Teamwork

I rode my 99th double century (the term for a ridiculous 200-mile-ish bike ride) on Saturday and had plenty of time to compose this week’s piece in my head. Sure, long-distance cyclists can ride whatever ludicrous distance they want solo, but their success rate, speed, and efficiency increase dramatically if they ride with others and work as a team. Drafting behind another rider can cut a cyclist’s aerodynamic drag by at least 20% and up to 95%. Over a 200-mile course, that can make hours of difference. So, what does that have to do with investing? In a word, teamwork. Teamwork strengthens us and allows us to cover more ground than would be possible alone. Particularly for the International and Global strategies at ACM, one of the frequent questions we get is: How does such a small team—two guys, essentially—cover the world? You’ve already guessed it, and it is through teamwork. And here is how it works.

Our teams are both internal to ACM and external. On the internal side, ACM’s expertise covers the top-down macro environment led by Dr. Charles Lieberman with frequent and inciteful input from fellow economist, Dr. JoAnne Feeney. Dr. Feeney’s many years as a sell-side analyst covering technology stocks gives us a “home field” advantage when we discuss semiconductor and related stocks. Our team of Kevins (Kelly and Strauss) fill our in-house fixed income needs and provide significant expertise when setting and adjusting our credit quality and duration parameters for fixed-income and balanced accounts. Paul Broughton’s extensive expertise in US stocks, covering small-to-large caps rounds out the internal portfolio management team. Rounding out the internal investment team are David and Jeremy Lieberman, Daniel DeRiso, and Zack Smith.

So, back to the pointed question: What About the Rest of the World? It is on the external side where the International Team applies leverage to its greatest benefit. We’ve been running the International and Global portfolios for more than 25 years and have developed deep and strong relationships with a global network of trading partners. Whether it’s Auerbach Grayson, DBS Vickers, Berenberg, Daiwa or a host of others, our trading partners give us immediate access to local firms, local knowledge and local expertise in any region of the world. Over the course of years, we have trained our partners in the style and quality constraints of our investment selections. While we perform our own rigorous due diligence on potential candidates, we avoid much of the chaff, because our network knows the type of companies we’re looking for. They often identify companies that we can then review in depth. Like drafting during a bike ride, we can go farther for longer with our partners helping us out.

Local access is critical to us and investor conferences are a significant source of on-the-ground knowledge. Regional conferences are offered around the world and throughout the year. David Ruff and I typically attend at least three to four conferences annually and this enables face-to-face meetings with management teams from at least a hundred potential investment candidates. Face-to-face meetings allow us to pick up on intangible clues: tone, hubris, body language, things that are impossible to glean from transcripts of an earnings call. While an in-person meeting is preferable, we will, at a minimum, have a video meeting with any potential candidate before adding it to our portfolios. Conferences also serve as a convenient leverage point to nearby companies. For example, from a recent conference in Munich, I was able to visit nearby companies in Austria and southern Germany. Dave frequently spends several months of the year in Thailand with his family and uses proximity to his advantage there, attending conferences in Singapore, Hong Kong and Tokyo. Whatever travel we do, we leverage to maximize the benefit.

Opposing teams can also provide useful, insightful information. Discussions with other portfolio managers at conferences or site visits often reveal points of view that we hadn’t considered. Because they are typically local or regional investors, they tend to offer a very different perspective than when talking to US-based investors. Whether it shakes our investment thesis in a company or bolsters it, more input and information is better.

The benefits from teamwork are obvious: we complement each other, push each other, challenge each other, play devil’s advocate, avoid groupthink, offer contrarian viewpoints and allow individuals to play to their strengths. We don’t always agree, but we examine the issues from all sides, resulting in more robust decision making. Riding solo doesn’t mean you won’t finish the 200-mile ride, but working with others makes it much, much more likely that you’ll finish. And more enjoyable.
Teamwork gives us the leverage to cover the world.

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