YouSaid · the spoken record

Brian Christiansen

lines on the record: 74
first: 2024-01-11
most recent: 2024-01-11
sittings or episodes: 1
sources: podcast

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“Happens sometimes, but very rarely will you see a meaningful deviation between our internal estimates that we have on a business versus market consensus for that same business on a 12 or 18 month basis, where we typically see the biggest deviations between what we're modeling for a business and sort of what's priced in the stock for looking at sell-side models, for example, is in years three, four, and five and beyond. And one of the reasons for that is, one, a lot of folks aren't modeling beyond a year or two and they're spending a disproportionate amount of time on trying to understand the 12 to 18 month period rather than the next five years. Two is even when folks do model it, the amount of time that they're spending.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“My response is often tell me the growth rate, and I'll tell you if that's attractive or not. Because if it's a 90 times PE company that's growing earnings only 10%, it's really hard to make the math work long term. But if it's a company that can compound earnings at 45% over the next five years, that can actually be very, very attractive in an expected return framework, even if you bake in meaningful multiple compression over the next five years.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Businesses, you really need to build conviction to own these businesses for the long term. And that conviction building process can often take you a couple months of research. So if you start with the evaluation opportunity, by the time you finish your work, there's a chance that that valuation opportunity may have closed before you had finished your due diligence. But if you reverse that process and just find the businesses that are the strongest fits with your first five criteria, then you can be on the offensive rather than the defensive and take advantage of it. The other thing is it's really hard to figure out what the appropriate valuation is for a business unless you've linked it to what its long-term growth prospects are. One of the things that I often will get questions from folks is how can you embrace a company that trades it ninety times next 12 month PE earnings?”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Last criteria is rational valuation relative to the market and business prospects. And the way to think about this is one of the reasons why our valuation criteria last is we actually tell our analysts to go out and find the best businesses, the strongest fits with our first five criteria. And we actually celebrate that as a win. We can build the financial model, write the investment case, vet the business, and put that business on our buy list. And then we can actually wait for that valuation opportunity to present itself. And one of the reasons why we often focus on valuation last is we just want to get to know all the best businesses regardless of valuation. To be a concentrated conviction weighted long-term investor in innovative growth.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Protected the rights of minority shareholders throughout that life cycle. The fifth criteria is financial strength and what that means to us is a business that has the cash flow and the balance sheet in order to control their own destiny. We just went through a time where cash was a commodity for many companies given the cost of capital is artificially low. But now when cash has a price again, this is a time when financial strength as an investment criteria really shines and shows its relevance is because if you're a business that's able to continue to invest when your competitors can't, that actually allows you to expand your moat during a down economic cycle and accelerate coming out of it, which we're seeing with many of the businesses that were invested behind.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is because in many of the markets that we invest in, a disproportionate amount of the economics tend to accrue to the market leader. And therefore, you want to own those businesses. Now, significant competitive advantage is our third criteria. That's where we spend a tremendous amount of time because that is what really underpins the sustainability of the earnings growth over time. The business that's growing at above average rate without competitive advantage, that's really just momentum. So the fourth criteria is clear mission and value added focus. That's really in many ways our governance and capital allocation criteria. We only want to invest behind management teams that not only have a demonstrable track record of creating wealth for shareholders and making effective capital allocation decisions. But we also want management teams that have”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we have six criteria sands. The first is sustainable above average earnings growth. What that means is a business being able to deliver at the low end at least double digit core type of earnings Kager when you're looking out over our investment time horizon, which we define as five years or longer. We're looking for leadership in a promising business space. One of the reasons why we focus on either companies that are the clear market leaders or they're on the path to”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a very small group of special businesses that can defy the laws of mean reversion and grow for much longer and for much faster than the market anticipates or priced in. And we want to exclusively focus on those types of businesses.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“I believe strongly you need a variant perspective over the long term to have differentiated value creation. And I think one of the things that's really interested in the time that I've been in this industry over the last, call it 17 years or so, is that if anything, the average time horizon for investors has shrunk rather than elongated. And I think that creates a time arbitrage opportunity, which essentially creates an inefficiency in the market. Another way I'd sort of describe this is we'd actually say and agree with the concept that most businesses are not special. They may be able to grow at an above average rate for a year or two, but the power of mean reversion is very, very strong. However, what we believe is that”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“That the predominant driver of a stock price over the long term is the core earnings power of the business and the ability for it to compound.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, one of the things that you fundamentally have to believe in is the long-term relationship between the earnings power of a business and stock prices when you zoom out the time horizon long enough. And I've seen enough of the data looking back at call at the S&P 500 over the last 60, 70 years, as well as the anecdotal data of looking at our own data at SANS over the past 30 years. And just being a practitioner in the industry to have a firm belief in that relationship, that when you zoom out the time horizon long enough and really five to seven years is the minimum you need when the horse really starts pulling the cart. And so that's a fundamental sort of relationship that you have to believe in. Now, that doesn't mean you can completely ignore valuation. And valuation is one of our six criteria. But it just means that you believe.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Concentration so their US strategy has 25 to 30 businesses in it. Our multi-geography strategies like global and emerging, the sweet spot is closer to 35 to 40. So we're definitely concentrated. We're conviction weighted. We're long-term oriented. And in many ways, those were definitely unconventional concepts to put all together back then while there's more people that do that today than 15, 20 years ago, it's still definitely a minority in the marketplace. So I think that idea of doing something different, the concept of opportunity being created by change and innovation. And then just being excited about the company as I was researching, those are things that sort of really drew me to growth investing.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“To me at Sands, what we're really trying to do is we're trying to predict the future. We're researching companies that in healthcare are changing the standard of care are completely inventing new paradigms from a technology perspective that really have the ability to be two, three, four times larger over the next three, five, seven, ten years. And innovation is so much at the center of these businesses. And then one of the things that did sort of align with some of the principles that David Swinson had talked about was that idea of being unconventional, right? If you do everything the same as everyone else, it's pretty hard to have a differentiated outcome. And the concepts of”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the early days, I didn't really know at a deep level the big differences between value and growth. And if anything, the longer I've been in the industry, I think many of those differences are a little bit overplayed. But what I did find interesting is it just seems strange that in private markets, folks would want to identify a great business, invest in it, hold it for a very long period of time as that business may have doubled or tripled its earnings over some reasonably long timeframe. They cared about the valuation that they paid up front. They cared about the valuation that they get paid upon exit. And that was the path to wealth creation. But then there was this different hat that everyone seemed to put on when they switched to public equities where everyone just started talking about value and not the compounding of earnings. And that concept seemed a little bit.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“We're very client centered. That's why clients are very squarely in our mission statement. And we're in the risk-taking business, but we want them to be prudent risks rooted in our investment criteria.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our mission at SANS is we exist to add value and enhance the wealth of our clients with prudence over time. And those are literally the same words that we've had since the firm's founding. And we think there's meaningful today as they were when they were first written. So from the perspective of adding value and enhancing wealth, what we're really trying to achieve is delivering attractive, absolute, and relative results versus the relevant benchmarks on a rolling five plus year basis because a core tenet of our investment philosophy is having that long-term approach. So we want exclusively focus on high quality, leading, innovative growth businesses around the world. And we want to own those businesses for long periods of time.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“A pretty remarkably global client base over the years as well. In fact, over the last 10 years or so, the percent of assets from clients outside the US is roughly doubled to overty percent. And now we have clients from over 40 countries around the world. There's been a lot of interest from overseas clients to access the type of concentrated, conviction weighted growth-oriented investing that we do in these leading growth businesses around the world. And we've actually opened up business development offices in London and Singapore over the last few years to help support that global client base in the local time zones. In addition to the global nature of our client base, we've also cultivated very long-term relationships with our clients. So well over two-thirds of our clients have now been with us for a decade or longer, nearly 80%.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“But as you fast forward to 2006, almost half of the revenues of the companies in our US portfolio were being generated outside the U.S. So we already knew that we wanted to globalize our research platform. So we are just at this transition point where we were going from a single strategy at the firm to actually launching our global strategy, which we launched in late 2008, early 2009. Over time, we launched our emerging markets strategy back in 2013. We also built out our private market capabilities. So today we have about 50 billion in assets under management in public equity strategies. And then we have a couple billion in our private capabilities as well. One additional observation on how the firm has evolved since I joined is we built”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so there's a lot of things that are similar. We still have our same mission. We still have our same investment philosophy and our same six criteria. We actually celebrated our 30th year anniversary last year. The firm was founded in 1992. But when I joined in 2006, we're definitely much smaller. We had about 50 people. We have close to 200 today. We had a single investment strategy at the time, which was our U.S. Select Growth Strategy. Around 2006, even though we had one strategy, we had already started really thinking about globalizing our research process. In the early 90s, when SAN started, if you looked at the revenue generation of the portfolio businesses in that select growth portfolio, maybe 25% of revenues on average were outside the U.S.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so some of the things that he talked about in the books were things like the firm having low turnover as part of its investment strategy, being large enough to obviously pay the bills, but not so large that their asset gatherers. Employee ownership rather than being owned by an outside institution located outside of New York. I thought that was a really interesting one. Obviously having a very clear investment philosophy process as well as track record was an obvious one. But some of those other characteristics that I picked up on in the reading I thought was very interesting as well.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“Buyer of an investment management firm and just kind of use that same list that Swenson talked about in his books. And I just went to the career service office and started just organizing a list of potential target firms to go work for. And SANS Capital was one of the companies and it piqued my interest because I was originally from Northern Virginia. SANS is located in Arlington, Virginia right outside of Washington, D.C. I was pretty lucky because Sans was hiring and so I've spent my entire career at the firm since then.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“High school, I owned my own web design company. So I had this extra cash line around. So that's when I bought my first mutual fund. There was definitely an interest in investing, but it got sort of cultivated in that business school environment because that's the first time I met other people who had worked in the industry. That's when I really dug in to try to learn everything I could. Right around that time, David Swenson was a rock star on campus. Even if you didn't know much about investing, everybody knew who he was because of the impact he had had on student life with how successful the endowment had been. And essentially one of the things that he talked about in his books was some of the correlations of the strong investment management firms that they had had and some of the qualities that they had looked for in the manager selection process. So I literally just was like, I'm going to pretend like I'm an institutional.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“I graduated from Yale in the mid 2000s, and I had received a fellowship as a Yale Silver Scholar. And that program is a little bit unique in the sense that they choose five undergrads to go straight to business school. And it was really there that I learned a lot more about how the investment management industry worked. My dad was a naval officer, so he was in the Navy for 27 years. He actually ran a Navy hospital. So he was in hospital administration. My mom was also in hospital administration. So she actually ran civilian hospitals. I didn't really have much institutional knowledge about how the investment management industry worked, but I did have a very strong interest in not only healthcare given the family background, but also technology and business when I was in.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on today's sponsored insight is Brian Christensen, Executive Managing Director and Senior Portfolio Manager at SANS Capital, a growth-focused public and private equity manager that oversees $50 billion in assets. Our conversation covers Brian's journey to Sans Capital, the firm's investment philosophy and approach to growth investing, six key investment criteria, portfolio construction, competitive advantage, and investment examples. Before we get going, my daughter Skylar is taking over the mic for this week's Spread the Word.”
2024-01-11 · Capital Allocators · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · IDENTIFIED FROM THE TRANSCRIPT · source