YouSaid · the spoken record

Matthew Benkendorf

lines on the record: 102
first: 2020-01-10
most recent: 2020-01-10
sittings or episodes: 1
sources: podcast

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“Yeah, I'm much more worried longer term about binary events than I need to because of our style with day-to-day or cyclical events. And there's two I worry about. One, I think there is no such thing as a free lunch in this experiments and exaggeration and extremism in monetary policy, they have a payback, right? And we all kind of have an idea of what it could be, but we won't guess it exactly and we'll probably miss out on the magnitude of it. But there will be a payback for the negative interest rate environment, right? There is no free lunch on that. What is that payback going to be? You know, I think in the bond market, it's going to be very difficult because, you know, this is often where we don't sort of see around the corner, right? We're focused on the near-term goals. A major central banking goal, right, is to spur inflation, right? And if, God forbid they're successful in that, you're going to decimate coupon investors, right? In order to achieve their goal, they're actually going to cause the great damage.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Politics, much better, less affected by shifts in disruption in certain industries. That's been your best game plan over the last couple of years versus trying to predict the next tweet and where tariffs are going or the next outcome of the next election. That has been your road to success. But having your finger on the pulse, as I mentioned though, does help when you realize people are getting a bit manic about it. You know, we are people and we get frenzied and we get manic. So if you do follow this and we do, you know, you follow closely. I read three newspapers a day. I think you have to keep your finger in the flow of how public sentiment is moving because you can use that to your advantage back in the investment world, even with quality companies taking advantage of excessive pessimism or optimism.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's two pieces. One, you really do, as we've talked a lot about, have to be just focused on the business, business, business. But on the other hand, you do have to have a pulse, a finger on the pulse, you know, of the market and where they're at because that's what can bring you greater opportunity, right? Understanding what the general feeling of sentiment is and where that's detached from real long-term reality. So you do as a portfolio manager and as an investor, I think have to have your hand in both of those buckets, right? The most important one, though, still being get the business right. And the key to managing, as you've said, and we've done it quite successfully, fortunately, all this, as I called it earlier too, this return to normalcy and volatility, uncertainty with tariffs and trades and political shifts. You know, the best way we've been prepared for that is having businesses that wouldn't be largely affected by that. And that sort of shocked people sometimes, yeah, you can do that, actually. You can have businesses that are much less affected by the macro, much less affected by the geopolitics.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“From the long term, right? And that's also why when people look about or talk about investing today, you know, has it gotten harder, easier? Actually, you know, the dynamics are quite similar once again. The more they change, the more they stay the same. The environment has probably gotten more volatile and more violent. So the advantage of buying hold or patience is as prevalent, I think, as it ever was.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“All buying in, buying into the invest in religion, being disciplined, you have to be long term to your question. It's the one basic advantage you need to exercise. Yet we live in a world and in an investment construct where everything is happening to fight that, right? Everything is trying to break you down.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“It's one of the only advantages you can have, right? It's the basics. And when we stick to the basics, look, call us, or say maybe we have a lack of imagination, because like all great things, often great businesses, great fortunes, right? We stole it from someone else. We took it from Warren Buffett, right? We took the playbook and we just try to apply discipline with a great team and a stable team to that. I think that's where you add a lot of value to and continuity, knowledge is cumulative, having a great team intact for a long period of time.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a real lack of imagination, right? In that analysis, right? Because the earnings where they are in five years should be what really matters, where they are in 10 years should be what really matters, right? So if you're myopically stuck in this world where you're looking at current PE or even just FY1 or FY2 PE, you're really missing the forest for the trees there. You need that E5 and 10 years out, and that's where quote unquote paying up for it or paying more for it today actually is delivering you a lot of inherent investment value because that embedded value is out in the tail.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think that's the other human nature element we capitalize on, and I think people need to capitalize on, right? Whereas people were sort of generally a bit cheap, right? We're always looking for a deal, right? That's why sales work, signs work, advertising works, deal, deal, deal, X percent off. It's like a magnet, right? We are attracted to that. That's human nature. And what you miss in that when you take that behavior aspect to the finance world and to investing is the reality that you get what you pay for in life, very much so in investing. So to your question, yes, you should pay more for a better business with a longer tail of earnings growth because also one problem we have in investing in the finance world is where as many smart people are in this industry and as sophisticated as the industry is, it's actually still pretty rudimentary when we look at important things like valuation, right? People often are looking at PE simplistically. PE1 or FY1P out one year.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“The only place where you find a bit of relative cheapness comes with a lot more commeasurate risk in terms of cyclicality. So if you want to wade into those waters here, you better know the answer to the question you're asking me because that's the danger in investing. When you look at a PE that might look relatively cheaper, but the E disappears. So actually, you thought you underpaid, but you ended up overpaying because your E wasn't predictable and disappeared, which is also a big piece of the risk you want to mitigate with better quality businesses. As a starting point, as long as you know where the E is or should roughly be, you actually can start to strike a more appropriate approximation of what that business is worth. But when the E is uncertain, you got to know where you are in the cycle. And as I said in context, you have to think we're later rather than earlier.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, exactly. You know, the unknown owns or however the rums fell, the quote goes. But I think if you step back honestly in terms of looking at the data and the facts, the economic cycle has still good underpinnings. If you look at the fundamentals of the U.S. economy, but we got to say we're later stage than earlier stage, right? I mean, I think just having some context of where you are is the only thing you can kind of get down to if you are top down. And I think even that can help though as well. And I say that too in that, you know, you've seen this little fits and start around the market and this concern of, well, people shift out of growth to value again. You know, we've also talked a little about fixed income equity and passive, active, but there's also been this other battle going on or raging between styles and growth and value and value I'd had a long period of success and then has now been in the doldrums and people are just waiting with bated breath for this big rotation back. And the problem there I have to your, you know, sort of where are we in the cycle question is.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think now we're digging into the trillion dollar question, right? Where is the world going? Not to dodge it in classic faction, but we want to build a portfolio where I don't need to know the answer to the question number one. I think that's the key to investment success, not having to answer these trillion dollar questions. And you can, remarkably, you can invest that way without having to need to know that answer. But putting that aside and just sort of expressing.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“We're concerned about or weighing down economics or geopolitics or in the way of monetary policy. So people should be a little bit careful on the equity side to not swing too far in sentiment, particularly too far negative because this market could have a lot of potential when you look at what you can buy, what you pay, and what you get still when you pay for it in terms of a coupon and growth. It's still quite attractive. And then particularly when you start to look at some of your alternatives for your capital.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I agree. So that's that. So maybe, yes, now it's time for them to pay a little bit of price of admission, right? And us to have a little easier time. But if you look at the two against each other to your question of whether people will or should continue to shift out of equities, I mean, if you look at the prospect in the right equity strategy still, the yield even you're getting there on a coupon, if you have real cash flow and real excess cash flow to distribute to your owners of the business, your shareholders, you can get growth, which gives you some inflation protection plus a coupon. I think equities are still very compelling. And that's why actually, you know, when people ask me about the market now recently, my word for the market, you know, where I was a bit more concerned at the beginning of the year is I think this market has potential. And I use that word very carefully because it is the word deliberately I think you used to describe often a bad sports team or an unruly child, right? Here's all these bad things you see, but hey, this kid's got potential, right? I think the market's a little bit like that. And a lot of the issues are correctable.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a very hard job. So call me lazy, but I just think I have an easier job right now as an equity investor versus a fixed income investor.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“I think as people were a bit hypersensitive to near term issues, you know, I think sort of the more things change, the more they stay the same in the long run. So I'm not hyper-sensitive to a huge shift there. And in fact, even if you look at your options, I think as an end investor, and here maybe I'll sound a little bit biased as an equity guy, I'm actually happy I'm an equity investor and not a fixed income investor right now because I think that's a hard seven percent.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, I think there's probably a little bit of element of that. I think, you know, they also may be slightly underappreciated thing, too, that I always have to remind myself and point out to people sometimes is if we actually do our job for our clients, they're going to take all their money because that's the job. Our job is to take their money from point A to point B and then they take it all from you, right? But they don't do it because you didn't do your job or they're unhappy with you. It's because you actually accomplished the goal. And there you actually should take some great satisfaction. We've had some clients like that particularly in the last couple of years where they've reached their goals in terms of their pension fund targeted returns and now they need to shift an asset allocation to a different mode or a different time horizon or fitting their liability match now. And we've just done our job. So thank you very much. We've delivered what we had to do. So you're going to always get a constant element of that too, even with great managers, I think, losing money.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think that's the one part that I think, as I mentioned, technology is going to bring about cheaper vehicles as there's been a tremendously difficult asset allocation questions. People have had to answer as well as you have an aging population and you have to shift towards fixed income. You have actually the wrong time. You want those sorts of coupons and yields and fixed income as the assets are shifting that way. So I think that's a bit of the element. I think you're seeing and explaining there in that even if you've done a good job, you're still seeing outflows because this is great at your asset allocation equation going on outside of us.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“And it's not just monetary policy, right? I think the world we live in today, as much as the hypersensitivity of the new cycle and the mediums of delivering news have made it, I actually think what we are in is a normal world right now, right? The world is supposed to be uncertain. We're supposed to have geopolitical issues, even physical conflict, right? Monetary policy uncertainty, difficulty for businesses. That's what the world's largely been like for a long period of time. We're just adjusting and adapting out of an abnormal period, which is why people are kicking and screaming a little bit more.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there's a lot of credibility in that definitely. I think Powell, you know, as the other quote I like to share, I think he's trying to do the impossible for the ungrateful, right? I mean, he's going to get a whole lot of criticism no matter what he does. But I respect the steadfastness he's following through. He's doing what he said. Maybe he could dial back communication, but I'm not here to micro manage. But I think he's doing the best to get us back to normalcy, which is very hard, right? I mean, getting off that.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think good for us, we kind of agree on that. You're starting to hear some murmurs of that of people kind of talk about this is maybe the Fed talking a little bit too much, right? I think that should be a part of the conversation now a little bit. You know, they went to this strategy a while ago of more transparency and maybe less transparency is a little bit healthier for risk and risk in the markets. I actually, you know, I differ on this maybe generally with my opinion too on Powell. You know, I think Powell's doing a great job, quite frankly. I think there's a lot of criticism of him. But if you step back, he's probably the right guy at the right point in time for the job in terms of his background. We always wanted this sort of pragmatic, business-oriented guy sort of clambered for it versus non-economist in it, right? And then it's like life, you know, then you finally get what you want and everybody changes their mind. I'll take it.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a pretty good backdrop for passive, I think. I would imagine. Now that we've had some at least uncertainty and volatility in what I would call normalcy back in monetary policy, some people might differ with that opinion, but I think this is actually what should be normal. Is it going to be moving towards normal anyway at the very least? Well, I think people think about normal. I think I have to be careful in two terms. Normal in terms of where the rate should be, but I'm talking about normal more in terms of you just shouldn't know exactly where it's going. There should be a little bit of uncertainty. Is it going up, down, staying the same, not 100% probability, right? I think that's kind of normal.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a pretty powerful variable you can compound and build a whole lot of decisions around, right? And look at the backdrop we've had. We had a Fed policy that was at zero with absolute visibility and certainty of where it wasn't going for so long.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, if I had that crystal ball, I'd probably ask the genie, you know, what's monetary policy for that? What's the Fed funds rate?”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“With this business through all your analysis, if I could ask you or give you access to just the answer to one question that would really help you with this business when you look forward, what would it be? Try to synthesize and boil things down into a list of things you would like to know, but maybe can't because they're unpredictable. But try to get to the crux of the matter, what's the most important issue that will help this business or drive its future growth or success. I think when you look at the overall investing landscape, you can ask yourself that similar question about monetary policy, right? If I was going to give you the access to a magic lamp with just one wish, right, and it would help you to set the landscape investing-wise for the next decade.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Over the last decade, roughly, has been monetary policy, right? If I always ask, when we look at a business even, I often ask either my members of my team or I ask myself,”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. So that's coming. And if you are average or lower quality, like the businesses we look at, you shouldn't be on the playing field, right? So that part, I think is due and proper and there is no defense for that, right? You have to add value. And the great thing about this is a performance oriented business just like sports. But unlike sports, actually, we play the game every day and our score is there every day and over the long term. So if you can't deliver, you shouldn't be there. That's one part. But two, the passive side, you know, there's two elements that are driving it. And one, I think, is a little more questionable. One lower cost in technology certain has helped, right? ETS? No doubt. Different vehicles. There's been good innovation there. As Volker said, you know, the best innovation that finance industry has been the ATM only. Probably technology has really helped when investment products too for a vehicle to get passive even cheaper. That's good. I think the other thing, though, people need to be a little bit cautious about when they look at this huge swing we've had to pass.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Use the word carnage. Yeah, look, it's an industry that's probably had a lot of other industries along comeuppance. We've seen all the other classic industries hollowed out by either tech or new iterations, right? But this industry, it took a while to get to it. You know, there was a lot of honey there and it took a while to people to focus in on it and start squeezing, but it's there.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think it's first our investment experience has been very good, owning great businesses that grow faster than the benchmark that are durable and predictable has worked and will continue to work. We're highly confident of that. The industry, though, look I think one, I always have a sort of split personality on this in that I can't and I don't think I should defend most active managers, right? Because I think the numbers are what they are. I think a lot of active managers and most don't add value, quite frankly. So the carnage that goes on and what should be a meritocracy of an industry is absolutely proper and correct.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“But in the mean reverting business that we're with most businesses that most investors hold, by nature, they're average and you better buy low and sell high to make a return. What we're trying to capture is long-term earnings compounding. You know, stock returns and earnings growth are correlated over the long term. Interestingly enough, stock returns and GDP growth aren't very correlated over the long term. But if you get the business right and the earnings compounding right and you own a portfolio, an aggregate that has a collective weighted average rate of earnings compounding that's attractive, that's what your investment returns will be and that's real add value.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you better buy low and sell high to make your money. What we want to do alongside the communication is with higher quality businesses that have these elements we've talked about, less cyclicality, more durability, a real long tailor runway of growth, not just one year, but five, seven, ten, fifteen, twenty, twenty-five, thirty. When you have those types of businesses, you really can hold through downturns. It's a slight nuance to understand, right? It's a fallacy to hold a really great business when a cycle turns because it is going to mean reverting. So the buy and hold strategy actually as it's sort of taught and sold. If you have the wrong businesses, it shouldn't be applicable, actually. You're following the wrong approach. But if you have great businesses where you can put your head on your pillow at night and know, look, not only are they not going out of business, even in this recession for reasons of A, B, and C, they're going to continue to grow their underlying earnings power. Those are the type of businesses. One, you can hold on to and sleep well, but two, you should add to them because the market's starting to give you a gift there.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's two things. It's one, the piece you just mentioned, the latter, the communication, but one, it's via this investment philosophy and style. That's critical, and I'll explain that because at the heart of it is what you mentioned, you know, these old studies, and I actually haven't seen the study in a while, but I'm sure the numbers are quite similar. Those classic studies of U.S. mutual fund investors, as you pointed out, the returns have looked great over the long term on paper, but most investors have never achieved those returns because of the dynamic you're talking about. And quite frankly, for average or lower quality businesses and often a benchmark, you might need to have a higher timing element because those businesses can be mean reverting. If you have a portfolio of lower quality businesses, whether benchmark or an active manager with just lower quality businesses, your timing is very important, right? The businesses themselves are going to be mean reverting in their economics. If you're in the energy space or based on materials space, those are commodity industries and those commodity prices are going to flow.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Communication, a lot of hand holding. That's half of your job as an investment manager, you know, not just to put the returns on the paper, but to keep the person on the bus over that journey. And the key to that is less volatility typically. It's the byproducts of a quality growth style whereby your downside capture protection is high, right? You preserve capital much better when things fall apart. Recession comes about. And then also your overall volatility is dampened over time because your businesses are just better and they're not subject to wild swings of volatility. So if you can keep the ride less bumpy, you definitely have a much better chance of keeping your investor in their seat over the ride and then you can accomplish the two key features, the returns and having the client there at the end point.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Benchmark indifferent can cause meaningful relative underperformance, right? But that's the price of admission. That's the price to be paid for great long-term outperformance. You have to absolutely underperform in certain shorter periods. And the key to that is education and communication. So it's the buy-in of the client institutional or retail on the onset. So we are the person they're looking for. We are the match because our strategy in terms of what we want to own, what we won't own, and how we view risk resonates with them. And then once they are on board, you know, I also say there's two pieces of the job from an investing standpoint. One is to deliver the returns on paper, which is important. But the second aspect, which is equally as important, is getting the client to realize those returns by staying on board with you for that journey. And that's why the client journey is very important to us. And you manage that through a lot of transparency, a lot of open...”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, this is, I think there's two keys to this. Number one, since we're in New York City, I'll use the great Billy Joel quote. When we spend a lot of time bringing our investors on board, I say, you know, you might think we're crazy, but we just might be the lunatic you're looking for, as a classic quote goes, because you got to really see risk as we see it. And it's a binary thing. Some people don't buy into that. They can't wrap their head around it or they just fundamentally don't believe it. They believe more in the classic risk theory we've talked about. But if you can get people to buy into that and understand it, and it really helps to show them the past success of utilizing a strategy like that, I think that's step one. Step two is your question is right on point, you know, you're managing people who all have constituents and their constituents have constituents, and that's what's made this business generally more complicated over time. More people watching with more visibility and more numbers, how do you explain things over the short term where”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think the sort of genesis of that is two things. You know, if I look back at college, I sort of learned two things. One related to your question and one that comes before it, I think, one, the power of protecting capital in down markets and then being long, though, consistently through markets to participate and really be able to compound capital over the long-term, the classic numbers of you don't want to miss out the biggest updays in markets by trying to time the market. Once again, trying to get away from this top-down pitfall that most people fall into. So I learned that very valuable lesson about preservation, but staying long through the market and you do that, I think, through quality. You can do that. And I think the second aspect then of it is risk management. You learn to throw out a lot of, unfortunately, what you learn in college about classic risk management because at the heart of your question about concentration, that's really about risk management. And that flies in the face of classic risk management theory, right? Of owning smaller pieces of more things.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. You want to start with businesses that have been great, that have proven to be great, and are demonstrating that in numbers. And that's what you're looking for. You're eliminating the poor numbers and you're critically looking for the clean track record of good numbers because that's not a perfect predictor of future success. It does get you over a one-foot hurdle and points you in the right direction and makes your future looking decision much higher probability that you'll be right about that. So I think that's a big key track record. And that's where I'd say go back to this human element or behavioral aspect. A lot of people don't want to do that because we have a human tendency to try to want to be smart or smarter, right? We want to try to predict what's going to be great. That wasn't great yesterday, right? But we try to start in a good place. Things that have been great and then make an easier, albeit still difficult decision of can they keep doing that.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“It's not highly complicated, I'd say, in terms of variables you're looking for, returns on invested capital, returns on equity, stability and operating margin, strength of balance sheet. I think the basic variables are easy. You then, though, improve it by looking for levels of those variables. So cranking up the scrutiny of the levels of variables you're willing to accept, but also then critically what's key is the track record. So you want clean track records as well. And I think that's glossed over once again going back to this human element, right? And when you say...”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Begin with the quant piece is key in that I think first where you should approach quant is first from an elimination standpoint negative screening when most people think of quant and screening you use the word screening typically it sort of has a connotation that you're looking for something when actually what you should be doing is eliminating things first and foremost you want to really narrow the world down because One, there's only so many hours in a day. There's only so much firepower you have or bring to bear in the research process, but also you want to just fish in a riper pond of opportunity because that greatly reduces risk as well over the long run by eliminating, as I've described, average or lower quality businesses. So we want screen to begin with.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Is a key. So we do that. I think we really do when we think about businesses, and as I mentioned earlier, businesses, you'd want to own, it sort of forces you. We sort of have a private business owner, I would say, somewhat private equity mentality, but we happen to be operating in the listed equity sphere, which gives us a liquidity advantage. So it also allows us to own great businesses, which we choose bottom up, but we can wake up every day and look at the screens and see what values the market is striking on those businesses and improve the quality of what we own for our investors, which is something as a dynamic of private investor can't do or a private equity investor can't do as quickly.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“The business, how will that business grow, and how is that sustainable? How that business will grow? How will that business endure through economic cycles, which you inherently will not be able to predict? So I think ignoring the top down, while is easier said than done,”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“I think this is also what's a common misnomer in investing that you have to get the top down right. You have to predict things. I think it's just general human nature. I think one of the greatest advantages in investing is typically behavior management. That's the key of it all, really. You know, the financial analysis, the investment philosophy we're talking about today, and that I'll describe is one piece. But also another powerful analogy I use in explaining it is investing is a lot like dieting. You know, a lot of people know the keys to living, typically a longer, healthier, happier life, right? What you should eat, what you shouldn't eat, how you should exercise in those elements, the key is discipline, right? And investing, I think, is very similar to that. It comes down to discipline. The roadmap is fairly clear, and it's been well laid out by Warren Buffett years ago. And the roadmap really needs to be centered on the business. It's all about the business.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Life is full of as they are average people and average businesses, right? That's just the nature. There's a lot of us and it's a law of numbers. But when you crank up scrutiny to a much smaller subsegment of either highly successful people or highly successful businesses, there's a great divergence. And that divergence, quite frankly, in today's world has gotten even wider”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Business attraction or investment attraction is a lot like personal attraction, right? Individuals, we are attracted to certain other individuals with certain characteristics, and it's very similar, I think, in the investment world. Those characteristics you're asking about, right? We tend to have an affinity and magnetized towards generally less cyclical businesses. Those businesses are just more attractive to us on the margin, less capital intensity in general is something that sort of we magnet towards, you know, the free cash flow conversion, the stronger balance sheets, very basic principles, but at high standards. I think that's a differentiation as well. You know, we”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and it's interesting, we've been exercising this investment philosophy for 20 years now Very consistently As I talk about it today, I always have to sort of smile and chuckle because 20 years ago, what we're saying now, quality and growth, they really weren't a style by any means. They weren't a box that now investors are sort of put in a little bit and mimicking. And I think that's important to recognize because, you know, one of the important lessons you learn in this business too is financial products are sold and not bought. So a lot of people use that nomenclature now because that's what's worked and it sells well. But I think when you peel back a layer of the onion, you find when talking to a number of managers who describe themselves either as growth or as in now a lot more describing themselves as quality growth, there's a big differentiation in terms of how people see businesses. What are they attracted to? You know, an analogy I use a lot is, you know,”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Dig down into what it is that, as I said, makes you want to get out of bed in the morning and operate that business. And that gets into basic things that play out in financial analysis, cash flow, returns on invested capital, incremental returns on invested capital, why you want a strong balance sheet, aspects like that.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“In a lot of ways, in terms of, you know, even though my upbringing wasn't a different business, would you want to own this business? I think that's the foundation that people miss a lot in stocks and in stock market investing when they think about purchasing something. You should really think about it in terms of, you know, if I was born or had the good fortune to be in a wealthy family that came from generations of owning a business, is this the one business I would want to own? You know, that would critically achieve the two goals you're looking for capital preservation over the long term and then an attractive rate of capital compounding. And I think when you scrutinize businesses at that higher level and think about it generationally, that really helps you when you get down to even a short-term vehicle like the stock market because you then really”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. Yeah, no, that's the interesting thing when you get into this city and you realize sort of the commoditized nature of most of the businesses here, particularly restaurants, right? You just wonder you drive up any of the avenues. You wonder how all these places stay in business. What are the margins on certain areas of their business? What is it about certain locations that make them thrive? So I see a lot of average businesses that I wonder why would you be in that business? Not to denigrate the business by any means, but I'm always sort of ranking and contrasting. And I think of it.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“That's exactly it. As a kid and even now today, you know, and on my way up here to the studio, I just am wired that way that I'm always looking around at things, wondering how they work and then generally looking at businesses and wondering how they work. And it kind of gets to, you asked about the philosophy, what we describe as quality, quality growth today. It's always breaking down businesses quantitatively and qualitatively into what makes certain ones great. And what makes most businesses, quite frankly, average? And why would you want to get out of bed in the morning, you know, to sort of engage in something? What's in it for you as an owner of the business?”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“In northwestern New Jersey. So I wasn't around the markets at all. It wasn't something we talked about at all at home. I don't know how I found it. I just sort of stumbled upon it once I got into high school, really. That backdrop of what was going on, then, as you described, that wasn't as close to me, which is actually interesting in that it was more about the process itself. It wasn't the result, you know, it was the item of being able to invest in a business via a stock. So I was actually disconnected, which is kind of back to, I think, what ends up successful today, not focusing on that aspect of it, the forward thinking, what the numbers, it's the fundamentals. So it's a very fundamental basis to start with.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's interesting if you look at my upbringing too. My father was a farmer from New Jersey at a landscaping business. We had a garden center.”
2020-01-10 · Masters in Business · Matthew Benkendorf on Managing Equities · IDENTIFIED FROM THE TRANSCRIPT · source