Marquette University AIM Program Speaker Series (February/March 2021)

 The AIM Spring 2021 Speaker Series Featured Six Investment Firms

During the first part of the Spring semester, the students in Marquette University’s Applied Investment Management (AIM) program were able to participate in the Speaker Series. They had the unique opportunity to listen and interact with various investment professionals from six different firms.

The outside speakers, who joined the AIM students via the Teams network, spoke about their various investment philosophies, perspectives, and approaches to equity valuation and portfolio management. The guests came from: Calamos Investments, Capital Innovations, ZCM Equity Group, Aviva Investors, Wasatch Global Advisors, and UBS Asset Management.

The following contains a synopsis of the material presented by the guest speakers:

Mike Klenn – Calamos Investments (Small Cap Growth Fund: CTSIX)

Mike Klenn

AIM alumnus, Mike Klenn, discussed their fund’s investment philosophy and provided insights into how they select companies. Taking advantage of behavioral biases that can lead investors to make suboptimal decisions, they try to take advantage and capitalize on these behavioral biases. 

Mike noted their fund utilizes a fundamental bottom-up stock selection process but also is mindful of market inefficiencies that can exist. He also made the important point that they have not only a solid buy process, they also have strong a sell discipline and try to avoid falling in love with any companies.

Michael Underhill - Capital Innovations

Mike Underhill, Founder and Chief Investment Officer of Capital Innovations, discussed with the students the current macroeconomic issues and relative market return patterns. He noted how consumer inflation expectations remain low, he believes they are starting an upward trend and that investors are likely to become increasingly more alarmed by inflationary risks. Mike discussed how his fund, which focuses on infrastructure, has a core investment philosophy that offers them the flexibility to tilt into growth-oriented investments at attractive prices.

Mike Underhill

Mr. Underhill explained that infrastructure investing continues to be a favorite of financial advisors given our country’s needs for infrastructure upgrades – and that these are likely to continue increasing as demand for clean energy solutions grows exponentially. 

He explained how their portfolios are managed and how they cover various infrastructure-related sectors to find intriguing investment ideas to capitalize upon.  He talked about their investment process and provided the students with important practices to follow in their own fundamental research-based processes. On an encouraging note, Mike noted he was bullish on emerging markets infrastructure spending as those nations seek to increase their competitive position on a global scale.  

Don Nesbitt – Ziegler Capital Management

Don Nesbitt

The third speaker of the semester was Don Nesbitt, a seasoned equity portfolio manager with Ziegler Capital Management. Don began his discussion talking about the value of understanding sources of return and the value in managing risks. He next talked about how his team seeks to identify market overreactions and how they analyze companies in terms of their sales growth when evaluating companies from a relative standpoint. Like Mike Klenn, Mr. Nesbitt discussed behavioral finance and how this leads to inherent market inefficiency. 

Talking about his approach at Ziegler, Don described how their break down securities into three categories: neglected, popular, and neutral. Using various quantitative screens and filters they identify investment candidates; however he also talked about how they also employ qualitative screens to create buy/sell lists.  Lastly, Mr. Nesbitt talked about the sell discipline they maintain and how continuous monitor the overall risk profile of their holdings relative to the overall portfolio.

Susan Schmidt and Adam Schmitz – Aviva Investors

Susan Schmidt

The fourth set of speakers consisted of Susan Schmidt and Adam Schmitz of Aviva. Ms. Schmidt went into detail about their investment process and philosophy – discussing how they develop a portfolio that has relatively neutral concentration of 50-70 stocks with no specific style approach. 

Adam Schmitz

This allows them to focus on identifying strong companies with positive and growing cash flows, low earnings volatility, appropriate leverage, and an increasing ROIC. In addition, she described how they seek out catalysts that include innovation, new business lines, promising product launches, and favorable M&A deals.

Susan noted that their team places a great emphasis on ESG at Aviva and they work to incorporate it into their investment approach. 

Overall, it was clear to the students that Susan and the Aviva team have a consistent investment philosophy and they are constantly on the lookout for quality companies with good cash flow and an increasing return on investor capital.

John Malooly – Wasatch Global Investors (Wasatch Small Cap Ultra Growth Strategy)

John Malooly

The fifth speaker of the series was a frequent guest in the AIM program, John Malooly from Wasatch Global Investors. 

Among some of the top performing funds over past decade, the class learned about John’s team approach and underlying belief that long-term stock prices are driven by solid earnings growth. To identify strong investment opportunities for his fund, Mr. Malooly noted they conduct extensive bottom-up research looking for high-quality growth stocks with a time horizon of roughly five years.

To execute on this philosophy, the Wasatch team seeks out companies that have long-term sustainable earnings growth and they target companies with the potential to substantially boost their earnings over the next five years. Furthermore, John indicates how they target companies with sustainable competitive advantages with high market share, competitive moats, or other attributes like unbeatable brand power and reputation. Like other guest speakers. they look for companies with low debt, strong cash flow, good management, and a reasonable valuation relative to their long-term growth prospects. John was clear that to be successful it takes good buy and sell discipline - and to the importance of keeping accurate and updated models as a method to determine optimal selling points.

Tom Digenan – UBS

Tom Digenan

Another guest who has visited AIM since the mid-2000s, Tom Digenan of UBS gave a presentation similar to his frequent TV appearance and talked about the macroeconomic environment of the past year. Tom provided the students with insights into the current dynamics playing out with value and growth stocks. 

Mr. Digenan talked about COVID-19’s impact to the economy and how he sees the rest of 2021 playing out. Noting that we are still 10M jobs below where we were pre-pandemic, he provided his thoughts about how the economy and society will be changed in the years ahead.

He provided unique insights into the current market trends and why growth stocks have outperformed value stocks since the Great Recession. While claiming not to have a crystal ball, Mr. Digenan noted he believes growth stock outperformance has been extreme and that their P/E ratios will come back into alignment with historical norms. The students enjoyed his insights on the economy and the changes he sees technology bringing to the investment profession. He was an ideal guest to complete the Spring semester Speaker Series.

Summary

On behalf of the students in the AIM program, we are thankful to all of the guest speakers who presented to the class. These opportunities are important and truly add the applied component to the AIM program. Each of the speakers are a part of highly successful funds and their insights and advice are invaluable. 

David Krause, AIM program director, said, "All of the guests had something in common – they promoted high ethical standards and expressed the importance of upholding the integrity of the industry. It is so important for our students to have the opportunity to interact with investment professionals. Thank you to each of our guests – you are positive role models, and we appreciate your support of the next generation of money managers."