low cost, very long-lived resources in key enabler commodities — copper is an obvious one, nickel to a certain extent, aluminum — there’s a huge amount of value that will be ascribed to those assets over time.

So that’s a big area of focus for us.

The third area is around grid stability.

As we’ve introduced more and more passive and intermittent power, which is renewables, onto the grid, it’s increasingly clear, not just in the developing world but right here at home, that our grid was really not designed to handle intermittent power sources.”

The inevitable value creation of these trends has developed a high return on equity investment for MacKenzie Davis.

“As I mentioned earlier, our job is to preemptively identify the businesses that we want to own, price them, figure out the intrinsic value of the business today and what we think the business will be worth in five years.

If we can buy it at or below what we think intrinsic value is, the bigger the discount, the bigger the position, in many respects.

And when the market decides that they want to pay for unsustainably higher long-term prices, or ascribe lots of value to projects that we think haven’t been fully de-risked, we’re equally happy to sell.

Here’s a great example.

We don’t have a position in this company today, so I don’t mind talking about it.

It’s a company in the lithium market, one of the largest, lowest-cost producers of lithium, called SQM (NYSE:SQM) in Chile, with a few unbelievable assets.

Truly, geologically unique assets.

One is the Salar de Atacama, which is a potash and lithium rich brine that sits up in the Atacama Desert, which is the driest place in the world.

It’s a great place to have a lithium evaporation pond, because it’s really, really dry and the lithium precipitates out of the brine.

And the other is a caliche ore body, which basically sits at surface and has very high concentrations of iodine and some unique salts.

We had identified that company from an asset and a management perspective 20 years ago, and it wasn’t until there was a really severe disruption in the potash market that the price was low enough that we could afford to invest it and have the margin of safety that we needed to put capital to work.

And then the lithium market took off, and the company went from being a potash company to a lithium company, in the market’s view, overnight.

We ended up selling our stake in a negotiated transaction to a strategic buyer at a significant premium to the current stock price, because somebody was willing to pay us more than what we thought the company was worth.

That’s hopefully a not too long-winded example of the type of work that we’re doing ahead of time, so that we can take advantage of market dislocations when they occur.”

Read the complete 4,606 word interview with MacKenzie Davis, exclusively in the Wall Street Transcript.

Jay D. Hatfield, Founder, Chief Executive Officer and Portfolio Manager of Infrastructure Capital Advisors recommends Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX).

Jay D. Hatfield, Founder, CEO and Portfolio Manager, Infrastructure Capital Advisors

Jay D. Hatfield is the Founder, Chief Executive Officer and Portfolio Manager of Infrastructure Capital Advisors, and has almost three decades of experience in the securities and investment industries.

At ICA, he is the Portfolio Manager of several ETFs, including InfraCap MLP ETF (NYSE:AMZA), and a series of hedge funds.

A focus on companies that own real or hard assets, like energy infrastructure and real estate, runs through Mr. Hatfield’s career.

Prior to forming ICA, he partnered with senior energy industry executives to acquire several midstream MLPs, which merged to form a company now known as NGL Energy Partners, LP (NYSE:NGL). He is a general partner of the publicly traded company.

In the years prior to forming NGL, Mr. Hatfield was a Portfolio Manager at SAC Capital (now Point72 Asset Management).

He joined SAC from Zimmer Lucas Partners, and earlier in his career he was head of an investment banking unit at CIBC/Oppenheimer and a Principal in an investment banking unit at Morgan Stanley & Co.

He began his career as a CPA at Ernst & Young, and holds an MBA from the Wharton School at the University of Pennsylvania and a B.S. from the University of California at Davis. ​

Mr. Hatfield is the Founder of Tutoring America, a non-profit organization dedicated to providing low-income students with supplemental tutoring services and technology to accelerate learning in both math and English language arts.

He frequently appears on or is quoted in Barron’sThe Wall Street Journal, Yahoo Finance, TD Ameritrade Network, and Bloomberg Radio/TV.

In this 2,192 word interview, Jay Hatfield details the  methodology that leads him to recommend Energy Transfer (NYSE: ET), Enterprise Products (NYSE: EPD), and MPLX (NYSE: MPLX).

“We believe in very detailed fundamental research — we do bottom-up models of every company, we call the company, review our models, we have an outside service that gives us data down to the well level, of course we look at commodities — and then develop differentiated views from consensus, and then overweight companies where we’re more optimistic about earnings and underweight companies where we’re less optimistic.

And we look at relative valuation models to determine which companies are the most attractive and which companies are least attractive, and then we normally underweight the least attractive companies and overweight the most attractive companies.

It’s worth mentioning, we also do write selective covered calls where we think it’s appropriate — normally where we’re overweight — and we believe that does add value over long periods of time as well.”

Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX) move to the top of the list using these methods.

“In our view, since energy is risky enough on its own in normal markets — although it actually has been somewhat defensive over the last couple of years, but it often can get volatile — we focus on the companies with a national footprint, investment-grade rating, fully diversified between natural gas, oil, refined products.

Those would be the companies that are more or less household names, at least if people follow pipelines, like Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX).

Those companies have diversified, national operations and normally good coverage of dividends, good dividend growth track records. We’re looking for the highest quality, because really, most of our clients are looking for stable to growing dividend income, so they want lower risk, national operations, diversified, investment-grade companies to anchor the portfolio.”

The long term view of the current energy production situation lends itself to support for Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX) as good long term portfolio investments.

“We had felt this before, but what we learned from Europe’s attempts at an energy transition is that if it’s done too rapidly, you’re going to have massive price hikes.

People forget that, actually, natural gas spiked before the Ukraine war, and that was a function of shutting down too much nuclear and too much natural gas production, not building any gas-fired units, and trying to rely just on wind, which is not a stable resource.

What a lot of people and investors forget is the first hydrocarbon that needs to be completely eliminated is coal. Coal still represents about 44% of global carbon emissions, and that’s why natural gas exports are so critical.

What should happen — it is not happening right now — is all the coal gets shut down first, and then we produce way more natural gas.

It’s a little bit counterintuitive.

Many environmentalists in the U.S. are trying to fight to close down all hydrocarbon production very rapidly, but we’ve already seen what happens when you attempt that in Europe, where you have a high probability of shortages.

The only scenario where we would have a rapid banning or transition away from all hydrocarbons is if we had a huge expansion of nuclear, but it’s almost impossible to site anything in the United States, much less a nuclear power plant, and they’re phasing out nuclear in most of Europe, particularly in Germany.

So that would be the scenario where you could get rid of all hydrocarbons — where you have a huge expansion in nuclear — but a lot of environmentalists are opposed to it, including me.

I think that the radiation danger of that exceeds the benefits.

So we see more of a 50- to 100-year transition, versus the 10 or 20 that a lot of environmentalists were proposing two, three years ago.”

This all leads to a firm “buy” vote of confidence from Mr. Hatfield for Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX).

“We think there’s an opportunity to be a contrarian and buy MLPs at what we think is a discounted price relative to fair value, get high yields that are averaging about 8% right now, get dividend growth, potential low-teens total returns, just because of that overhang which caused a lot of investors to just abandon the sector.”

Get the complete picture on the portfolio picks Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX) by reading the entire 2,192 word interview with Jay Hatfield, energy infrastructure expert,  founder, CEO and portfolio manager of Infrastructure Capital Advisors, exclusively in the Wall Street Transcript.

McDonalds (NYSE:MCD) is a top pick from Sean Chaitman, President and Chief Investment Officer of Shelter Rock Management.

Sean Chaitman, President and Chief Investment Officer of Shelter Rock Management.

McDonald’s (NYSE:MCD) is a dividend growth stock that lets investors sleep at night according to Sean Chaitman, President and Chief Investment Officer of Shelter Rock Management.

He has three decades of investment management experience as a portfolio manager and a research analyst.

Prior to Shelter Rock, he was at Heirloom Capital Management, a long and short investment fund that had assets in excess of $500 million.

He was also a member of the long and short investment fund Zinc Capital Management where he focused on technology investments.

Mr. Chaitman was formerly a senior equity research analyst at Jesup & Lamont Securities Corporation and a member of Smith Barney’s value stock research team.

Mr. Chaitman received a B.S. degree in economics from the University of Wisconsin and an MBA from Columbia Business School.

He was ranked by Reuters as a top 10 small- and mid-cap electronics analyst in its 1999 and 2000 surveys.

He has been quoted and featured in The Wall Street JournalInvestor’s Business DailyForbes and The Wall Street Transcript. Mr. Chaitman is married to Lori, global head of investor relations at Kyndryl Holdings, and  they have two sons, Max and Jack.

In his 2,245 word interview, exclusively in the Wall Street Transcript, Mr. Chaitman places McDonald’s (NYSE:MCD) as a core holding.

“Another stock that we like is the ultimate sleep-at-night dividend growth stock, and that’s McDonald’s (NYSE:MCD).

It’s been a solid long-term core holding in all of our strategies. McDonald’s (NYSE:MCD) has raised their dividend every year for the last half century. We think the stock can continue to deliver high single-digit to low double-digit returns in the next five years.

The company’s been very successful with their digital ordering, menu creativity and productivity enhancements. We know McDonald’s (NYSE:MCD) will greatly benefit from artificial intelligence which we expect to continue to drive cash flow.

The nice thing about McDonald’s (NYSE:MCD) stock is when the economy is strong, people eat at McDonald’s (NYSE:MCD).

When we’re in a tough economy, like we’re in now, people go there even more.

The stock also tends to shine in difficult markets. Last year it was a standout for having positive returns.

The same thing even happened in 2008, which was the worst market in most of our lifetimes — actually all of our lifetimes. It’s a good hedge for our portfolios when we go through difficult markets…

Wendy’s (NASDAQ:WEN) and Google (NASDAQ:GOOG) already announced an artificial intelligence chat-box drive-through partnership so we know McDonald’s (NYSE:MCD) is also working on this.

I would expect when we go through drive-throughs, instead of a person saying, “What can I get for you” — you’re probably going to have a computer, an automated program, asking that.

This will lead to a lot of employee savings and efficiencies…

One thing we know is, at McDonald’s (NYSE:MCD), they tend to get ahead of the trends.”

Two other stock picks rival McDonald’s (NYSE:MCD) in the Chaitman portfolio:

“There’s a couple of stocks that we’re invested in that are benefitting from the resurgence in travel now that the pandemic has subsided. O’Reilly Auto Parts (NASDAQ:ORLY) is a large supplier of car parts and Transdigm (NYSE:TDG) is the leading supplier of airplane parts.

They’ve both been great stocks to own and we think that will continue to be the case over the long term.

Both companies are growing double digits and generate very strong cash flow.

In the case of O’Reilly, more people are taking road trips and new cars have become less affordable.

This is causing more wear and tear on cars. O’Reilly’s taken advantage of this by opening new stores.

They have a large distribution network of readily available parts and a well-trained workforce of service professionals.

This helps generate a lot of repeat business.

They also use a lot of their excess cash flow to fund a large share buyback program.

The company has actually bought back close to 50% of their shares over the last decade.

This is a nice tailwind for their earnings per share growth and it helps support the stock in difficult markets.

For Transdigm, as I mentioned, it’s the leading plane parts supplier and they have the added benefit of being a single-source supplier for a lot of high-margin proprietary parts used on most commercial and military aircraft.

Over time, the company grows with the aerospace industry, but at a much quicker pace, since they use a lot of their excess cash to buy other aerospace companies.

They also pay out large special dividends every couple of years using their excess cash flow.”

Dividends from McDonald’s (NYSE:MCD), O’Reilly Auto Parts (NASDAQ:ORLY) and Transdigm (NYSE:TDG) are not the portfolio building stock recommendations in this exclusive Wall Street Transcript interview.

“We always go through these periods.

And I would go back to a famous quote that Warren Buffett once said: “Only when the tide goes out do you learn who has been swimming naked.”

Every year we get these hot technologies and new investment themes that people get excited about.

There’s a halo effect on a lot of stocks that get caught up in it and don’t deserve it.

People buy up a group of stocks — no matter what their fundamentals — out of a fear of missing out.

You see a bubble form and then the bubble pops.

I think that as you invest over time, you want to be aware of that.

If you remember a few years ago, everybody was looking for the next Tesla.

An electric vehicle company, Rivian (NASDAQ:RIVN), actually went public with no sales and it had a value more than FordGM and some other big car companies combined on the promise of making electric trucks for Amazon.

Not surprisingly, Rivian’s stock has dropped about 90% from the IPO. We saw the same with crypto.

I think the lesson to learn is: Know what you own, know why you’re investing in it, and don’t overpay for smoke and mirrors.

This is why we follow processes when we invest — to help keep our emotions in check.”

Read the entire 2,245 word interview, exclusively in the Wall Street Transcript.

 

PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL) are two bank stocks that were negatively affected by the Silicon Valley Bank debacle.

Christopher Marinac, Director of Research at Janney Montgomery Scott, believes this may provide investors with a low entry point into the stocks.

In this 5,517 word interview, exclusive to the Wall Street Transcript, Mr. Marinac details what it will take for PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL) and the entire banking sector to recover.

PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL) are two bank stock picks from Christopher Marinac, Director of Research at Janney Montgomery Scott.

Christopher Marinac, Director of Research, Janney Montgomery Scott.

Mr. Marinac oversees the firm’s Equity Research team, which covers more than 225 companies within the financials, health care, infrastructure, and real estate sectors.

Mr. Marinac has more than 27 years of financial services and research analysis experience. Prior to joining Janney in 2019, he was Co-Founder and Director of Research at FIG Partners LLC, a premier investment banking and research firm specializing in community banks.

At FIG, he established and managed an award-winning Equity Research team that covered more than 150 banks, thrifts, and REITs.

Earlier in his career, he spent six years as Managing Director at SunTrust Robinson Humphrey and five years as a Research Analyst at Wachovia Corporation (formerly Interstate/Johnson Lane Inc.).

He has served as a financial expert and resource to global and national media outlets including American Banker, Bloomberg, CNBC, Financial Times, FOX Business, and The Wall Street Journal.

Mr. Marinac graduated from Kent State University with a Bachelor of Science in Accounting and Finance.

He is actively involved with Atlanta Ronald McDonald House Charities Inc., where he is serving his fourth three-year term as a board member.

“Every investment participant can either be labeled as a specialist, where they’re bank-dedicated specialists and really understand banks and financials, or they are generalists, which is that they own multiple sectors, they have expertise in some, but they tend to be general, and so they’re not, I would say, bank aficionados.

They own banks because they are required since banks tend to be a major part of the index.

If you’re Russell 2000, you might be almost 20% in banks. Other indices, it may be closer to 12% or 15%.

Either way, the bank sector tends to be a meaningful component of your benchmark, and you must knowingly underweight your benchmark and have zero relative to your benchmark.

Sometimes that happens.

In 2008 and ’09, there were many investors who just completely left the sector because they wanted to let the dust settle on the carnage of the Great Financial Crisis. And because of those memories, a lot of people thought that because of a couple of bank failures that we’re right back to the financial crisis of 2008.

That’s not the case, but it is the issue that we face, because perception can be reality in the short term in the stock market.

And so, we must be respectful of the idea that we have investors who think this is a repeat of 2008 and 2009, and that muscle memory of looking back so quickly at 2008 is why the stocks are underperforming.

The flip side of this whole conversation is the opportunity to have outsized profits in banks if given the time and patience for this to play out.

That’s really where the debate goes, and where I think our conversation could be enjoyable for readers, because I think that’s where the opportunity is.

So part of what I thought might be interesting is to give you a little bit of a lay of the land for what the concern is with investors, and then how we feel it’s going to play out.”

This may benefit investors will to put their investment dollars into PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL).

“…That’s part of the challenge that hit us in March, because Silicon Valley Bank had the largest securities portfolio, a lot of it was classified as held to maturity — HTM — and it was definitely underwater immediately from higher interest rates.

Silicon Valley did not prepare for the liquidity necessary to give their depositors their money back, and so Silicon Valley had a classic run on the bank in a matter of hours on March 9th, 2023.

The bank failed the next day, because the FDIC had to close it because the bank was upside down; they just didn’t have a choice.

That led to a contagion of Signature Bank (OTCMKTS:SBNY) and First Republic (OTCMKTS:FRCB) and a few other banks, namely PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL) who struggled and have since stabilized.

My opinion is that Western Alliance and PacWest moved deftly to raise liquidity and position themselves to get back on their feet.

They have shrunk in size, but they were able to raise liquidity to stabilize these big outflows.

First Republic hadn’t been able to stabilize, and ultimately failed on the 30th of April.

There were a good seven weeks that passed, but First Republic just was not able to stay open as an FDIC bank; they had to be failed, and then JPMorgan (NYSE:JPM) bought the assets at a discount.

So, where we are today is that the marketplace is still struggling with the aftermath.

We have questioned PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL)

The stocks have been very negatively affected, PacWest more than Western Alliance.

As of today, PacWest trades approximately 36% of its tangible book. Western Alliance is about 85% of its tangible book.

Many banks are trading between 80% to 100% price to book. There are a lot of bank stocks trading at discounts.

There’s been all kinds of conjecture about other possible issues with these big regional banks around the country, and I would tell you that I think there’s been a lot of misinformation from the beginning about what is and isn’t a risk in the system.

Investors are confused.

Some of the general investors believe that they can’t invest in banks, and so they took positions to zero.

There’s an anti-bank mentality in many parts of Wall Street today.

It’s unfortunate, but it’s also the same thing we experienced in 2009.

We’ve seen this movie before and we know how it ends, and it doesn’t really end badly, it just ends with challenges that the industry must face to work through the issues.

2009 was really credit related.

This time it is more interest rate related, and we still have to solve some of these problems.”

Read the entire 5,517 word interview, exclusive to the Wall Street Transcript.

Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP) are three examples of superior ESG investments approved by top tier portfolio managers.

Amberjae Freeman is CEO and Board Chair at Etho Capital and this Xylem (NYSE:XYL) investor is one such portfolio manager.

ETSY (NYSE:ETSY) investor Amberjae Freeman is the CEO and Board Chair at Etho Capital.

Amberjae Freeman, CEO and Board Chair, Etho Capital.

Her career in sustainable finance began 15 years ago when she received dual fellowships with the Clinton Global Initiative in New York City and the Clinton Hunter Development Initiative in Kigali, Rwanda.

Ms. Freeman developed innovation-focused thematic portfolios for fintech startup Swell Investing.

As senior analyst for the SRI Wealth Management Group at the Royal Bank of Canada (RBC), she developed proprietary ESG and impact research and mission-related investment solutions for institutional, foundation, and endowment portfolios representing US$2 billion in assets.

Ms. Freeman was also an adjunct political science and economics professor at Santa Barbara City College (SBCC) and coordinated country-specific research to support asylum cases for the Center for Gender & Refugee Studies (CGRS) at UC Hastings College of the Law.

Ms. Freeman received bachelor’s and master’s degrees in global and international studies from the University of California, Santa Barbara.

In this 3,136 word interview, exclusively in the Wall Street Transcript ESG Investing Report, Amberjae Freeman explores the techniques behind ESG investing and what process leads to a portfolio pick like Xylem (NYSE:XYL).

“Our approach is quantitative and qualitative.

Our key differentiator is that we focus first on carbon emissions data.

We use total supply chain carbon emissions data Scopes 1, 2, and the critical and often overlooked Scope 3 carbon emission information to determine a company’s overall climate efficiency and investability.

We also conduct qualitative ESG bad actor risk assessments as well. That means firms with poor management decision-making regarding social and environmental concerns and companies with a significant track record of poor corporate governance would not be appropriate for investment.

We also avoid companies involved in certain kinds of activities, such as the production of alcohol, companies that primarily derive revenue from gambling, or the production and sale of weapons are also ineligible for inclusion…

The way we think about sustainable investing has a lot to do with not just avoiding so-called “bad actors” but also avoiding certain kinds of industries and sectors altogether. For example, we avoid tobacco because the cultivation of tobacco is very carbon-intensive and detrimental to the environment.

In the same way, violent conflicts and war are ecologically disastrous and detrimental to humans and wildlife, so we avoid investing in weapons…

I am surprised that some investors still cling to the notion that investing sustainably means you will have to sacrifice returns. This assumption is patently false.

The idea behind modern portfolio theory is that an investor can maximize their return by taking on the optimal amount of risk and that the best way to minimize risk is to distribute your capital across industries and sectors.

This is, of course, solid reasoning.

However, simply distributing your investments across sectors and industries doesn’t account for the fact that some industries and sectors may experience a significant loss of value over time as they become less viable investments as market demand changes.

The idea behind sustainable investing is that you are trying to create value for your investors in perpetuity. That means forever. To do that, we must have an eye on what is happening in the markets today and what solutions and technologies will shape the future.”

This detailed process has led to an investment in Xylem (NYSE:XYL), along with many other portfolio picks.

“…You may also find Xylem (NYSE:XYL). It is a water technology company that thinks about water solutions holistically. They create water solutions for residential and industrial areas.”

But Xylem (NYSE:XYL) is not the only US stock for investors, our next portfolio manager is a investor in Etsy (NASDAQ:ETSY).

R. Paul Herman, FSA, is CEO, Founder, Chief Investment Officer, Portfolio Manager and Series 65 Investment Adviser at HIP Investor.

Etsy (NYSE:ETSY) investor R. Paul Herman, FSA, is CEO, Founder, Chief Investment Officer, Portfolio Manager and Series 65 Investment Adviser at HIP Investor.

R. Paul Herman, FSA, CEO, Founder, Chief Investment Officer, Portfolio Manager and Series 65 Investment Adviser, HIP Investor.

HIP Investor licenses its 140,000 impact investment ratings of stocks, bonds and funds to investors, investment advisers, wealth advisers, fund managers, hedge funds, fiduciaries and retirement plans, including 401(k)s.

HIP’s ratings have helped drive the Newsweek Green Rankings and the Peter Drucker Index.

HIP’s strategies focus on great places to work, sustainable real estate, global dividends and sustainability leaders.

Mr. Herman’s book “The HIP Investor: Make Bigger Profits by Building a Better World” is included in 28 university, MBA and MPA curricula.

Mr. Herman is a graduate of the Wharton School of Finance at the University of Pennsylvania, he has advised boards and executives while with McKinsey, and is an adviser to the Sustainability Accounting Standards Board (SASB), Net Impact and Sustainable Brands.

In his 3,200 word interview, exclusively in the Wall Street Transcript, Paul Herman leads investors through the thought process that led to his Etsy (NASDAQ:ETSY) investment.

“We focus on companies that have declared a goal ranging from net zero by a certain year to being climate positive by a certain year. And those all relate to greenhouse gas emissions and other environmental factors.

You’ll find companies across all sectors, all industries, including companies like Novo Nordisk (NYSE:NVO), which battles diabetes, that has an aggressive climate goal, as well as companies like Etsy (NASDAQ:ETSY) that have a business model that reuses materials and hence can have a lower climate footprint, as well.

We also have a Great Place to Work strategy.

This, again, generally is about 50 companies in the strategy.

These are companies where employees have been surveyed, and historically, you’ve seen these firms in Fortune magazine working with the Great Place to Work Institute.

And those companies, in addition, usually have diverse workforces, workforces that don’t turn over, but actually stay inside the company and grow inside the company — and again, cutting across multiple industries and sectors.

But since many CEOs say people are the most important asset, this actually prioritizes companies that value their human capital and typically get a positive return on investment out of employee innovation and employee teamwork.”

While Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY) pass the investment test for our portfolio managers, this portfolio manager has conducted high level analysis has led to an investment decision for Copel (NYSE:ELP).

Yongai Xu, CFA, is a Portfolio Manager at Canada’s Letko, Brosseau & Associates.

Copel (NYSE:ELP) investor Yongai Xu, CFA, is a Portfolio Manager at Canada’s Letko, Brosseau & Associates.

Yongai Xu, CFA, Portfolio Manager, Letko, Brosseau & Associates.

Before joining the firm in 2013, she worked for HSBC Bank (China) from 2009 to 2011, focused on retail banking strategy and investment advisory.

Ms. Xu is a graduate of HEC Montréal where she received a M.Sc. degree in finance, and Fudan University, where she received a bachelor’s degree in international economics.

She is a CFA charterholder and a holder of the FSA credential.

In her 2,136 word interview, a TWST exclusive, Ms. Xu goes through the investment analysis that leads to portfolio pick like Copel (NYSE:ELP).

“ESG analysis starts at the very beginning of an investment analysis.

And then each analyst at our firm has an industry-specific framework, because our company is organized along global sectors and global industries, so every analyst is a sector specialist.

They are the one who is most familiar with the most important ESG factors that are most relevant to their sector.

So, whether it’s for developed country companies or emerging market companies, they apply the same metrics.

For example, let’s take the mining industry.

We look at the labor relationship with local communities, the regulatory environment, the safety environment and safety policies of the company, the safety track record, and then all the way to the environmental footprint, like waste intensity, water pollution, and CO2 emission.

It’s a very comprehensive framework, but very particular to that industry.

And because this kind of expertise is needed for different sectors, we believe the analysts are the best people to integrate this ESG analysis, which means we do not layer on external reports or external third-party vendors for the ESG conclusion and ESG analysis.”

This led her to “…one company called Copel (NYSE:ELP).

It’s the third largest power distribution company in Brazil.

If you look at the energy mix of this company, 85% of their power generation assets are based on hydro and 14% of the assets are from wind and solar.

They have a joint venture in a gas plant. And in the most recent 2030 net zero target, they will eventually divest the stake in that gas plant to be net zero by the end of 2030.

And they have a very rich pipeline of new power generation capacities, mostly concentrated in renewable energy. This is the most important reason why we like the company.

And if you look at their corporate governance, they have recently migrated from a lower level to a higher level in terms of corporate governance in the Brazilian Stock Exchange.

And if we look at their track record of shareholder return policy, such as dividend policy and the board composition, and the level of board independence, it’s really a role model in emerging country companies in terms of ESG.”

Although not an investor in Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP), Sheila King has some insights into creating an ESG friendly portfolio.

Sheila King, CFA, is Vice President, Co-Portfolio Manager Fixed Income at Eagle Asset Management.

Sheila King, CFA, Vice President, Co-Portfolio Manager Fixed Income, Eagle Asset Management.

Sheila King, CFA, is Vice President, Co-Portfolio Manager Fixed Income at Eagle Asset Management.

Ms. King co-manages Eagle’s Tax-Advantaged Fixed Income strategies and Eagle ESG Focused Fixed Income suite of products.

She joined Eagle in 1987 and has 36 years of investment experience.

During her time at Eagle, Ms. King has served as a Credit Analyst and Co-Portfolio Manager.

Ms. King was named to InvestmentNews’ 2022 list of Women to Watch.

She also served on the board of directors for CASA (Community Action Stops Abuse) for 10 years.

She is an avid athlete, having completed Half Ironman and Ironman races and hiked to an elevation above 14,000 feet. She received a bachelor of science degree in business administration from the University of North Carolina and is a CFA charterholder.

In her Wall Street Transcript exclusive 2,755 word interview, Sheila King explains how Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP) are not the only portfolio assets that an ESG investor should consider.

“Here’s the way I look at it.

As a portfolio manager, I’m not looking to go up against ESG indices.

I’m looking to go up against the traditional indices — that being, say, the Bloomberg Intermediate U.S. Government/Credit Index, or the 10-year muni-index.

I believe that over a long period of time from an ESG perspective, we’re looking to lower risk.

It’s something you’ll always see from a fixed income manager. And so, lowering risk and having attractive risk/reward returns fits very well for ESG.

So I’m always going up against your traditional indices. And I think that makes sense. I try to let the clients know that. So, certainly I believe that we can. The clients expect us to be able to be in line with — or beat — our indices.”

Xylem (NYSE:XYL), Etsy (NASDAQ:ETSY), and Copel (NYSE:ELP) are just a few of the many portfolio recommendations made by our experienced and expert portfolio managers.

Get them all by reading the entire interviews, exclusively in the ESG Investing report, only in the Wall Street Transcript.

 

CEO of Phunware (NASDAQ:PHUN) Russ Buyse

Russ Buyse, CEO, Phunware (NASDAQ:PHUN)

COO of Phunware (NASDAQ:PHUN) Randall Crowder

Randall Crowder, COO, Phunware (NASDAQ:PHUN)

Phunware (NASDAQ:PHUN) has two highly experienced senior executives guiding the company to shareholder returns.

In this 5,432 word interview, exclusively in the Wall Street Transcript, the Phunware CEO and COO describe their path to success.

Russ Buyse is the CEO of Phunware (NASDAQ:PHUN).

Mr. Buyse has two decades of executive leadership experience in both product and services companies, leading teams to create innovative solutions from startups to enterprises.

He founded two companies, served as an executive in six others, and was an Entrepreneur in Residence at a venture capital firm. He holds a bachelor’s degree in computer science from the University of Texas at Austin.

Randall Crowder is the COO of Phunware (NASDAQ:PHUN).

Over the past decade, Mr. Crowder has led over 40 angel investments and deployed over $60M across 14 companies as a venture capitalist.

Mr. Crowder is a co-founder and Managing Partner at TEXO Ventures where he focused on tech-enabled health services and he is the sole founder and Managing Partner at Novē Ventures where he focuses on investing in existing companies looking to leverage blockchain technology.

Prior to TEXO, he led the Central Texas Angel Network (CTAN) to becoming one of the most active angel networks in the country.

Mr. Crowder also founded and launched Texas Venture Labs (TVL) at UT in order to give the next generation of investors unique experiential learning opportunities outside of the classroom.

Mr. Crowder was a Captain in the United States Army and is both Airborne and Ranger qualified.

Mr. Crowder holds a B.S. from the United States Military Academy at West Point and an MBA from the McCombs School of Business.

He is also a Kauffman Fellow and member of the Young Entrepreneur Council (YEC).

The COO of Phunware (NASDAQ:PHUN) explains the company’s beginning.

“Phunware was founded back in 2009.

The premise was pretty simple. It was helping large brands transition from web to mobile. At the time, mobile was non-obvious; about 3% of internet content was consumed on mobile. We set about correcting that.

We built the first NFL app, the first NASCAR app, most of Fox Media Group’s mobile application portfolio, and the Olympics. We’ve done hotels, hospitals, stadiums, airports.

There aren’t many firms with more experience in mobile than Phunware.

But what you become is really a custom development shop and we didn’t want to be that.

We wanted to innovate within the mobile space, so that these large brands could build scalable ecosystems on mobile that took into account all the other competing datasets and third-party solutions that they might leverage in order to scale and grow successfully.

And so, we invested in a platform.

That platform now allows you to license mobile software the same way you would license a CRM from HubSpot or Salesforce.

This allows our clients to tech-enable contextual engagement.

For about 10 years, we were this custom development shop, but we were making these investments in what this platform would become, and we went public with the idea of scaling that location-based SaaS platform.

We raised about $100 million as a private business. We raised over $100 million since we went public at the end of 2018.

We work primarily in the health care and hospitality space, but it’s really anywhere you have a complex user journey; anywhere you need that Disney World experience where you’re going to download a mobile application in order to enhance your experience and optimize everything you’re going to do while you’re on site.

For most businesses, what you’re really looking at is how can I better engage my target audiences, my consumers, and use mobile to make more money, save more money, or get more out of the money I’m already spending and make proper use of all the other systems I use to engage consumers…

Think about your experience as a consumer.

You live a very analog life even though you’re surrounded by a very connected digital world.

You go to a grocery store and maybe you cross an RF signal to open a door, maybe you tap your credit card on the reader when you leave, but that’s it. Technology doesn’t really serve you.

You go to your favorite beach resort and still today, people are sitting somewhere by a pool wondering where in the world the waiter is or you’re sitting on a beach thinking, “I sure wish I could get another towel.”

There are all these moments for technology to serve you if there was just the proper connection, if you can reach the person who could scratch that itch and address that pain point.

That’s what our mobile platform is doing. We’re providing context for that engagement.

Who are you? Where are you? What’s important to you right now? Let’s address that in a seamless way.

That’s what Amazon did. If you think about it, Amazon to the world is a global mall, where not only can you buy books, but you can buy anything.

But to small businesses, it’s their CRM, ERP, and POS business systems all wrapped into one that can manage how they engage you and how they sell you products and services.

We’re taking that exact same framework, and we’re applying it to the real world. We’re going to allow businesses to manage all the things they want to get in front of you, so that we can turn your phone into a mobile concierge because we can’t assign an employee to every single consumer that’s on site.

But every single consumer has a phone.

So, let’s turn that phone into a mobile concierge and let’s get you what you need when you need it. It’s mobile ordering.

It’s being able to book and buy.

That’s what was really surprising to Atlantis in the Bahamas.

It’s a 140-acre island with five distinct luxury resorts, and now they’re making seven figures through this mobile application they licensed from us and that actually surprised them.

What’s going on is that people live in an on-demand world, and they have ADHD. We have consumers with limited attention spans.

If you don’t get them when they’re most willing to make a decision to buy or engage or book, you’re going to lose them forever.

That experience has to be flawless and seamless.

The undercurrent of all of this for Phunware is location. We have the best location-based services capabilities in the world.

As an investor, you should be thinking, “OK, I know you have a lot of mobile experience, that makes sense; I know you have a couple of really great reference customers; that makes sense. What are those moats that you created around your platform? What are those dynamic blockers to other people trying to do what you do?”

It’s actually location-based services, or LBS, that is a huge competitive advantage for us. That’s the ability to triangulate a mobile device, both indoors and outdoors so that I can engage you.

Maybe I want to engage you and tell you how not to get lost at a hospital. Everybody has dealt with that. You go to these massive hospitals, and you can’t find your way around.

We have a solution for that and can make sure that you know where to go, what parking garage to park in, what level to park in, how to go directly to your appointment so that you’re not late, how to basically drop a pin if you want to have somebody else from your care team find you or family member meet you.

And then the same thing for a resort.

You’re at Atlantis and you’re trying to find your way to the Stingray Encounter and you want to link up with your significant other.

Easy.

We can allow you to book and buy that right from the palm of your hand.

All of that requires this location-based services capability, where we can find you, engage you, and then give you something that actually delights you.”

Randall Crowder, the COO of Phunware (NASDAQ:PHUN) explains how investors will reap the benefits of the Phunware (NASDAQ:PHUN) software platform.

“I would tell investors if I could tell them anything, you’re looking at Phunware and it’s somewhat binary.

The way we’re trading today, if you don’t want to open a position by making an investment, you’re assuming we’re just going to go away.

We haven’t gone away in the last 14 years and we’ve innovated in some of the most incredible spaces and with the most incredible brands.

It’s a great entry point if you’re checking out this interview today because we have traded very well in the past.

If you look back at our stock price, it’s more volatile than we would like, but we have been a top gainer on NASDAQ in terms of volume and price appreciation multiple times: 3x, 4x, 9x.

A lot of people are tracking PHUN, the ticker symbol.

We are very liquid and have great volume for the size of the company we have.

But when our stock starts to move, and we talk about the brands that we’re working with, our stock moves in a big way.”

Get the complete picture of Phunware (NASDAQ:PHUN) by reading this entire 5,432 word interview, exclusively in the Wall Street Transcript.

 

Bridgeline Digital (NASDAQ:BLIN), GSE Systems (NASDAQ:GVP), and Materialise (NASDAQ:MTLS) are three widely divergent software companies but all are dedicated to turning around an existing software business.

Bridgeline Digital (NASDAQ:BLIN) CEO Ari Kahn

Ari Kahn, CEO, Bridgeline Digital (NASDAQ:BLIN)

Ari Kahn is Chief Executive Officer of Bridgeline Digital, (NASDAQ:BLIN).

Prior to joining Bridgeline, Dr. Kahn was the co-founder of FatWire, a leading content management and digital engagement company.

As the General Manager and Chief Technology Officer of FatWire, Dr. Kahn built the company to a global corporation with offices in 13 countries and top industry analyst ratings.

After winning many of the Global-2000 as customers and growing annual revenues to more than $40 million, FatWire was acquired by Oracle in 2011 for $160 million.

After leading that successful acquisition, Dr. Kahn became Chairman and CEO at the resort development company Great Land Holdings.

He led the company through the 2008 recession and grew it into one of the most successful businesses in the region.

Dr. Kahn received his Ph.D. in Computer Science and Artificial Intelligence from the University of Chicago.

In this 2,924 word interview, exclusively in the Wall Street Transcript, the highly experienced software executive details his turnaround strategy for Bridgeline Digital (NASDAQ:BLIN).

“I’m one of the founders of the marketing technology space with a company called FatWire.

And I saw Bridgeline around 2016 at an investor conference and saw that it was essentially in an identity crisis trying to make this transition. And I invested in the company and then ultimately came in as the CEO to transform the company.

So today we are a company that is squarely a software company focusing on marketing technology with a very specific mission.

And that is to help our customers grow their online revenue by increasing their traffic, and we’ve got several apps, software apps, that do that, by increasing the conversion of that traffic to their website into buyers, into customers, and we’ve got apps that do that, and then also increasing the average revenue per customer on the website.

So examples for this are, we’ve got apps that help your website have a higher ranking at Google.

This would increase the number of visitors.

We have apps that help those visitors find the products that they want to buy with recommendations, for example, or with enhanced search, so if you’ve got a large product catalog to be able to search through your products.

And then we’ve got products that will help them once they’re ready to check out, make recommendations for purchases, for instance, and increase the amount that they’re going to spend.

So that’s who we are today.

We’ve been publicly traded since, I think, 2007.

But after I came in, we essentially restarted the company in 2019.

I invested, I brought in other investors, and we started doing acquisitions in this space. And we’ve been growing through acquisitions in the marketing technology space.”

GSE Systems, Inc. (NASDAQ:GVP) CEO Kyle Loudermilk

Kyle Loudermilk, CEO, GSE Systems, Inc. (NASDAQ:GVP)

Kyle Loudermilk is the CEO and President of GSE Systems (NASDAQ:GVP) and also serves as a member of the company’s board of directors.

He is a technology executive whose 25-year career has focused on growing technology companies through organic growth, geographic expansion and M&A, creating significant shareholder value along the way.

In his extensive 4.482 word interview, exclusively in the Wall Street Transcript, the GSE Systems (NASDAQ:GVP) CEO goes over his evolutionary strategy to develop shareholder wealth.

“The origins of GSE trace back over 50 years to Singer-Link Corporation, and it has been a public company since the 1990s, through the combination of three companies that together provided nuclear power plant simulation systems, globally. That company is GSE Systems with the ticker symbol GVP.

I’ve been here for over eight years. I was brought in as part of a turnaround team to look at the company and understand how we can move it forward.

What we did was really focus on the very origins of the business that made the company special, which was serving the nuclear power industry.

We got rid of all distractions, proved that we can be profitable serving nuclear power for that period of time, and then leveraged our ability to be profitable and diversify the company so that we could offer a broader set of solutions into the nuclear power industry.”

The next step in the GSE Systems (NASDAQ:GVP) turnaround story was building on the base revenue stream.

“What we learned was there was a very broad ecosystem of vendors serving nuclear power that were in need of a transition plan: owner-founded, aging out.

And so, we found some opportunity to diversify the business, to provide unique engineering services and white-collar staffing services to nuclear power.

From there, we embarked on a series of acquisitions.

One was True North Corporation that provides specialty engineering choice around programs and performance.

Another was DP Engineering, which does design and analysis engineering work for the nuclear power industry and defense sectors.

Another was Absolute Consulting which provides white-collar “above the shoulders” specific staffing to industry and that was leveraging our history with Hyperspring, which provides training services and white-collar staffing to nuclear power, an acquisition that occurred shortly before I joined the company.

By putting these companies together, we’ve diversified the business.

We’re a very different company today in what we offer to this very unique and special industry, nuclear power and adjacencies in government labs and nuclear defense.

In parallel, we’ve taken the intellectual property, which historically the company would give away to generate engineering projects. We now package that intellectual property to license it and have created an annuity stream for the business that’s been growing nicely.”

Materialise (NASDAQ:MTLS) Executive Chairman Peter Leys

Peter Leys, Executive Chairman, Materialise (NASDAQ:MTLS)

Peter Leys has been the Executive Chairman of Materialise (NASDAQ:MTLS) since 2013.

Previously, from 1990 to 2013, Mr. Leys was Corporate Finance Partner at the Brussels office of Baker & McKenzie CVBA, where he focused on mergers and acquisitions, and capital markets.

Mr. Leys teaches a mergers and acquisitions contract design course at KU Leuven.

Mr. Leys holds a Candidacy Degree in Philosophy from KU Leuven and Master of Law degrees from the KU Leuven and the University of Georgia.

In this 4,492 word interview, exclusively in the Wall Street Transcript, the Executive Chairman of Materialise (NASDAQ:MTLS) explains in detail how to manage a software company to success.

“The company started its activities as a typical 3D printing facility where you get files from third parties, and you 3D print them and then you send the printed part to the customer.

But as early as the 1990s we learned that it’s not just the printing that matters.

It’s actually the knowledge that you gather as to how we can print more effectively that really makes a difference.

We got CAD files from customers who were not able to print those products themselves, and we were able to do so.

The customers asked us, “Can you just explain to us how you do it?”

And that’s where we decided very early that next to simply printing parts and sending them to the customers, we should probably package the knowledge that we gather as to how you should print more effectively, turn that into a software package, and then license that software, not only to our customers, but also to our competitors.

And that’s what we started doing as early as the mid-1990s.”

This 3D expertise developed into a multiple revenue streams for Materialise (NASDAQ:MTLS).

“The manufacturing activity, which is still there, but basically now has made the move to 3D printing many more end parts rather than prototypes.

And second, our software activity, where we still, as of today, gather knowledge from our colleagues at the manufacturing unit and then package it and send it in the form of new releases, or license it in the form of new releases to our customers…

And then we have a third segment, which is the medical segment, because very quickly, we learned that there’s another way to “valorize” or monetize your knowledge, the knowledge that you gather as you print.

It’s not by simply converting that into a software package, but it’s also by going deeper, going more vertical into a specific activity.

We quickly learned that one of the most attractive segments for 3D printing was the medical segment in general, and one in particular, the medical device sector.

And if I can be even more specific, the sector of personalized medical devices, because with 3D printing at virtually no extra production costs, you can make many different personalized products, which will basically cost you the same as if you were to make a batch of identical products because the printer just prints along, regardless of whether it makes 16 personalized hip implants or 16 standard implants.

And of course, personalization in the medical sphere just adds more value and makes much more sense.

Hence, more openness from that sector to actually venture into the sector of personalized medical devices.

So our medical sector is where we combine, on the one hand, our software knowledge, and on the other hand, our manufacturing knowledge, to make very particular personalized implants and personalized medical instruments for particular sub-segments of the medical device industry.

I refer to, on the one hand, the cranial-maxillofacial sub-segment — in short, CMF — all the bones that have to do with the face.

And on the other hand, the orthopedic sector, the joints like hip, shoulder and knee.

Obviously, I mean, it doesn’t require too much explanation to understand that, in particular, for the face, personalization makes much sense.

People might have a similar knee implant.

When we talk about nose bones, you probably want more personalization than just have the same nose bone that would perfectly fit my face.

And so, the entire sector and also the surgeons are focused on personalization.

Hence, our very successful collaboration with Johnson & Johnson in the field of bringing personalized implants for the CMF market to the U.S. and European markets.

And we have similar collaborations, for instance, with Zimmer Biomet with respect to joints in general, and more, in particular, personalized medical instruments to better place knee implants.”

Learn more about Bridgeline Digital (NASDAQ:BLIN), GSE Systems (NASDAQ:GVP), Materialise (NASDAQ:MTLS) by reading the complete interviews with their CEOs, exclusively in the Wall Street Transcript.

Peter Leys, Executive Chairman, Materialise (NASDAQ:MTLS)

Technologielaan 15, 3001 Leuven, Belgium

 

WNS (NYSE:WNS) and Globant (NYSE:GLOB) are two top picks from Maggie Nolan, CPA, is an IT services analyst at William Blair

Maggie Nolan, CPA, IT services analyst, William Blair

WNS (NYSE:WNS) and Globant (NYSE:GLOB) are two top picks from this award winning professional equity analyst.

Maggie Nolan, CPA, is an IT services analyst at William Blair.

She began at the firm in June 2015 and previously worked in public accounting.

She graduated from Miami University with a bachelor’s degree in business, with majors in finance and accounting.

In her wide ranging, exclusive 3,519 word interview with the Wall Street Transcript, Ms. Nolan demonstrates her ability to pick winners.

“IT services are the bucket of companies that will do anything from system integration work, tech consulting, product development, and beyond. I also include the BPO companies within my coverage — business process outsourcing — and some value-added resellers as well…

I cover bellwether IT services companies in this space, so names like Accenture (NYSE:ACN) or Cognizant (NASDAQ:CTSH). I cover Infosys (NYSE:INFY).

I cover some of the custom product development companies, so like an EPAM (NYSE:EPAM) or a Grid Dynamics (NASDAQ:GDYN) or a Globant (NYSE:GLOB), and in the BPO space, WNS (NYSE:WNS), Genpact (NYSE:G) for example, and value-added resellers, like CDW  (NASDAQ:CDW) or ePlus (NASDAQ:PLUS).

All in, I have over 20 companies under coverage in this space, ranging from large cap all the way down to even some micro-cap companies.”

A recap of the last few years illustrates how WNS (NYSE:WNS) and Globant (NYSE:GLOB) will become dominant stocks in this category:

“It’s been a really interesting last couple of years for IT services in general.

You have the COVID-19 pandemic that hit in 2020, which really changed how people look at the industry.

You had a massive shift in work from home that accelerated a lot of business decisions around migration to the cloud, collaboration technology, looking at different ways to interact with their customers in a virtual world.

And so, the IT services space, when things stabilized a little bit from the initial fear of the pandemic, saw a huge boom in spending around digital transformation and all of the work that was fueled by those trends that I mentioned from the pandemic.

C-suites and boards everywhere were asking the question: How can I use technology to stabilize my business in this environment to help me overcome supply chain challenges, challenges with reaching the customer through a virtual format?

And so, you saw a tremendous amount of spend going towards these types of initiatives and the group really benefited.

And we saw growth rates really accelerate across the IT services group to levels that we have not seen in the recent past.

You saw hiring levels accelerate really rapidly for the people who do this work within the organizations to meet the tremendous demand that we saw.

And some really interesting dynamics around the employees at these companies, taking on different preferences of how they want to work and where they want to work, as we saw with a lot of companies during COVID.

And we saw a shift of these employees into new roles, high levels of attrition, and it drove wages up over time as well. You have a really strong demand environment for these companies.

You have a changing supply side as well. Pricing really increased and that was kind of the peak of COVID, all these factors coming together, coming out of the initial phases of COVID.

So the next phase was things starting to normalize a little bit.

You saw the spending patterns at clients starting to come down and a set of companies within IT services realizing that, well, we can’t hire at these rates forever, because, one, there’s not enough talent out there.

We’re already very supply constrained.

There’s a big gap in the number of employees to actually fit these job descriptions.

Then the other piece of it is that they didn’t want their culture to start to fray from bringing on so many employees in such a short amount of time.

Because when the culture starts to fray, the quality of the deliverables to your clients can decline.

So you saw these business models starting to slow.

Around the same time, geopolitical turmoil impacted the supply of talent and demand patterns from clients.

And then you saw the onset of some level of macroeconomic uncertainty which started to slow down some of the spending as well.

So we’ve come to a point where now we’re seeing slower levels of growth out of the majority of this group, although there are some that are more resilient than others.

BPO, in particular, tends to have a little bit more resilience when it comes to spending in difficult macro environments.”

The particular strengths that WNS (NYSE:WNS) and Globant (NYSE:GLOB) bring to this situation are detailed in full by Ms. Nolan.

“We’ve talked about several of our BPO companies since the economy has slowed somewhat.

And in particular, we’ve highlighted WNS (NYSE:WNS) as a company that we feel can be a good holding in a scenario where you think there’s going to be a prolonged downturn.

The company has a low correlation to the macro.

So they can grow revenue in the double digits and hold a pretty steady, if not slightly expanding, margin profile in these types of environments because they are able to lean on one of the dimensions of their offerings, which is that they can drive efficiencies in their clients’ business models and drive down costs and increase productivity.

So in that type of environment, we actually see some clients shorten their decision cycles during the sales process and push work more aggressively to a company like WNS (NYSE:WNS) to meet their own needs in terms of their own internal budgets.

So that’s one that we’ve found to be a good holding in this type of environment.

Now, the last couple of weeks have been pretty dynamic for that stock and the peer group around fears around conversational AI and chatbots and what does that do to their value proposition.

Well, WNS (NYSE:WNS) has probably right around or less than a fifth of revenue coming from some of those more customer service types of offerings.

And the reality is, artificial intelligence is not catching them off guard, chatbots are not catching them off guard.

They’ve been incorporating this type of technology into their service offering for a number of years, using chatbots as a first line of defense in customer experience interactions and then also using the technology to augment their own employees.”

“If we stick with our theme around companies that are embracing technology, there’s a company, Globant (NYSE:GLOB)they do a lot of custom product development for their companies, and they’re an interesting one because they’ve seen these trends in artificial intelligence take hold as well. And they’ve done a lot of work within their own business model to have their employees embrace this technology.

So you can look back and see that they’ve been talking about augmented coding, reusable code, no-code applications and empowering their employees with that for a number of years.

They’re one that we’ve always felt has been cutting edge within the IT services landscape in terms of emerging technologies. They’re quick to adopt things internally and then they are really proficient at using those technologies to help improve projects and experiences for their clients as well.

So, a really interesting company that we like.

Certainly, not bulletproof in terms of the macro and client budgets in this type of economy, but definitely long term have really nice positioning for secular tailwinds in digital transformation spend.

So it’s a good time to do work on the company, understand their business model and value proposition.

Again, it’s an IT services company serving mostly blue-chip customer base with employees out of Mexico and Argentina and elsewhere in Latin America as well as India, growing in a normalized environment, healthily in the double digits, and have an ability to drive a similar level of growth on the bottom line as well.”

Get the complete details on WNS (NYSE:WNS) and Globant (NYSE:GLOB), and many others in the IT Services sector, exclusively in the 3,519 word interview in the Wall Street Transcript.

Autodesk (NASDAQ:ADSK) is just one stock recommended by Jay Vleeschhouwer is Managing Director - Software Research at Griffin Securities

Jay Vleeschhouwer is Managing Director, Software Research at Griffin Securities

Autodesk (NASDAQ:ADSK) is just one stock favored by Jay Vleeschhouwer, Managing Director of Software Research at Griffin Securities.

Mr. Vleeschhouwer has over 40 years of research analyst experience in the technology sector, including software, computer hardware and imaging technology.

He formerly was senior analyst at Merrill Lynch, Josephthal Lyon & Ross, Bear Stearns, and Cantor Fitzgerald.

He was ranked by Refinitiv Starmine Analyst Awards (U.S.) #1 in “top stock pickers.”

Mr. Vleeschhouwer received a B.A. degree in economics and political science from UCLA and an MBA degree from the University of California, Berkeley.

“I cover what is referred to as engineering and enterprise software.

In enterprise software, that would include Adobe (NASDAQ:ADBE) and Microsoft (NASDAQ:MSFT).

And under engineering software, which at times has also been referred to as technical software or industrial software, that would include a variety of companies whose products and services are used to design and engineer any number of industrial products, electronics and durable goods.

And the customer base for the companies that I cover, which I’ll name in a moment, would be in the automotive market, aerospace, any number of industrial markets, and as well the electronics and semiconductor markets.

The companies that I follow include Autodesk (NASDAQ:ADSK)Ansys (NASDAQ:ANSS)Dassault Systemes  (OTCMKTS:DASTY)PTC (NASDAQ:PTC) — formerly known as Parametric, Altair (NASDAQ:ALTR) and Bentley Systems (NASDAQ:BSY). And I should also mention Cadence Design (NASDAQ:CDNS) and Synopsys (NASDAQ:SNPS).

And over time, a number of the companies we have followed have been acquired…

The companies that I follow are generally funded from their customers’ R&D and engineering budgets.

And those, by and large, remained quite stable. In fact, in some cases, as we’ve seen in the semiconductor industry, they have increased substantially in the last number of years.”

Autodesk (NASDAQ:ADSK) is most clearly affected by the current rapid expansion of US production plants.

“On the first topic you mentioned, which is onshoring, one example of how that would affect our companies is the design and construction of the manufacturing facilities themselves.

Some of the companies that we follow provide software that is used, in fact, in architecture and engineering and construction activities — known as AEC for short.

The leading company that would come to mind for that would be Autodesk (NASDAQ:ADSK).

To the extent that there is commercial construction activity of that kind, new factories, new battery factories or anything of that kind to support the onshoring activity, some of our companies would stand to benefit from that construction activity.

Later on, once the factories are up and running, again, our companies don’t get paid for how many widgets are produced in those factories.

But the products that would ultimately be made in those factories have to be designed and engineered, of course. And that then brings us back to the companies that we follow.

I think another very topical example of that would be what’s going on with the construction of new semiconductor fabrication facilities by, for example, Intel (NASDAQ:INTC) and TSMC (NYSE:TSM).

Sooner or later, those fabs will be up and running and the semiconductor companies want to utilize those as much as possible.

And that in turn will depend in part on the chips that are designed — and which need to be produced — through those facilities.

In many ways, the design and engineering of not only production facilities, but the products that flow through those facilities can be considered a kind of arms race.

And our companies provide the tools for the competition and product strategy requirements of their customers.

And inasmuch as our companies are in a relatively concentrated industry, that is to say there’s a small number of leading companies that comprise the industry rather than a large number of small companies, we have a fairly concentrated set of companies that then, again, is a very healthy situation, I think, in terms of growth, pricing power, operating margins and cash flow.”

Autodesk (NASDAQ:ADSK) is not the only stock this award winning analyst is pursuing

“In many ways, the companies that we follow — not all, but many — either are developing their own AI for their own purposes, for their own commercial applications.

Microsoft and Adobe certainly stand out in that respect.

A number of other companies have also begun to embed AI capabilities to enhance the productivity of their own products.

And at the same time, a number of our company’s products that they make available to their customers, in turn, enable AI.

So, for example, I mentioned earlier that we follow a number of companies in what’s known as electronic design automation — or EDA for short — Cadence and Synopsys being the two largest companies in that area.

And in addition to embedding AI features in their own software, their software is used by their customers to design AI chips, like NVIDIA (NASDAQ:NVDA), for example.

And then those new chips, in turn, enable more AI.

It becomes this cyclical process, where the software from our companies enables their customers among the semiconductor companies to design better and faster chips generally, but also AI-specific chips.

We see this from Microsoft, for example. In turn, those dedicated processors enable the consumption of more AI functionality and applications. And so, this builds upon itself.”

This recursive investment scenario benefits Autodesk (NASDAQ:ADSK) as well as NVIDIA (NASDAQ:NVDA).

“So, absolutely, our companies are going to be both enabling AI by their customers and offering it commercially within their own software…

Software, by nature, is a high margin business.

There are virtually no production costs associated with software.

There is, of course, the cost of development and the cost of sales and marketing.

But the gross margin on software is typically going to be very, very high.

The way you get operating margin improvement, obviously, is to leverage your R&D spending, your sales spending through faster revenue growth, expanding your markets, and so forth.

Those are all kinds of generic considerations.

But also, you want to think about their end-markets.

When you think about what’s going on in the automotive industry and the new developments there, new kinds of vehicles, new kinds of battery technology, all of that is going to be a tailwind for our companies.”

To get the full 3,289 word interview with the #1 Starmine Analyst Award winner Jay Vleeschhouwer, read it exclusively in the Wall Street Transcript.

Jay Vleeschhouwer, Managing Director – Software Research, Griffin Securities

e-mail: info@griffinsecurities.com

Travelers (NYSE:TRV) is a top pick from Thomas H. Forester, CFA, is the Chief Investment Officer of Forester Capital Management

Thomas H. Forester, Chief Investment Officer, Forester Capital Management

Travelers (NYSE:TRV) is a top portfolio pick from this experienced professional value investor.

Thomas H. Forester, CFA, is the Chief Investment Officer of Forester Capital Management, Ltd. Previously, he managed over $1.4 billion for Scudder Investments, investing in value stocks at the firm’s Dreman Value Advisors.

Prior to that, Mr. Forester managed assets at Peregrine Capital Management and Thomas White International.

He received a B.A. in economics from the University of Colorado and an MBA from the Kellogg School of Management at Northwestern University.

This highly experienced portfolio manager picks Travelers (NYSE:TRV) as a safe bet for today’s market.

“One of the companies that we own is Travelers (NYSE:TRV).

And again, this is another long-term holding. Travelers (NYSE:TRV) is a property/casualty company, largely selling to businesses and institutions.

They’ve done a very good job of being able to choose the customers that they have — to watch the rates that they charge these customers.

They’re looking at profitability, so they’re not going to just take on anybody. They want to find that good mix of acceptable risk and good premium.

So there’s a recipe to that, and each insurance company has their own recipe.

Travelers (NYSE:TRV) has been very good at watching the profitability of the policies that they retain. And it’s more of an art than it is a science, but they’ve done a very good job of managing that.

Their investment portfolio is conservative, and their loss ratios are good.

So it’s a solid insurance company that has grown steadily along.

It hasn’t seen the ups and downs that the banking industry has had.

We like that.

It’s done well over the years, and we think it’s a stock that’s going to stay in our portfolio for quite some time.”

Chief Investment Officer Thomas H. Forester cautions investors on tech names.

“We do have some tech names, though we’re underweight tech.

Oracle (NYSE:ORCL) is one name that we still like.

And we like the software names.

We recently sold Microsoft (NASDAQ:MSFT), and that was a valuation issue — that it’s just gotten just too expensive.

We originally bought Microsoft at like $12 way back in 2009 or something like that when everyone said it was dead. So we made quite a bit on that.

Oracle is a software company.

It makes the kind of software that runs companies’ businesses.

It’s a subscription model, so you’ve got recurring revenues.

Their issue has been one of growth.

But they’ve been able to either raise prices or find new customers and continue to have some growth. And it’s all recurring, so it’s pretty steady.

And we think that even in a recession their business will not get hit nearly as much as, say, the hardware makers.

And you’re seeing companies right now, whether it’s Micron (NASDAQ:MU) or even HP (NYSE:HPE), a lot of these companies, when you hit a recession, when things start going down, they actually start losing money.

We don’t think a company like Oracle will see that sort of thing.

They’re not as operationally leveraged as a manufacturer would be, like a Hewlett Packard or a Micron that makes DRAM.

You can see these companies that are cyclical, when you do hit a recession, you end up seeing them go from making a couple bucks a share to losing a couple bucks a share.

And if something like that were to continue for a few years, you start wondering about the viability of a company like that.

As value managers, we don’t want to be in that kind of a situation.

We like the fact that Oracle has recurring revenues, recurring customers.

So a company like that is something that’s conservative and fits into our portfolio and the types of things that we look at.”

While Travelers (NYSE:TRV) is a current buy for this highly experienced Chief Investment Officer, he warns investors about today’s market.

“Be cautious right now.

Find something that has solid earnings, a solid balance sheet, something that if they need to weather a storm, they can.

That’s not going to work every day, every week, but we think over the longer run that that will work tremendously well.

We’re concerned about the economy here.

Who knows where the economy is going to go.

But if you look at the money supply, M2 — M2 growth has been negative the last, I don’t know, 11 months, something like that.

Generally, that means that you’re heading for a recession or in one.

We’re going to put out a piece next week — we do a quarterly piece — and one thing I was looking at was, whether it’s truck loads and rail loads, the growth there has gotten negative as well.

And that’s just not something you generally see in a healthy economy.

If you look at the leading indicators, those have been predicting a recession for a while now.

So we’ll see if we actually get one.

But we think this is a time to be cautious.

We’ll see where things play out.

But if you look at the Federal Reserve, for example, the Fed has been pumping money into the economy since 2009.

And every time that they try to pull back from it, they can’t do it; they can’t finish the program.

So they’ve printed $8 trillion, $9 trillion.

And every time they try to take that off, it lasts a few months. Then the market goes down a little bit and they have to jump back in.

We think that the Fed is in a difficult place right now because you have inflation.

So, in general, they’re supposed to be fighting that. People get very upset about runaway inflation, so the Fed needs to protect against that.

At the same time, it’s concerned about the stock market and the banking system.

And so, the banking system says, flood everything with money. But inflation says, “Oh, you better stop flooding everything with money.”

So they’re in a little bit of a predicament.

We think the tea leaves are concerning us about going into a recession right now. And we’ll just see over the next six months to a year.

We’ll see how things look at the end of the year.

But there are a lot of concerns out there. So we would suggest people be cautious at this time.

Obviously, our approach that has downside protection to it, we think, fits in quite well in these sorts of markets. And we also think this could be going on for quite some time, but we’ll see…

However, we also think — and look forward to — when there finally is capitulation in the market and when things get cheap and values go down like they did in 2008 that our hedging will stop, and we look forward to going long the market at that point and maybe even leveraged long.

So we look forward to those days.

We just don’t think the valuations are there right now, and that’s why our hedges are on and that’s why we think that hedging is going to play a big part over the next few years.”

Get the complete portfolio picks from Chief Investment Officer Thomas H. Forester by reading the entire interview, only in the Wall Street Transcript.

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