Mandeville portfolio manager explains firm's portfolio approach during crisis and why he's always optimistic of a better tomorrow
Sean Moir is a glass-half-full kind of guy. It means that, in the middle of a global pandemic with many people’s anxiety hitting the roof, the portfolio manager is happy to invest in the power of human spirit and determination.
It’s what he believes will get us all out of this predicament – and it’s also what he believes will ultimately drive markets higher once again.
“That’s why when I look at my practice, my clients and portfolio, I am always optimistic and I always look forward to a better tomorrow,” the Mandeville Private Client portfolio manager told WP.
The spectre of Warren Buffett looms large when Moir discusses his and Mandeville’s investment philosophy. The firm is well-known for its strategy of using private and alternative investment vehicles.
But Buffett also offers guideposts for how to select companies and opportunities. One of the primary principles is that these companies have a wide moat and are able to defend their market share position.
Moir said: “They are essential services, which is a term we're hearing more and more of today. The cost of switching from their services to somebody else’s is tantamount to an act of insanity! That type of business is going to thrive in all conditions.”
The next Buffett gem is concerned with the prudent use of other people’s money, whether that be through you own personal investing and use of loans to augment this or through the companies you select. Naturally, it’s vital these are projects that will create equity value over the long term. Key to this is a clean balance sheet, debt relative to size and, critically, cash flow.
“What we’re going through right now is a cashflow crunch,” Moir said. “The Government is trying to step in, trying to support our cash flow during this crisis so that we continue to get through to the other side.
“That's a function of cash flow – and so we also take a look at this with the companies we invest in. This is something Warren Buffett talks about all the time. I want to see my companies creating real cash flow, getting more money in the door than they're spending on their operations, financing, and development and acquisitions.”
Put all those ingredients together and you can identify companies that have held up better than those who have not. These may include the likes of Apple, with hundreds of billions of dollars on their balance sheet, and Microsoft, for example.
What makes Mandeville unique, though, Moir said, is its ability to invest in private equity and real hard assets like real estate and infrastructure. He holds up one company that developed medical isotopes and has had some real success. Mandeville was able to buy in at a very lucrative market cap.
“The value of that investment has gone up,” Moir said. “And because it's valued on that fundamental basis, it has provided not just the stability to this crisis but an increase in value, given all the positive factors that have occurred over the past year with that particular business.”
Of course, liquidity plays an important role in portfolio construction, so this is supplemented by public equities and private debt that will hold value during a crisis and provide liquidity if needed.
Alternatives and hard assets also require a longer-term picture. Moir compares this to owning real estate – you only really care about the price of your house when it’s time to sell.
“When you think about your investment portfolio and why you're saving money, you're saving for that future need, whatever that may be, whether it be retirement, passing it to your kids or your grandkids, or a future house purchase.
“You have a date in mind in the future and the price in the interim is not important. It's not unimportant, but it's not everything. That’s why I like private assets and why I'm okay with them being valued on a fundamental basis, a couple of times a year.”