Stephen S. Smith founded Smith Group Asset Management, a Dallas-based investment management organization, in 1995, and serves as the company’s CEO and Chairman of the investment committee.
He began his career in the late 1960s as an engineer with NASA in the lunar landing program. Mr. Smith joined Wachovia Bank as a computer systems analyst in the mid-1970s and transitioned to the bank’s investment management division in order to help design and implement a portfolio management system.
He left Wachovia and joined what is now known as Bank of America in 1983. Mr. Smith held a number of senior investment positions at Bank of America until he departed in 1995 to found Smith Group.
In this 3,625 word interview, exclusively in the Wall Street Transcript, Mr. Smith details his portfolio management methodology and top picks for 2019.
“Right now, we have seven portfolio managers; I’ve personally been involved in hiring all of them, and the qualities that I look for in identifying portfolio managers are, number one, they have to think like an engineer.
They have to be problem-solvers. It doesn’t mean they have to have an engineering degree, but they must think like an engineer, know how to use a scientific method to identify and solve problems.
The second thing I require is that the members of our portfolio management team have to have the proper training in order to be able to analyze the companies that will go into the portfolio and the right kind of training to manage the risk of our portfolios.
The Chartered Financial Analyst, or CFA, program is very good at training us to do that; I got my CFA charter back in 1981, and I require every member of the portfolio management team to either have the CFA charter or have a CPA, and that’s a requirement of all seven of us.
And the last thing that I require is that the members of the team must be team players.”
The team is currently cautious on high value, large cap tech stocks:
“I’ve had a long enough career that I saw a moat around Polaroid and IBM (NYSE:IBM) and Eastman Kodak(NYSE:KODK); they had dominant positions in their industry until they didn’t, and then when they didn’t, they had a long downward slide.
So although we do own Facebook (NASDAQ:FB), and we own Google (NASDAQ:GOOG), we don’t own them at the level that the benchmarks do.
And it does appear that some of the FAANGs, especially Amazon with valuation levels that are off the charts, seem to be pricing in expectations that are way better than they could ever achieve.
So we like bread-and-butter technology, consumer discretionary and are especially concerned by the megacap technology companies that dominate the growth benchmarks.”
Get the complete list of the stocks that make this cut by reading the entire 3,625 word interview, exclusively in the Wall Street Transcript.