Value Investing with Legends

Success comes from value creation.    For a strategic initiative to create value, it must increase willingness to pay or decrease willingness to sell. Otherwise, the resources expended will not flow into profitability.   Today’s discussion is one I was looking forward to because we’re focusing on value-based strategy frameworks and using strategic analysis to understand whether a company has a competitive advantage. Joining us to explore this topic is someone who has taken a fundamentally sound framework and brought it to life with excellent insights and vivid examples, Felix Oberholzer-Gee.   Felix Oberholzer-Gee is the Andreas Andresen Professor of Business Administration in the Strategy Unit at Harvard Business School. A member of the faculty since 2003, Felix has won numerous awards for excellence in teaching, including the Harvard Business School Class of 2006 Faculty Teaching Award for best teacher in the core curriculum and the 2002 Helen Kardon Moss Anvil Award for best teacher in the Wharton MBA program. He teaches competitive strategy in executive education programs such as the Program for Leadership Development, the Senior Executive Program for China, and a program for media executives titled Effective Strategies for Media Companies. His course, Strategies Beyond the Market, is a popular elective class for second-year MBA students. Felix is the author of numerous books, and his latest book, Better, Simpler Strategy, will be a major subject of today’s conversation.   In this episode, Felix, Tano, and I discuss how Felix defines his strategy framework, why willingness to pay and willingness to sell should be at the core of every strategy conversation, the value of ROIC as a metric of success, how Felix thinks about driving competitive advantages, value capture versus value creation, how to think about complements and substitutes, the potential for innovation and productivity growth, and so much more! Key Topics:   Welcome Felix to the show (2:03) Why a Ph.D. for career advancement unexpectedly led to Felix’s transition into academia (2:24) How case writing guides Felix’s interests and research focus (4:20) Defining a value-based strategy framework (6:25) Why should every conversation start with “Are we increasing willingness to pay or are we decreasing willingness to sell?” (10:08) Why Felix chose return on invested capital (ROIC) as a primary metric (12:40) Looking at ROIC distribution over the long term (14:22) Focusing on creating a competitive advantage inside of your industry segment (18:25) The significant issues strategists have with P&L statements (21:31) Value capture versus value creation (24:56) Determining willingness to pay (28:21) Harnessing network effects to increase willingness to pay (29:19) When to be worried about new entrants (33:18) Types of relationships between complementors (36:59) Understanding complements and value creation (40:26) Identifying complements and subtitutes (43:27) The effect of different management practices on productivity and willingness to sell (50:53) Tying willingness to pay and willingness to sell to strategy maps (56:01) Case study: Best Buy (58:09) The potential for innovation and productivity growth (1:02:09) Why Felix is obsessed with the differences between how we think about products and services versus jobs (1:04:50) Felix’s book recommendations (1:08:18) And much more! Mentioned in this Episode:   Felix Oberholzer-Gee’s Book | Better, Simpler Strategy: A Value-Based Guide to Exceptional Performance Youngme Moon’s Book | Different: Escaping the Competitive Herd Frances Frei & Anne Morriss’ Book | Uncommon Service: How to Win by Putting Customers at the Core of Your Business Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

To be a good value investor, you must be a good credit analyst.   Over the years, I learned so much from the many investors I’ve met through Heilbrunn. I’ve shamelessly incorporated these ideas and insights into my lecture notes and the curriculum. Today’s guest is one such person.   Mitch Julis has had a disproportionately large impact on both my thinking and the program design. Now he joins me for a conversation about the rich interactions between the nature of the firm’s business operation and the liability side of the balance sheet.   Mitchell R. Julis is the Co-Founder, Co-Chairman, and Co-Chief Executive Officer of Canyon Partners, LLC. Mitch is a graduate of the Woodrow Wilson School at Princeton University, Harvard Law School, and Harvard Business School. He received an honorary doctorate from Yeshiva University of New York in 2011. Before forming Canyon, Mitch directed a group of professionals responsible for a distressed and special situation securities portfolio at Drexel Burnham Lambert. He was a bankruptcy and creditors’ rights attorney at Wachtell, Lipton, Rosen & Katz in New York.   In this episode, Mitch and I discuss his journey from Bronx to Beverly Hills, the juxtaposition of accounting and accountability, why increasing spending power can undermine our federal system of competition, the four P’s of understanding governance, Mitch’s accidental entry into restructuring and bankruptcy law, arbitrage opportunities that arise in distressed situations, his approach to risk assessment, and so much more!     Key Topics:   Welcome Mitch to the show (0:39) Mitch’s rich childhood in the Bronx (3:14) The journey to Princeton and Mitch’s goal to go to the Woodrow Wilson School of Public and International Affairs (9:35) The juxtaposition of accounting and accountability (15:47) Why increasing spending power can undermine our federal system of competition (18:09) How the four P’s of understanding governance play out in real-world situations (23:58) Mitch’s accidental entry into restructuring and bankruptcy law (29:31) Challenging the Countryman definition of executory contract at Harvard Law (33:12) Mitch’s unexpected career moves (35:39) How Mitch’s time at Drexel shifted his thinking about financial markets (38:30) Exploring arbitrage opportunities that arise in distressed situations (42:05) Using accounting to its maximum potential when modeling the evolution of the balance sheet (49:09) Insights from Canyon’s statement of changes in net financial obligations (50:09) Chapter 11 escape holes and loopholes created by the private equity world (54:49) Mitch’s approach to risk assessment (57:08) How the next financial crisis will play out (1:03:50) What keeps Mitch up at night with worry? (1:11:08) Mitch’s movie recommendations (1:15:14) Embracing a continuous learning mindset with humility (1:18:29) And much more!     Mentioned in this Episode:   Canyon Partners Richard E. Neustadt’s Book | Presidential Power and the Modern Presidents: The Politics of Leadership from Roosevelt to Reagan Philip Hamburger’s Book | Purchasing Submission: Conditions, Power, and Freedom Freddie Gershon’s Book | Sweetie Baby Cookie Honey: A Novel Sujeet Indap & Max Frumes’Book | The Caesars Palace Coup: How a Billionaire Brawl Over the Famous Casino Exposed the Corruption of the Private Equity Industry The Offer on Paramount Plus Rabbi Benjamin Blech’s Article | Bernie & The Godfather Spirited on Apple TV     Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

“Right next to the really cheap junk, there are some really cheap gems."   Welcome to a new season of the Value Investing with Legends podcast!   We're delighted to welcome our first guests for the season, Andrew Wellington and Dan Kaskawits from Lyrical Asset Management. In 2008, Andrew started the firm with three core pillars of investing: value, quality, and analyzability. That approach leads them to focus on building concentrated portfolios that generate great returns through the core principles of value investing with a long-term time horizon.   Andrew Wellington is the Chief Investment Officer of Lyrical and has more than two decades of experience in the asset management industry. After spending five years in management consulting, in 1996, Andrew joined Pzena Investment Management as a founding member and its first research analyst. Five years later, after honing his skills as an equity analyst and value investor, Andrew joined Neuberger Berman in 2001, where he went on to run their institutional mid-cap value product. After Neuberger, Andrew spent two years in activist investing at New Mountain Capital. Andrew graduated summa cum laude and as the top graduating senior from the University of Pennsylvania’s Management & Technology Program in 1990, earning a Bachelor of Science in Economics from the Wharton School and a Bachelor of Science in Engineering from the School of Engineering.   Dan Kaskawits joined Lyrical in January 2018 as a Senior Research Analyst. Dan has over 15 years of experience investing in public equities. Before Lyrical, he served as an Analyst at Elm Ridge Capital from January 2011 to December 2017 and as an Associate at Citi Investment Research from October 2003 to June 2009. Dan graduated from Tulane University and received an MBA from Columbia Business School. Dan has earned the right to use the Chartered Financial Analyst designation.   In this episode, Andrew, Dan, and I discuss how they got started in the asset management industry, lessons they learned from value investing legends, why Andrew founded Lyrical Asset Management, what makes a successful international value strategy, Lyrical’s approach to search, how they operationalize their core pillars, why it’s advantageous to be a generalist, their top book recommendations, and so much more! Lyrical Asset Management LP’s participation in this interview does not convey any offering or the solicitation of any offer to invest in the strategies discussed. Moreover, the information contained in this interview is not provided by Lyrical in a fiduciary capacity and does not constitute investment advice. Positions held by Lyrical portfolios are subject to change without notice; Lyrical bears no responsibility to update any opinions or information expressed herein. A list of all Lyrical recommendations is available upon request. Please see lyricalam.com/notes for a discussion of certain material risks of an investment in Lyrical’s strategies.   Key Topics:   Welcome Andrew and Dan to the show (00:56) How Andrew got into asset management from management consulting (3:09) Dan’s journey to Columbia Business School and his asset management career (5:29) Invaluable lessons from Joel Greenblatt and Rich Pzena in being an equity analyst and a value investor (8:25) Learning to be a value investor at Elm Ridge (11:05) The restrictions that come from career concerns and what makes Lyrical Asset Management different (16:04) Crucial elements of a successful international value strategy (19:43) Lyrical’s approach to search and the use of screens (23:33) Defining quality and analyzability and how Lyrical operationalizes them (29:20) Computing ROIC with significant intangibles (36:12) Ashtead Technology is a quintessential example of Lyrical’s investment philosophy (42:43) Often overlooked benefits of counter-cyclical cashflow (46:59) The generalist’s advantage (50:04) Dimensions of popularity (52:52) Why Lyrical offers clients the opportunity to invest in value ETFs (54:55) How the FAANG stocks influenced the outsized return of growth vs. value stocks in the past 10 to 15 years (59:14) Lyrical’s value-focused impact strategy (1:02:27) Andrew’s philosophy: “Don’t predict; prepare.” (1:06:19) Dan and Andrew’s book recommendations (1:08:44) And much more!     Mentioned in this Episode:   Lyrical Asset Management Value Investing with Legends Podcast | Allison Fisch - Unlocking Value in Emerging Markets Annie Duke’s Book | Quit: The Power of Knowing When to Walk Away Benjamin Graham’s Book | The Intelligent Investor Rev Ed.: The Definitive Book on Value Investing Bruce C. Greenwald’s Book | Competition Demystified: A Radically Simplified Approach to Business Strategy James Montier’s Book | Value Investing: Tools and Techniques for Intelligent Investment Michael Mauboussin’s Books Annie Duke’s Book | Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts Walter Isaacson’s Book | The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race Walter Isaacson’s Book | Steve Jobs Ryan Holiday’s Book | Stillness Is the Key     Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

“We look for exceptional small and mid cap companies with the wherewithal to become exceptional large companies.”   This is at the core of the investment philosophy of today’s guest, Columbia Business School alum Amy Zhang. Amy is Executive Vice President and Portfolio Manager of the Alger Small Cap Focus, Alger Mid Cap Focus, Alger Mid Cap 40, and Alger Small Cap Growth Strategies. She joined Alger in 2015 and has 27 years of investment experience, including over a decade at Brown Capital Management as a Partner, Managing Director, and Senior Portfolio Manager of its Brown Capital Small Company Strategy.   Amy has received multiple accolades, including being named one of the "Best Female PMs to Invest with Now" by Morningstar in 2022 and one of the “Top 20 Female Portfolio Managers” by Citywire in 2021, 2019, and 2018.   In this episode, Amy, Michael, and I discuss Amy’s unconventional background and studies, why she made the move to managing small cap growth portfolios, how to think about small cap investments, the key metrics she looks for when assessing potential companies, her classification system of motorboats and sailboats, opportunities available in the current market, and so much more!   For more information and disclosures please visit www.alger.com     Key Topics:   Reflections on the 2021/22 academic year (0:51) Welcome Amy to the show (1:26) How Amy found her way from studying math and physics to starting her investment career (2:44) How Amy’s decision to apply to Columbia Business School (CBS) led to her first job in finance (5:43) Getting broad experiences after graduating from CBS (8:33) The valuable training and experiences Amy gained in her early career (10:24) Why Amy made the move to managing small cap growth portfolios (12:23) How Amy’s investment philosophy has evolved (14:23) Alger’s criteria for small cap (16:30) Getting a realistic perspective on the total addressable market (TAM) (19:10) Measuring the growth of intangibles inside a firm (23:53) Quantitative and qualitative metrics for assessing moats (25:12) Why management discussion is essential (26:51) Company classification: motorboats vs. sailboats (30:14) Why barriers to entry are more significant than first-mover advantage (32:15) Making the buy or sell decision (35:05) Assumptions that go into the margin of safety (37:37) Opportunities offered by the current market turmoil (41:42) Not all growth is created equal (45:57) How Amy thinks about portfolio construction in today’s market (48:02) The importance of being benchmark agnostic (50:53) What worries and excites Amy most about the next few years in financial markets? (52:50) Amy’s book recommendations (54:47) And much more!     Mentioned in this Episode:   Philip A. Fisher’s Book | Common Stocks and Uncommon Profits and Other Writings Seth A. Klarman’s Book | Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor Michael Mauboussin’s Book | More Than You Know: Finding Financial Wisdom in Unconventional Places Scott Davis’ Book | Lessons from the Titans: What Companies in the New Economy Can Learn from the Great Industrial Giants to Drive Sustainable Success Mark Robichaux’s Book | Cable Cowboy: John Malone and the Rise of the Modern Cable Business     Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

How do you create a portfolio strategy that takes into account both safety and the pursuit of your aspirational goals?   That’s what today’s guest, Ashvin Chhabra, set out to answer with the Wealth Allocation Framework. Ashvin is President and Chief Investment Officer of Euclidean Capital, a New York-based family office for James H. Simons & Marilyn H. Simons. The Simons Foundation is dedicated to advancing research in mathematics and the basic sciences and is currently one of America's largest private funders in those areas. Prior to his current position, Ashvin was Chief Investment Officer for Merrill Lynch and Chief Investment Officer at the Institute for Advanced Study in Princeton, New Jersey. He's also the author of a terrific book, The Aspirational Investor, which was published in 2015. Ashvin holds a Ph.D. in Applied Physics from Yale University in the field of nonlinear dynamics.   In this episode, Ashvin, Tano, and I discuss Ashvin’s background as a theoretical physicist, why he didn’t see himself becoming a great trader, how the Wealth Allocation Framework was developed, his frustrations with modern portfolio theory, how he brings behavioral finance into wealth management, how to think about inflation and wealth preservation, and so much more!     Key Topics:   Welcome Ashvin to the show (1:05) The beginnings of Ashvin’s dream of becoming a physicist (2:58) The deep insights Ashvin was exposed to in his university studies (3:53) Benoit Mandelbrot’s influence on Ashvin’s thinking (5:51) Ashvin’s transition from theoretical physicist to derivatives trading (9:20) Why Ashvin didn’t resonate with a career on the trading floor (11:24) How the Wealth Allocation Framework was developed (15:54) Three main components of the wealth allocation framework (18:11) The engine of wealth creation (22:24) Why we need to understand models in their specific context (25:05) An evolving view of risk (28:46) Bringing behavioral finance into wealth management (31:23) Ashvin’s perspective on the evolution of the endowment model (34:55) Diversifying through various ecosystems (38:26) How to think about inflation and wealth preservation (41:43) Bringing in an element of common sense and humanity (45:26) The macro issues that worry Ashvin (47:52) The beauty of the non-linear aspects of financial markets (51:13) Ashvin’s book recommendations (53:03) And much more!   Mentioned in this Episode:   Ashvin B. Chhabra’s Book | The Aspirational Investor: Taming the Markets to Achieve Your Life's Goals Ashvin B. Chhabra’s Paper | Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors Patrick Bolton, Tano Santos and José Scheinkman’s Paper | Cream Skimming in Financial Markets Robert A. Caro’s Book | Working Robert A. Caro’s Book | The Power Broker: Robert Moses and the Fall of New York Benoit Mandelbrot & Richard L Hudson’s Book | The Misbehavior of Markets: A Fractal View of Financial Turbulence Benjamin Graham’s Book | The Intelligent Investor: The Definitive Book on Value Investing Morgan Housel’s Book | The Psychology of Money: Timeless lessons on wealth, greed, and happiness Amor Towles’ Book | A Gentleman in Moscow   Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

“The data is the data, and that’s it.”   As a model user, it’s easy to get hyperfocused on quantitative data but reality requires a broader approach.   In the current market environment with uncertainty at every turn, it’s an advantage to be able to blend quantitative and qualitative analysis with years of experience observing the interaction between the economy at large and financial markets.   Today we’re joined by Wall Street Legend, Abby Joseph Cohen, a student of the market who has seen lots of ups and downs from early in her career.  Abby was most recently Senior Investment Strategist at Goldman Sachs and she is now a full-time member of the faculty at Columbia Business School, where she teaches a very popular course called the Future of the Global Economy.   Abby started her Wall Street career at T. Rowe Price, ultimately landing at Goldman Sachs in 1990. She made her name there as Chief US Portfolio Strategist, was named a Managing Director in 1996, and made Partner in 1998 shortly before the firm went public. Abby is a native New Yorker, attended Cornell University, and received a master's degree in economics from George Washington University.   In this episode, Abby, Tano, and I discuss the unusual route Abby took in her studies when she combined economics with computer science, why she considers herself a reformed quant, the importance of combining quantitative and qualitative data, what we can learn from financial crises of the past, why she doesn’t believe we’re experiencing the end of globalization, and so much more!   Key Topics:   Welcome Abby to the show (1:06) The unusual path Abby charted for herself in her studies (2:25) Why Abby considers herself a reformed quant (4:35) When a model stops working (6:23) The art of using a model (7:55) What happens when many investors are using the same models (9:58) How declining interest rates have impacted financial markets in recent decades (13:08) The issues that have developed out of the rise of ETFs and index funds (15:03) What we can learn from the TMT (technology, media, telecom) sector runup in 1999 and 2000 (18:46) The sustainability of companies and how it affects pricing (20:27) The evolution of the syllabus for the Future of the Global Economy (23:00) Factors that cause a crisis to become a lasting phenomenon (25:19) Risks associated with monetary and fiscal policy decisions taken during COVID (27:11) Abby’s take on the potential end of globalization (31:37) The problem with current methods for measuring productivity (36:22) The increasing role of the Federal Reserve in stabilizing the world financial system (38:21) The anticipated evolution of the energy sector over the next few decades (42:14) Abby’s single biggest worry (45:44) What keeps Abby optimistic about the future (47:17) Abby’s book recommendations (48:54) And much more!   Mentioned in this Episode:   Madeleine Albright’s Book | Fascism: A Warning Fiona Hill’s Book | There Is Nothing For You Here: Finding Opportunity in the Twenty-First Century Amor Towles’ Book | The Lincoln Highway: A Novel   Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Welcome back to Season 7!   From the move to Manhattanville to the new curriculum for the value investing program at The Heilbrunn Center, there have been many changes since we wrapped our last season at the end of 2021.   Outside of that, a lot has happened in the markets. We’ve seen significant drawdowns in some growth stocks, conversations are centered around inflation and stagflation, and the geopolitical situation is bleak after the atrocious Russian invasion of Ukraine.   For our upcoming episodes, we’re exploring different aspects of how to navigate these difficult times. Joining us today to discuss the international dimension of investing in this situation is our guest, Allison Fisch.   Allison is Principal and Portfolio Manager at one of the great names in value, Pzena Investment Management. Pzena was founded in 1995 by Richard Pzena as a value-oriented investment management company and now has more than $50 billion of assets under management. Allison joined Pzena in 2001 after starting her career as a business analyst at McKinsey & Company. She earned a B.A. summa cum laude in Psychology and a minor in Drama from Dartmouth College where she was a member of the Phi Beta Kappa and Psi Chi national honor societies.   In this episode, Allison and I discuss how starting in management consulting created a great foundation for her investing career, how she developed her investing philosophy, why she’s excited about opportunities for value in emerging markets, her approach to idea sourcing, risk management, and portfolio construction in emerging markets, and so much more!   Key Topics:   Welcome Allison to the show (1:27) Where Allison’s interest in investment management started (2:46) The skills that often make management consultants great portfolio managers (4:01) Managing the transition from McKinsey to asset management (6:21) Being a generalist versus a specialist (8:39) How Allison developed her investment philosophy (11:27) Allison’s journey from analyst to co-portfolio manager at Pzena (12:55) Pzena’s idea sourcing strategy (15:52) Getting to the underlying value of businesses across geographies (17:39) Portfolio construction in emerging markets (21:49) Why value works better in emerging markets (27:27) How Allison thinks about policy and currency risk in emerging markets (30:52) Managing geopolitical risks in times of crisis (34:25) How to approach reentry into historically unstable markets (38:47) Integrating ESG into your investment philosophy (41:24) Huge opportunities for value investors (44:15) What Allison is reading right now (46:17) And much more!   Mentioned in this Episode:   Pzena Investment Management   Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Time arbitrage is one of the biggest behavioral advantages an investor can have.   Joining us today to talk about what it means to be an engaged, long-term shareholder is Munib Islam. Munib is someone who has experienced investing from many different angles, from a traditional long-short hedge fund to sitting on corporate boards and seeing the process of approving corporate performance from the inside.   Munib Islam is the Founder and Managing Partner of LTS One Management, an investment partnership created earlier this year with funding from Jorge Paulo Lemann, Marcel Telles, and Carlos Alberto Sicupira. Before starting LTS One, Munib was a longtime partner and briefly Co-Chief Investment Officer of Third Point, a New York-based hedge fund with over $15 billion of assets under management. Before joining Third Point, Munib worked as an associate at Oak Hill Capital and Lazard. He received a BA in Economics magna cum laude from Dartmouth College and an MBA from the Graduate School of Business at Stanford University.   In this episode, Munib, Tano, and Micheal discuss Munib’s introduction to a career investing, similarities and differences between working in private equity and public markets, why Munib was excited to bring capital to European markets, the value of cognitive diversity, Munib’s investment philosophy, the challenges of activism, and so much more!   Key Topics:   How Munib was initially drawn into the world of investing (3:06) Munib’s early career in the investing world (4:32) Where Munib developed his investing foundation (6:27) Learning about the experiential aspects of an investing career (7:27) The overlap at the analyst level for private equity and public markets (8:58) Key differences between working in private equity and public markets (10:27) Munib’s journey from analyst to co-portfolio manager at Third Point (12:48) Why Munib was well-positioned to find opportunities in the European markets (14:39) Challenges of attracting investment in Europe in the wake of the financial crisis (15:47) The main goals behind the founding of LTS One (18:31) Firms with risk-management DNA versus stock-picking DNA (21:00) Developing a robust risk management approach (22:24) Munib’s evolving approach to hiring (23:58) Focusing on capital allocation improvement with a soft twist of operational improvement (26:42) What investors can learn from academia (28:07) Munib’s investing philosophy (31:33) Finding ideas where you can change a company’s trajectory (33:30) The actionability aspect of activism (36:05) The value of time arbitrage (39:19) Crucial elements for successful long-term orientation (43:36) The benefit of highly concentrated activist strategy (46:22) Why Munib looks for good businesses with questionable leadership (48:26) What operational excellence looks like (50:27) Common pitfalls in capital allocation (51:37) Munib’s approach to portfolio optimization (53:43) How Third Point identified Baxter as a good investment opportunity (55:56) Third Point’s strategy for Baxter (58:11) Munib’s biggest lessons from his first board experience at Baxter (1:00:58) Highlights from Third Point’s investments in Sony (1:02:50) LTS One’s investment in Cellnex Telecom (1:05:50) Why it’s an exciting time to invest in International Flavors & Fragrances (1:10:43) Munib’s worries about the current market environment (1:11:09) Munib’s current focus (1:12:36) Why Munib believes in reading widely across disciplines (1:13:25) And much more!   Mentioned in this Episode:   Robert Hagstrom’s Book | Investing: The Last Liberal Art The Nomad Investment Partnership Letters To Partners Daniel Coyle’s Book | The Culture Code: The Secrets of Highly Successful Groups     Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

Activist investing is the new frontier for value investors, allowing them to be the agents of their own returns.   Today we’re continuing our examination of the activist style of investing by exploring the intersection of two important trends in the money management industry: activism and environmental, social, and governance investing.   Impactive Capital’s Lauren Taylor Wolfe joins us to share her perspective and Impactive’s unique approach to creatively incorporating environmental, social and governance (ESG) into activism.   Lauren is co-founder and Managing Partner of Impactive Capital, an activist investment management firm that currently has more than 1.5 billion in assets under management.  Prior to founding Impactive, she spent 10 years at Blue Harbour Group where she was a Managing Director and Investing Partner. Lauren earned her M.B.A. from The Wharton School at University of Pennsylvania and a B.S. magna cum laude from Cornell University.    In this episode, Lauren, Michael and I discuss her non-linear journey to investing, what she learned from working in different industries, how she became interested in activist investing, what Impactive is doing to improve diversity in the industry, and so much more!   Key Topics:   Lauren’s first business endeavors (2:05) Lauren’s work experiences after graduation (3:13) Why Lauren was drawn to value investing early in her career (6:16) How TurboChef raised Lauren’s interest in activist investing (8:57) Why many executives struggle with capital allocation (11:49) Impactive’s focus on business quality and time horizon (14:13) The evolution of activist investing (16:25) Impactive’s approach to working with management (18:21) Idea screening and ESG considerations (20:33) How Impactive values businesses (21:24) Thinking about business resilience (25:13) Portfolio construction and sizing (26:40) Lauren’s thoughts on luck and skill (30:22) Creating a diverse workforce in investment management and our support industries (32:08) Impactive’s approach to idea sourcing and prioritization (34:30) HD Supply’s business background (37:39) HD Supply’s move from Home Depot to private equity and back (40:49) KBR’s transformation into a high quality business (46:16) The opportunities Impactive identified with KBR (49:30) Lauren’s perspective on meme stocks and SPACs  (52:41) Opportunities and risks on the horizon (54:47) Books that Lauren is reading (57:01) And much more!   Mentioned in this Episode:   Impactive Capital William Thorndike’s Book | The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success Robert G. Kirby’s Article | The Coffee Can Portfolio Annie Duke’s Book | How to Decide: Simple Tools for Making Better Choices Scott Page’s Book | The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy Scott Page’s Book | The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies Bill Gates’ Book | How to Avoid a Climate Disaster: The Solutions We Have and the Breakthroughs We Need Kazuo Ishiguro’s Book | Klara and the Sun Ted Koppel’s Book | Lights Out: A Cyberattack, A Nation Unprepared, Surviving the Aftermath   Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!

In a world of plentiful capital and compressed yields, activism and being the agent of one's returns is a way forward.   Transformational activism in particular is centered around a deep commitment and trusting relationship between the investor and the company. This multi-dimensional approach forgoes short-term solutions like financial engineering and instead focuses on working with great leaders to put together the right people, resources, and strategies for long-term results.   Few firms exemplify the value creation associated with shareholder engagement and activism better than ValueAct and today I’m joined by Mason Morfit, Chief Executive Officer and Chief Investment Officer of ValueAct Capital.   Mason Morfit is a Partner, the Chief Executive Officer and Chief Investment Officer of ValueAct Capital, a governance-oriented investment fund with over $14 billion in assets under management. ValueAct has a very highly concentrated portfolio and one of its partners has served on the Boards of Directors of 44 public companies over the life of this great activist fund. Mason himself has served as a director of Microsoft Corporation, Valeant, Bard, Immucor, and many other companies.   In this episode, Mason and I discuss why he became interested in the psychological aspect of economics, how the activist investor landscape has shifted, the difference between transactional and transformational activism, the value of a learn-teach relationship, and so much more!   Key Topics:   The advantages of Mason’s experience growing up as an outsider (2:30) What drew Mason to studying economics and psychology (3:48) Working in the health care group at Credit Suisse First Boston in the late 90s (5:37) Mason’s introduction to activist investing (7:24) Activist investing in the time of the imperial CEO (9:42) How corporate scandals and Sarbanes-Oxley changed the landscape for ValueAct (10:44) 20 years of network and relationship building (12:54) The immense value of documentation and knowledge sharing (13:50) Defending against self-attribution bias (15:24) The inherent problems with a public company board (17:48) ValueAct’s role in mitigating against bureaucratic biases (18:24) Integrating the work of board committees (19:37) Psychological paradigms that emerge based on corporate history (22:18) Shifting paradigms that no longer work (24:14) Differentiating between transactional and transformational activism (28:15) Finding opportunities in interesting times (30:36) ValueAct’s mission (31:38) The key ingredients of ValueAct’s successes (34:37) Creating a learn-teach relationship (35:46) How the learn-teach relationship helps with organizational diagnosis (37:44) Creating an environment that empowers truth (39:38) The changing Japanese corporate governance landscape (41:25) Olympus as a case study of ValueAct’s expansion into Japan (43:31) ValueAct’s unique approach to investing in the Japanese market (47:45) Why activism today is more relevant than ever before (49:53) Shifting opportunities for an activist investor (51:51) Creating 21st century global champions (54:04) The disproportionate reward of disruptors at the expense of incumbents (55:27) Mason’s book recommendations (57:14) And much more!   Mentioned in this Episode:   ValueAct Capital John Irving’s Book | The World According to Garp Kazuo Ishiguro’s Book | The Remains of the Day Sir Lawrence Freedman’s Book | Strategy: A History   Thanks for Listening!   Be sure to subscribe on Apple, Google, Spotify, or wherever you get your podcasts. And feel free to drop us a line at valueinvesting@gsb.columbia.edu.   Follow the Heilbrunn Center on social media on Instagram, LinkedIn, and more!