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Manager’s ‘DORA Day’ leads to profitable study of women
There are lots of theories about the best way to manage money but one of the most enduring is to adopt long-term thematic bets resulting in idiosyncratic concentrated portfolios. Enter Guardian Capital to the Australian market.
Guardian has become a client of third-party marketer Allen Partners and has committed to offering its style of investing, which has a strong tilt towards quality stocks, to Australian funds.
As is probably flavor of the month, Guardian, which is a Canadian-listed global manager, looks to blend quality with growth. The growth part of it reduces quality’s bias towards utilities and other staid stocks and the quality part reduces the likelihood of getting caught in a bubble.
On a visit to Australia this month, Guardian investment manager Giles Warren and senior vice president Michael Hughes, described their unusual way of helping to discover future themes for analysts to explore.
Twice a quarter the firm holds a ‘DORA Day’, which is a day where staff go out, or stay in, and research anything – Day of Researching Anything. Recent examples are as broad as the changing role of women in the economy and as narrow as investment opportunities in virtual and augmented reality technologies.
The ‘Women in the Economy’ research, which started early last year, has resulted in several investments in the global equities portfolio, which consists of 20-25 stocks. The results are intuitive but you wouldn’t normally think about them in a day-to-day portfolio management way.
For instance, with more women in paid work, especially in developing nations, they are less able to, or likely to want to, breast feed children for very long, prompting soaring demand for infant milk formula. Mead Johnson in Chicago is one of the world’s few pure infant formula companies which the Guardian team visited and analysed over a five-month period before buying into.
From the same research, the analysts observed that certain beauty product retailers were having a lot of success mixing prestige brands with mass-market products under the same roof and that traditional beauty products, such as lipstick, enjoyed consistent demand even in economic downturns.
Giles Warren says Guardian does not invest in banks as a rule, because they have too much leverage and are being disintermediated by technology and regulations. Similarly, utilities tend not to make it because they don’t exhibit enough growth.
Another important criterion is corporate governance, such as how the company deals with its shareholders and customers. This tends to preclude investing in emerging markets directly, but Warren points out you can still get good emerging markets exposure through certain developed market companies.
“We want business diversification – we want to see they are diversified with their customers, geographically and with their products,” he says. “We also look for a sustainable competitive advantage.”
