A Perspective On Global Value Investing

The Stonehill FMA continued its 2011-12 Executive Speaker Series on Wednesday, November 16, 2011 with a presentation on “Creating Alpha Through Global Value Investing” by retired analyst and fund manger for Wellington Management Company, Joseph H. Schwartz CFA.  A mixture of career perspectives, “unsolicited career advice” and detailed suggestions of what it takes to beat the market, Mr. Schwartz’s presentation provided numerous insights into the business of successful investment management.  Joe’s more than 30 year career, most of which spent at Wellington Management in Boston, was one built on hard work and being positioned to capitalize on opportunity.

As a “Value Investor”, Mr. Schwartz bases his investment approach on the philosophy, “There is a spectrum of relative pricing efficiency that exists in the global capital markets.  Focus on the areas of greatest inefficiency”.  In the Fixed Income markets, areas of opportunity include lower quality sovereign debt, structured finance products and credit default swaps. In the Equity Markets, he highlighted small-to-mid cap stocks, emerging markets and venture capital.  Markets are greatly impacted by human behavior and through out his career, human behavior often pushed markets to create attractive opportunities for his style of investing.

So what were the common elements that led to a strong investment performance throughout his career?  Joe highlighted 6 key points:

  • All were small-to-mid-cap stocks
  • All had negligible investor recognition and low valuations
  • All had strong core franchises, cash flow and balance sheets
  • They were important, but not yet leading industry players
  • Each had an attractive new product pipeline
  • Each had an improving competitive position

These elements were not in play every year, especially in the days of the “Dot Com Bubble”.  And while it was very hard in those days, patients prevailed and set up opportunities for the creation of alpha in the “eight years that followed”.  While Joe discussed a number of examples, in particular he highlighted an investment his firm made in orthopedics industry player, Smith & Nephew of the United Kingdom.  Taking the opportunity to visit the company in London and a frank discussion with its new management team proved to be the insight necessary to believe that value creation was the new mantra of the company.

As for career advice to the more than 50 students present at the meeting, among the points Joe made, he highlighted in particular:

  • Work very hard – you’re competing.
  • Never stop learning.
  • Get out of your comfort zone.
  • Be creative and open-minded.
  • Be skeptical of consensus thinking, but not cynical.
  • Be quietly confident; be humble.  Avoid hubris.
  • Keep an even keel with your emotions – it’s hard.
  • Share your success – be a mentor and give back.
  • Enjoy your career – it’s a privilege.

Mr. Schwartz ended his presentation with of list of readings for those students seriously interested in a career in investment management.  An active session of Q&A followed.

FMA President, Danielle Rellas presenting FMA gift to Joe Schwartz.

Joe is currently a Member of the Board of Trustees of his Alma Motta, St. Johns University and is active in pro bono work for other educational and charitable institutions.  It was a privilege to have him come to campus and meet with our FMA Chapter.  A PDF of his presentation is attached below.

Joseph Schwartz Presentation









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