Wall Street Transcript Interview with Michael M. Meyer, Partner and Analyst/Portfolio Manager at Cooke & Bieler: High-Quality, Lower-Risk Approach to Large-Cap Value Investing, October 10, 2012 - The Wall Street Transcript has just published its Large-Cap Investing Report offering a timely review of the sector to serious investors and industry executives. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Large Cap Investing - Value Investing - Long-Term Investing
Companies include: Ball Corporation (BLL), Rock-Tenn Co. (RKT), Cisco Systems, Inc. (CSCO), Kohl's Corp. (KSS), Macy's, Inc. (M), Western Union Co. (WU) and many others.
In the following excerpt from the Large-Cap Investing Report, an expert portfolio manager discusses his firm's investment philosophy and top picks for investors:
TWST: Please start with a synopsis of Cooke & Bieler as a firm and describe its overall investment strategy.
Mr. Meyer: Cooke & Bieler is an independent partner-owned investment management firm that has been around since 1949. Currently, we have about $4.5 billion in assets under management, which are predominantly institutional. We also manage money primarily, I would say, for wealthy Philadelphia families, and we subadvise a couple of mutual funds through the Wells Fargo (WFC) Advantage Funds Group. So we're a boutique investment-driven firm, and consequently, most of our resources are tied up in and allocated to the team of seven people we currently have making investment decisions and managing portfolios. And that's across all of our strategies, which at this point are large-cap, midcap, small-cap and all-cap value strategies.
From a philosophical standpoint, we've employed the same investment strategy since the early 1970s. The process that we have in place to ensure that we're consistently applying that philosophy certainly has evolved over the years, but really, philosophically, we've always approached investing the same way from the bottom up, keeping in mind always that fundamentals ultimately drive stock prices. Likewise, we take a long-term perspective and are very committed to our original research effort, which is something that we've had in place at Cooke & Bieler, again, since the early 1970s.
We've long had a very healthy respect for the destructive and debilitating effect that negative compounding has on investment returns, so we're also very committed to avoiding permanent impairment of capital, which makes us very attuned to attractive underlying economics, financial strength and valuation in our stock-selection process. In short, we refer to our approach as a high-quality, low-risk approach to investing.
TWST: We are going to focus on the large-cap value strategy. Would you give us a snapshot of that portfolio as it stands today?
Mr. Meyer: Right now, in our large-cap portfolio, we have roughly 50 holdings. We are very much committed to staying in a range of 40 to 50 holdings. We want to maintain a fairly concentrated portfolio. We view ourselves as active managers. We believe in the research we do and in our ability to add value, so we want to invest in the ideas in which we have the most conviction. So we constrain ourselves to 50 holdings, and that's currently where we are.
Looking at the portfolio's positioning, we would say that with overweightings in several economically sensitive sectors, including consumer discretionary, industrials and technology, combined with an underweighting in utilities, the portfolio at this point is geared to perform best in a growing but balanced economic environment.
And we purposely say balanced because the portfolio, at this point, is underweight to some extent in energy and basic commodities for a combination of qualitative and valuation reasons. With the pullback that we saw in many of those stocks over the past year, we did take advantage of a few opportunities, but again, we have less exposure than the portfolio's value benchmark.
And finally, as always given our commitment to capital preservation and quality, we believe the portfolio is invested in stocks of financially strong, competitively advantaged and durable franchises that should hold up relatively well in a challenging environment, consistent with our long history of performing well in down markets.
TWST: Has the portfolio changed to any significant degree over the past year or so, and what's its typical turnover?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Large Cap Investing - Value Investing - Long-Term Investing
Companies include: Ball Corporation (BLL), Rock-Tenn Co. (RKT), Cisco Systems, Inc. (CSCO), Kohl's Corp. (KSS), Macy's, Inc. (M), Western Union Co. (WU) and many others.
In the following excerpt from the Large-Cap Investing Report, an expert portfolio manager discusses his firm's investment philosophy and top picks for investors:
TWST: Please start with a synopsis of Cooke & Bieler as a firm and describe its overall investment strategy.
Mr. Meyer: Cooke & Bieler is an independent partner-owned investment management firm that has been around since 1949. Currently, we have about $4.5 billion in assets under management, which are predominantly institutional. We also manage money primarily, I would say, for wealthy Philadelphia families, and we subadvise a couple of mutual funds through the Wells Fargo (WFC) Advantage Funds Group. So we're a boutique investment-driven firm, and consequently, most of our resources are tied up in and allocated to the team of seven people we currently have making investment decisions and managing portfolios. And that's across all of our strategies, which at this point are large-cap, midcap, small-cap and all-cap value strategies.
From a philosophical standpoint, we've employed the same investment strategy since the early 1970s. The process that we have in place to ensure that we're consistently applying that philosophy certainly has evolved over the years, but really, philosophically, we've always approached investing the same way from the bottom up, keeping in mind always that fundamentals ultimately drive stock prices. Likewise, we take a long-term perspective and are very committed to our original research effort, which is something that we've had in place at Cooke & Bieler, again, since the early 1970s.
We've long had a very healthy respect for the destructive and debilitating effect that negative compounding has on investment returns, so we're also very committed to avoiding permanent impairment of capital, which makes us very attuned to attractive underlying economics, financial strength and valuation in our stock-selection process. In short, we refer to our approach as a high-quality, low-risk approach to investing.
TWST: We are going to focus on the large-cap value strategy. Would you give us a snapshot of that portfolio as it stands today?
Mr. Meyer: Right now, in our large-cap portfolio, we have roughly 50 holdings. We are very much committed to staying in a range of 40 to 50 holdings. We want to maintain a fairly concentrated portfolio. We view ourselves as active managers. We believe in the research we do and in our ability to add value, so we want to invest in the ideas in which we have the most conviction. So we constrain ourselves to 50 holdings, and that's currently where we are.
Looking at the portfolio's positioning, we would say that with overweightings in several economically sensitive sectors, including consumer discretionary, industrials and technology, combined with an underweighting in utilities, the portfolio at this point is geared to perform best in a growing but balanced economic environment.
And we purposely say balanced because the portfolio, at this point, is underweight to some extent in energy and basic commodities for a combination of qualitative and valuation reasons. With the pullback that we saw in many of those stocks over the past year, we did take advantage of a few opportunities, but again, we have less exposure than the portfolio's value benchmark.
And finally, as always given our commitment to capital preservation and quality, we believe the portfolio is invested in stocks of financially strong, competitively advantaged and durable franchises that should hold up relatively well in a challenging environment, consistent with our long history of performing well in down markets.
TWST: Has the portfolio changed to any significant degree over the past year or so, and what's its typical turnover?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
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