I
f we had to summarise today’s investing
environment in one line we would say:
‘There are no obvious sources of value in
the markets.’ Strong performance globally
has made nding attractive investments
more di cult.Although it’s still possible
to uncover businesses with good long-
term growth prospects without paying full
price, today we need to look much harder
for these opportunities than we did a few
years ago, which is more consistent with a
normal operating environment. Given the
current investing landscape, our investment
approach and speci cally our proprietary
insights will be more important than ever
for helping us nd attractive investments.
A proprietary insight is an idea generated
from the random collection of facts.The
‘insight’ part usually revolves around
how a particular business is going to look
materially di erent in the future than it does
today and the‘proprietary’ part re ects the
fact that our unique view about the business
is not captured in today’s share price. No
matter the investment climate, our goal is
to buy high-quality, undervalued businesses
with strong competitive positions,
defendable barriers to entry and long-term
growth prospects that are run by competent
management teams, and hold them until the
market fully recognises their potential.We
search for companies that can grow despite
macroeconomic headwinds and build our
portfolios around our proprietary insights.
EDGEPOINT
Satellite manager: Global Equity
Tougher climate to find good value
long-term investment opportunities
Our investment
approachwill bemore
important than ever
Tye Bousada and Geoff MacDonald
W
e thought this quarter we would talk
about the management of two of our
favourite holdings. Our investment style is
to nd the highest quality for a reasonable
price. One characteristic of quality is
stewardship, which we de ne as the board
protecting the interests of all stakeholders
as much as their own. Oil Search, an
Australian-listed company, is run by Peter
Botten. Peter has invested time in meeting
local tribes and building a relationship with
them based on trust rather than handouts.
This has allowed the company to develop
oil and gas elds in Papua New Guinea, a
country where others fear to tread, and
provided a good return for shareholders
over the past decade. Unicharm is a family-
owned Japanese company that has been
successful in emerging markets.The chief
executive is also head of corporate social
responsibility. He makes the distinction
between shareholder capitalism and
public interest capitalism, stating that‘the
fundamental goal of a company has changed
from maximising shareholder returns to
making contributions to society while
generating pro ts’.We continue to believe
that, in the long term, companies run by
stewards will deliver the best returns.
FIRST STATE
Global Emerging Markets
Stewardship protects interests
of boards and all stakeholders
Companies runby
stewardswill deliver
the best returns
Jonathan Asante
THE INVESTOR CENTRE
THE INVESTOR
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31
T
hree of the team travelled to Nebraska
in early May to attend a two-hour Q&A
session with Markel, which we hold in
the portfolio. Insurance holding company
Markel is one of our favourite companies
as it exempli es many of the characteristics
we look for in investments. Firstly, Markel
treats shareholders as partners and
management has the majority of its wealth
invested alongside investors. It is important
to the management team that investors
understand what the company is trying to
achieve. Secondly, Markel seems to be a
great place for work-life balance.Teamwork
is paramount and having fun is a stated
objective of the company. Probably for this
reason, executive compensation is much
lower than could otherwise be justi ed.
Thirdly, the company does not manage itself
to‘ t an accounting standard’. Instead,
it manages the business to create long-
term value for shareholders, sometimes
at the expense of short-term results.The
long-term track record of value creation
is tremendous. Finally, Markel treats its
community and policyholders well. It does
not‘optimise’ its tax bill via tax havens as
many of its competitors do, and it pays
insured claims quickly.They maintain a
strong balance sheet that ensures they ful l
promises to policyholders. Markel ranks
highly in our estimation and over time we
expect the company will perform well.
Given the reasonable valuation, we remain
happy shareholders.
FIRST STATE
Joint manager: Worldwide Managed
and Worldwide Opportunities
Why Markel exemplifies many plus
points we look for in investments
Markel seems to be
a great place for
work–life balance
Jonathan Asante
