Michael Cook is the Founder, Chief Executive Officer, and Chief Investment Officer of SouthernSun Asset Management. In his over 30 years of experience as a research analyst and portfolio manager, Mr. Cook has developed a unique investment philosophy and process, which serves as the core of the firm’s U.S. and global equity strategies. Throughout his career, he has been featured and quoted in The Wall Street Journal, Barron’s and Bloomberg Markets magazine, and has been a speaker on CNBC, Fox Business News and Bloomberg TV. Mr. Cook attended Covenant College and the OCCA Business Programme, Wycliffe Hall, University of Oxford, and is a member of the CFA Institute. In his exclusive interview with the Wall Street Transcript, Michael Cook discusses his investment philosophy and details the essential financial information underpinning his top portfolio picks.
“We’ve historically, since the beginning, concentrated our efforts on small to medium-sized businesses with really more of a private equity approach. So we’ve been many times called a private equity firm that manages public equity. We focus in on value and fundamentals of businesses, what unique niches they may operate in and management teams that have a long-term perspective to creating shareholder value. So that’s been done since the beginning and we continue to do so today; even though we do have three strategies per se, they all really focus on that same core of fundamentals that we think is rather unique.”
An example of this unique persepective is top pick, Darling Ingredients.
“I would say one of the businesses we find interesting at the moment is a company called Darling Ingredients (NYSE:DAR). Darling is a Dallas-based company that originally was in the rendering business and has really transformed themselves into a very diverse business across the feed and fuel complex. For folks that don’t understand what rendering is — rendering is when you take cattle, pig or chicken carcasses and render them down into usable fats, oils, tallows and bone meal. Rendering is a recycling business that generates valuable byproducts.”
To get more top picks and the detailed analysis that led to their inclusion in Michael Cook’s portfolio, please read the entire interview in the Wall Street Transcript.
Scott Wallace is the Founder and Chief Investment Officer of Shorepath Capital Management LLC. Mr. Wallace joined AllianceBernstein as a U.S. Large Cap Growth Portfolio Manager in 2001 and became U.S. Large Cap Growth Team Leader on March 31, 2010. Mr. Wallace also was a partner and member of the senior leadership team at AllianceBernstein charged with managing and setting strategy for the firm. Prior to joining AllianceBernstein, he was with JPMorgan for 15 years, where he was a managing director and held a variety of roles in the U.S. and abroad, most recently as head of equities in Japan. Mr. Wallace has a B.A., magna cum laude, from Princeton University. In this exclusive interview in the Wall Street Transcript, Scott Wallace describes his investing philosophy as well as some specific stock recommendations from the Shorepath Capital stock portfolio.
“One of the things we believe very strongly is a no-labels approach to investing. No particular style or cap size has a monopoly on interesting franchises that trade at a meaningful discounthttps://www.twst.com/interview/looking-for-great-companies-trading-at-a-discount-to-intrinsic-value to their intrinsic value. We try really hard to be open-minded about all the labels that other people might attach to our investments. Right now, you’ll see a portfolio that tends to be a little more large-cap-focused. ”
The portfolio manager has a method for dealing with the current U.S. government:
“I think one of the things about Trump that has been a lesson to me so far in his presidency is to ignore the rhetoric, ignore the tweets and follow what he does. The tweets can be quite inflammatory, and if you follow them in your portfolio, you can often get led astray. So instead, follow what he is actually doing, and so far at least, what he’s doing on the trade front actually isn’t hugely different.”
This leads Scott Wallace to some interesting special situations.
“So there are a few individual companies we have found attractive lately. The first is a recent spinoff from Delphi Automotive (NYSE: DLPH) called Aptiv (NYSE:APTV). Aptiv does a lot of vehicle electrification, autonomous driving and user entertainment gear for cars. I bought it when it got spun out of Delphi. ”
To get additional top stock picks from Scott Wallace, Founder and CIO of Shorepath Capital, read the entire interview in the Wall Street Transcript.
The newest Investing Strategies Report has been published at the Wall Street Transcript and includes interviews with highly regarded money managers including Randall M. Heck, Michael Cook, and Diane E. Jaffee of the TCW Group.
This Investing Strategies Report is supported by the new release from the Conference Board.
The Conference Board produces a monthly “economics indicators” for the U.S. as well as a number of other highly developed economies around the world and was the Winner of the Consensus Economics 2016 Forecast Accuracy Award (U.S.) Recently, the Conference Board has released it’s newest stats:
The Conference Board Leading Economic Index® (LEI)for theU.S. increased 0.4 percent in April to 109.4 (2016 = 100), following a 0.4 percent increase in March, and a 0.7 percent increase in February.
“April’s increase and continued uptrend in the U.S. LEI suggest solid growth should continue in the second half of 2018. However, the LEI’s six-month growth rate has recently moderated somewhat, suggesting growth is unlikely to strongly accelerate,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “In April, stock prices and housing permits were the only negative contributors, whereas the labor market components, which made negative contributions in March, improved.
This new Investing Strategies Report, and the new economic indicators, provides investors with the both the macro ecnomic viewpoint as well as the specific stock upside needed to increase their portfolio value significantly in 2018. Read all the interviews in the Wall Street Transcript.
Karen Hiatt, CFA, is a Senior Portfolio Manager, a Managing Director and CIO Focused Growth Equities with Allianz Global Investors, which she joined in 1998. She manages all focused-growth strategies. Earlier, Ms. Hiatt was a senior research analyst, sector head of the U.S. consumer team and U.S. Director of Research. She has 22 years of investment-industry experience. Ms. Hiatt was previously a vice president and analyst at Bioscience Securities, a boutique investment bank. She has a B.S. in finance, cum laude, from Santa Clara University. In her exclusive interview with the Wall Street Transcript, Ms. Hiatt explains her investment methodology:
“We are a global money manager, really diversified across assets, as well as client base. In terms of what I work on specifically here, it’s the Focused Large Cap Growth portfolio, very fundamentally driven. And what I mean by that is, we construct a portfolio, really on a stock-by-stock approach, meaning we try to pick the best stocks within our platform, with a growth and quality bias, trying to stay valuation-sensitive, really focusing on a risk/reward approach, picking the best stocks we can to ultimately construct a very concentrated portfolio. We try to keep the stock count below 40 stocks, which leaves really a portfolio driven by stock-specific dynamics.”
Karen Hiatt sees a number of opportunities in the current market.
“We still, on a global basis, have a long way to go in terms of moving total payments from cash to credit. When you think about e-commerce, it requires some sort of credit option for the most part, or at least a payment option. Again, mobile provides payment and the digital necessity of digitizing the opportunity to take payment from one company or person to another company or person. Security really matters.
So you put all that together, and Visa, specifically, really takes on very little balance sheet risk to deploy payments on a global basis. And less than 20% of payments are digital still. So there’s a long way to go in terms of market opportunity. So PayPal (NASDAQ:PYPL), Square (NYSE:SQ) and Visa (NYSE:V) are three examples of stocks in the payment thematic.”
To get all of Karen Hiatt’s recent stock buys for her portfolio, read the entire interview in the Wall Street Transcript.
Ravi Jain, Ph.D., CFA, is a Portfolio Manager of the Large Cap Growth Strategy at Ironwood Investment Management. Dr. Jain currently serves as an associate professor of finance at the University of Massachusetts Lowell, where he teaches undergraduate and graduate courses in finance. He seeks to invest in companies that can compound their earnings through wise capital allocation, with emphasis on firms — both parents and subsidiaries — emerging from spinoffs. Preferred businesses are permanent in nature, generate high return on capital, have the potential to reinvest earnings and have good management. In his exclusive interview with the Wall Street Transcript, Dr. Jain discusses his investment philosophy and where it takes his portfolio.
“The rationale for adding positions, which are exposed to the growth in India, is because I understand that market very well, and I think India will be a fast-growing economy for a long period of time. It is a consumer-led economy unlike other emerging markets which have largely been export-oriented stories. India will be a consumption story, and whenever there is a consumption story across the world, companies with long-established brands do very well. ”
“I think the Indian economy will be a consumption-led economy. Services comprise majority of the GDP, and there is a big middle class emerging in the country. Consumer stories will do very well, but other sectors like finance, infrastructure, travel, health, education and defense will also grow faster than the GDP.
For example, the domestic air travel grew 28% last month on a year-on-year basis. The per capita GDP in India is $1,700 compared to $60,000 in the U.S. As that per capita GDP increases, the incremental dollars will be available to be spent on health care, education, travel, financial services, and other basic and discretionary needs.“
For the complete detail on which publicly traded companies are best positioned to take advantage of this growth, read the entire interview with Dr. Ravi Jain in the Wall Street Transcript.
John Campbell is a Managing Director and Research Analyst covering real estate-related stocks across a handful of industries for Stephens Inc. He joined Stephens Inc. in 2011 as a Research Associate in the business services and insurance brokerage space. Mr. Campbell was promoted into a lead analyst role in 2014, and has since built and currently leads the firm’s Real Estate Services practice. Prior to joining Stephens Inc., Mr. Campbell spent time as a corporate strategy planning analyst at FedEx. He holds a B.A. in banking and finance and an MBA from Ole Miss. In this exclusive interview in the Wall Street Transcript, John Campbell finds the high growth names in the real estate sector.
“I think it’s probably best to break my list into a couple of different buckets. The first one would be the real estate brokerage versus the hybrid and tech-enabled real estate brokerages that are coming about. When you look at that side, you’ve got the traditional player like Realogy (NYSE:RLGY) or RE/MAX (NYSE:RMAX). Realogy owns Coldwell Banker and CENTURY 21, a lot of the household names that you’re familiar with.”
“And then there are the up-and-coming players that are utilizing technology to a much greater extent, like Redfin (NASDAQ:RDFN). There’s a U.K.-based company called Purplebricks (OTCMKTS:PRPPF) that is taking a lot of share and is now expanding overseas and is starting to establish somewhat of a beachhead here in the U.S. And then you’ve got guys like Compass on the private side, which just got $450 million of funding from SoftBank (OTCMKTS:SFTBF) — the biggest U.S. real estate tech investment we’ve ever seen. So you’ve got a trend of the old players doing OK in a market that hasn’t changed quite as much as some might believe, and I think they continue to take share here and there, but you’ve got this kind of overarching threat coming from some of the newer players and the possibility that the industry or the way we buy and sell houses completely changes from what we are all used to seeing.”
Read the entire interview with John Campbell to get the complete information on where to invest in real estate technology stocks.
J. Paul Newsome is a Managing Director and the Senior Insurance Analyst in the Research Department of Sandler O’Neill + Partners, L.P. Previously, he was Vice President and the senior property-casualty insurance company research analyst at A.G. Edwards and at Lehman Brothers. Mr. Newsome has worked in or covered the insurance industry for over 20 years. Prior to Lehman Brothers, he worked at Dain in Minneapolis, and Oppenheimer and Company. Mr. Newsome has B.A. degrees in mathematics and economics from St. Olaf College in Northfield, Minnesota, and an M.S. degree in economics from Iowa State College. In his exclusive interview with the Wall Street Transcript, this award winning analyst makes a case for auto insurers.
“At the moment, we’re pretty bulled up on the auto insurers, Progressive (NYSE:PGR) and Allstate (NYSE:ALL). I think that’s where the market is improving the most. I think there are some companies like those that are very well-positioned. We had a fairly significant change in the underlying dynamic of claims inflation three years ago, and there are companies that are ahead of that claim frequency trend, and there are companies that are behind. I think those companies that are ahead of that trend will benefit more than the others, and that benefit will probably come through this year and maybe next for those companies. We’ve already seen a pretty darn strong quarter for the first quarter of 2018 for Progressive, and so it looks like the auto insurers that are ahead of the game on claim frequency trends will do very well.”
J. Paul Newsome also details his opinion on the results of the Fed tightening interest rates:
“To the interest rate environment, most of the companies I cover have been pretty conservative with respect to how they’ve set up their portfolios and are relatively short in duration in their portfolios. The typical duration is about four years. It’s actually up a little bit; at one point, interest rates were so low that insurers were capitulating on any investment income and just keeping their portfolio extremely short because there just wasn’t much difference between a one-year bond and a three-year bond. That’s changed a little bit with rising interest rates, and you’ve seen companies extend a little bit, but they’re still relatively short-duration portfolios.”
To get all the details on J. Paul Newsome’s current insurance company stock picks, read the entire interview in the Wall Street Transcript.
Douglas N. Raucy has served as the President and Chief Executive Officer and as a member of the board of directors of 1347 Property Insurance Holdings, Inc., since its inception in October 2012. He has served in the same positions at subsidiaries Maison Insurance Company and Maison Managers Inc. since their inception in October 2012. Prior to joining the company, Mr. Raucy served as the Chief Executive Officer and President and as a member of the board of directors of Access Home Holdings LLC, Access Home Insurance Company and Access Home Managers LLC from August 2011 to October 2012. He also served as the Chief Executive Officer and President and as a member of the board of directors of Prepared Holdings LLC, Prepared Insurance Company and Prepared Managers LLC. From January 2001 to August 2008, he served as the Chief Operating Officer of the Institute of Business and Home Safety, or IBHS, a property mitigation firm that focuses on disaster-resistance property research and education.
Mr. Raucy’s prior executive experience also includes positions held during his 20-year tenure at Allstate Insurance Company, including his role as the Director and Founder of the National Catastrophe Team and National Catastrophe Center from 1995 through 2001, where he led the Allstate Insurance Company efforts for every major national catastrophe. He previously served as a member of the advisory board for Marshall Swift/Boech and a consultant to the Ocean Research & Resources Advisory Panel, a U.S. federal advisory committee studying the effects of the ocean on global weather patterns. Mr. Raucy obtained a bachelor’s degree from Utah State University.
In his exclusive interview with the Wall Street Transcript, Mr. Raucy details his current status as well as the future growth strategy for Property Insurance (NASDAQ: PIH)
“A lot of milestones. We ended the year with over 50,000 policies in force, which is really pretty amazing for us because we’re not one of these Florida takeout companies that just take out 50,000 policies overnight. These are typically all policies that we’ve underwritten, most of them we’ve gained organically through the independent agency network, and we know every one of them, so we know they are good policies, we’re happy with what we have. About 34,000 at the end of the year were in Louisiana, about another 12,000 at the end of the year were in Texas, and we ended up with about 4,000 or so in Florida. So we’re starting to get some pretty good spread. We just recently got into Florida, though; we went in at the end of last year. So we’re in three states now. All the 50,000 policies were closing in on $100 million in premium. ”
Read the entire interview at the Wall Street Transcript for the complete detail on Property Insurance Holdings and its recipe for success.
Paul E. Smithers has served as the President and Chief Executive Officer of Innovative Industrial Properties, Inc., since its formation and is one of the company’s directors. From August 2013 to July 2015, Mr. Smithers served as Co-Founder and Chief Legal Officer of Iso Nano International, LLC, a designer and manufacturer of advanced materials for use in the aerospace, consumer goods, electronics and safety industries. Prior to his time at Iso Nano, he was the Managing Partner of Smithers & Player, Attorneys at Law from September 1989 to July 2013 and was with the law firm of Ropers, Majeski in San Francisco from 1982 through 1988. Much of Mr. Smithers’ 35 years of legal experience has involved both commercial and residential real estate transactions and disputes. He is a member of the California Bar and a licensed California real estate broker.
In his exclusive interview with the Wall Street Transcript, Mr. Smithers details the methods behind his underwriting of industrial medical marijuana facilities.
“Innovative Industrial Properties is a publicly traded REIT focused on the acquisition, ownership and management of specialized industrial properties that are leased to experienced, state-licensed operators for regulated medical-use cannabis facilities. We completed our IPO and started our real estate operations with the acquisition of our first property in December of 2016. Our current property portfolio consists of six properties comprising over 700,000 rentable square feet located in five states, which are New York, Maryland, Arizona, Minnesota and Pennsylvania.”
The underwriting potential for this asset category is projected to have enormous potential.
“We look at the medical-use cannabis sector as a tremendous market opportunity. The regulated cannabis market in North America is projected to be $24.5 billion by 2021, and this represents a 28% compounded annual growth rate from 2016. As you probably know, 29 states have regulated medical-use cannabis programs, and several more are expected to come online in the near future.”
For the specific financial and legal strategy of the CEO of Innovative Industrial Properties, read the entire interview in the Wall Street Transcript.
Michael Brilley is the President and Senior Fixed Income Officer of Sit Fixed Income and oversees the operations and management of taxable and municipal strategies for custom separately managed accounts, private investment funds and mutual funds portfolios. He leads a team of fixed income portfolio managers and analysts. Mr. Brilley is also a Senior Vice President and Senior Fixed Income Officer for Sit Investment Associates. He joined Sit Investment Associates as the firm was establishing Sit Fixed Income Advisors in 1984 – adding taxable and municipal fixed income investment strategies to the firm’s growth equity strategies.
“…Housing bonds are attractive in that, even though they might have a long-stated maturity over 30 years as in the duration of a single-family mortgage, they are really intermediate in duration because people pay down principal and people move and pay off loans. It is a way to invest in longer maturity and longer dated bonds that are really intermediate in duration, so it is a way to get long yields with intermediate risk. For multifamily, these would be apartment buildings typically, as in low income. Again, these bonds would have sinking funds that amortize payoff principal over time there. They also are like a mortgage, except that they are not refinanced like a single-family dwelling.”
Unrated fixed income municipal bonds are also a sweet spot, for specific issuers.
“On education, the two main areas that we invest in are college revenue bonds and also charter schools. The charter schools are one of the main areas of non-rated bonds. In terms of non-rated, a lot of our multifamily investments are non-rated, and those would be often what is generally called a CCRC or a Continuing Care Retirement Community, and that would be a complex that would often have independent living, assisted living, nursing care and maybe Alzheimer’s memory care. A lot of our non-rated bonds are either CCRCs or charter schools.”
Read the entire interview with Michael Brilley, President and Senior Fixed Income Officer of Sit Fixed Income, for the details on his individual fixed income portfolio choices.
