In this episode, Mawer portfolio managers and analysts discuss what they fundamentally look for in a bank as an investment. Specifically, how they view banks and the industry trends, as well as local dynamics, and ultimately what makes each of these businesses both unique and attractive. David Ragan discusses Scandinavian banks, highlighting Handelsbanken's smart lending and DNB's stability. Josh Samuel analyzes DBS in Singapore, emphasizing its low cost of funds and high ROE. Grayson Witcher focuses on J.P. Morgan in the U.S., noting its strong management and unique financial assets, while Alex Romaines examines First Citizens Bank in the U.S., which capitalized on market turmoil. Mark Rutherford covers Canadian banks, noting their conservative strategies and high ROE. Siying Li discusses HDFC Bank in India, and Asim Hussain explores Mitsubishi UFJ in Japan, emphasizing their unique upward-sloping yield curve.

Key Takeaways:

• The ideal bank investment is stable, lends to reliable clients, and operates in a rational, well-regulated market. Diversification in lending, funding, and economic exposure helps prevent insolvency and builds resilience, crucial in a highly leveraged industry.
• The Scandinavian banking environment is stable and well-regulated, with rational competition and prudent lending. Banks like Sweden's Handelsbanken and Norway's DNB provide consistent returns, low loan losses, and steady growth, supported by smaller, consolidated markets and strong economic stability.
• DBS in Singapore sustains strong net interest margins and 15–16% ROE. Strong management boosts investor returns through higher payouts, reducing risks from limited growth in foreign markets.
• U.S. banks face intense competition with little brand differentiation, often competing on interest rates alone. While experienced in managing risk, they are vulnerable in recessions. Banks trade at lower valuations than other sectors due to weaker competitive advantage.
• J.P. Morgan stands out in the U.S. market due to its strong management, high returns, low leverage, and strategic acquisitions during downturns. It diversifies through unique assets, investment banking, and asset management, enhancing resilience.
• The U.S. banking industry is fragmented and competitive, with a history of crises. Fragility creates opportunities for well-managed banks trading below intrinsic value.
• Canadian banks are highly consolidated and operate with a leveraged model, lending and raising equity. They now generate significant revenue from wealth management and insurance, reducing dependence on loan spreads. Strong regulatory relationships foster stability, with banks earning attractive returns while supporting economic growth.
• HDFC Bank, India’s largest private bank, has strong management and benefits from a growing economy. With low non-performing loans and high ROE, it continues gaining market share from public sector banks, despite short-term challenges from its recent acquisition.
• Mitsubishi UFJ, Japan's largest bank, has a rich history and significant market share. With an upward-sloping yield curve and a focus on digitalization, it stands to benefit from rising interest rates, driving potential profit growth despite past challenges in the Japanese banking sector.

Host: Andrew Johnson, CFA, Mawer Institutional Portfolio Manager
Guests: David Ragan, CFA, Mawer Portfolio Manager, Joshua Samuel, CFA, Mawer Equity Analyst, Grayson Witcher, CFA, AB Mawer Portfolio Manager, Alex Romaines, CFA, Mawer Equity Analyst, Mark Rutherford, CFA, Mawer Portfolio Manager, Siying, CFA, Mawer Equity Analyst, Asim Hussain, CFA, Mawer Equity Analyst

For more details and full transcript visit: https://mawer.com/the-art-of-boring/podcast

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.

Follow us on social:

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In this episode, Peter Lampert, lead portfolio manager of the International Equity Strategy, discusses the recent Chinese stimulus and its effects on emerging markets. He highlights key long-term risks in China, including weak sentiment, regulatory challenges, and geopolitical tensions, while emphasizing the potential of companies like Tencent and Tencent Music. The conversation also covers Turkey's Bim, a discount retailer thriving amid economic uncertainty. Peter explains how the portfolio's success stems from stock selection, especially with stealth performers like Vietnam’s FPT and Taiwan’s IGS, and the importance of balancing macro risks with company-specific growth potential.

Key Takeaways:

•China's recent stimulus signals a shift from restrictive policies to boosting economic growth, leveraging the U.S. Fed's easing cycle to inject liquidity and stabilize the economy.

•The stimulus could mitigate three key challenges: weak consumer sentiment, regulatory uncertainty, and geopolitical risks. While long-term issues persist, the focus on growth reduces the likelihood of worst-case scenarios in the near term.

•Macro factors and bottom-up analysis are deeply intertwined in portfolio decisions. As risks shift, so do portfolio positions.

•Higher macro risks in China lead to applying higher discount rates and requiring better ROI. Growth projections for economically sensitive companies are adjusted lower due to structural challenges, leading to exits when valuations no longer meet the stricter risk criteria.

•Companies with independent growth drivers can perform well despite China's economic challenges, as they are less reliant on the broader economy and can thrive even in a weaker market environment.

•One example is Tencent, whose strong management, dominant WeChat position, and conservative monetization approach offer growth opportunities. Despite China's economic challenges, Tencent can pull monetization levers, making its valuation attractive amid broader pessimism.

•This year’s strong performance of the emerging markets portfolio has been driven by careful stock selection, focusing on lesser-known "stealth performers" like FPT, IGS, and Aegis Logistics, which consistently generate shareholder value.

•Peter highlighted one such performer: Bim, a Turkish discount retailer. Bim has thrived despite economic challenges. With Turkey's economic outlook improving, Bim is positioned for long-term success as it continues to offer value to consumers.

Host: Rob Campbell, CFA, Mawer Institutional Portfolio Manager

Guest: Peter Lampert, CFA, Mawer Portfolio Manager

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. 

Visit Mawer at https://www.mawer.com 

Follow us on social: 

LinkedIn -

https://www.linkedin.com/company/mawer-investment-management/ 

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Portfolio Manager Crista Caughlin discusses the economy and factors that drove markets in the second quarter of 2024.

Key points from this episode:

• Because inflation is easing at a gradual pace, central banks with likely be cutting rates gradually.
• We are at the end of a global tightening cycle and starting to see countries tweak their policies to better fit their domestic markets, but there is not and likely won’t be, a material divergence in the path forward among central banks.
• The yield curve has been inverted for almost two years, which is longer than average. However, it's not the longest inversion on record. In the late 80s, the yield curve remained inverted for over two and a half years before a recession.
• In continuation of the first quarter, equity markets did quite well again, with most reaching new highs during the quarter. The strength was primarily driven by a narrow segment of the market, notably technology.
  
  

Host: Kevin Minas, CFA, MBA, CAIA, Institutional Portfolio Manager
Guest: Crista Caughlin, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/quarterly-update-q2-2024

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Twitter - https://www.twitter.com/mawer_Invest

CIO Paul Moroz discusses resilience, global monetary policy, and current themes such as TikTok and a potential “technological iron curtain.”

Building resiliency while finding opportunities in emerging markets.

A deep dive into the themes, fundamentals, and opportunity sets in the payments industry.

The impacts, risks, and potential opportunities from the COVID-19 crisis fallout on the Canadian small cap universe, and why valuations are ultimately a “blunt tool.”

A review of the quarter: a significant rebound in markets, the potential impacts of continuous monetary and fiscal stimulus, and deglobalization.

Why the current market environment “feels like 2030 is happening in 2020,” our perspective on the recent market recovery, and more.

The implications of cloud migration for enterprises, investors, and business models.

Why the strategy was created, how it was launched, and some holding examples.

Deputy CIO Christian Deckart discusses natural contradictions in the portfolio and how the team plays “intellectual best ball.”

Exploring the why behind the FAANG’s outsized stock returns and the overall challenges of valuating tech companies.

In this episode, Portfolio Manager Jeff Mo makes the case for investing in U.S. mid-cap equities, highlighting the country’s strong business environment, large domestic market, and GDP growth. He discusses current market trends, including artificial intelligence, and his team’s risk management evaluation, especially with a pivotal U.S. election looming on the horizon.  

Key points from this episode:

• The U.S. is an attractive market for investing due to its strong rule of law, business environment, and large domestic market.
• Mid-caps are an investing sweet spot. While smaller companies struggle to gain competitive advantages, mid-caps have similar competitive advantages as large caps but with much more attractive growth profiles.
• There is one dominant theme right now in the market, which is artificial intelligence and anything related to that, all the way down to companies that are building HVAC systems for data centers.
• With risks like elections, the team goes through the portfolio company by company to evaluate potential changes as a result of an administration change.
• In thinking through the risks as part of their ongoing risk management exercise, the portfolio appears resilient, prepared, and diversified for many different scenarios, including different election outcomes.

 
Host: Rob Campbell, CFA, Institutional Portfolio Manager
Guest: Jeff Mo, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/navigating-the-u-s-mid-cap-landscape-resilience-amid-uncertainty-ep160

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.

Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Twitter - https://www.twitter.com/mawer_Invest

CIO Paul Moroz weighs in on recent movements in the market and how we may have “crossed the Rubicon” with respect to direct fiscal stimulus and are perhaps seeing the “collapse of the bond standard.”

Lead portfolio manager, Grayson Witcher, discusses how the team is positioning the portfolio amidst the current uncertainty.

A review of the quarter: how we’re positioning our portfolios and what investors should keep in mind during these volatile times.

CIO, Paul Moroz, answers clients’ most frequently asked questions during these extraordinary times.

What we’re doing to mitigate potential sharp edges in the portfolio, as well as position for medium and long-term risks and opportunities.

Fractals, raining money, and making decisions under uncertainty. CIO Paul Moroz continues the discussion of the current economic environment.

CIO Paul Moroz discusses our strategy and thoughts during this time of significant market volatility. 

Why our team locks themselves in a room for a week to speak with over 30 management teams: to drive focus and attention on the companies that are going to have the best chance of meeting our investment criteria.

Lead portfolio manager, David Ragan, on how the team strategizes in the wake of a market shake-up (e.g., coronavirus). Also included: updates on HFDC, Seven & i, and Aon.

CIO Paul Moroz discusses how we’ve approach building resilient global portfolios over the years, the new “Cold War” between China and the U.S. and its wider reaching impact, and how “the real money’s in the holding.”

In this episode, Portfolio Manager Jeff Mo discusses common behavioral biases that can hinder clear sell decisions, and the tools, such as checklists and trigger points, that can help slow down emotional thinking. He provides examples of companies that he and his team properly exited based on changing fundamentals as well as those they may have held onto for a bit too long, proving the power of the endowment bias.

Key points from this episode:

• Mawer’s sell discipline mirrors the inverse of its buy criteria: wealth creation, management quality, and discount to intrinsic value.
• The endowment bias makes it difficult to sell stocks you already own; try to always consider your holdings, and don't get married to them.
• Valuation is not the most important plank of Mawer’s sell discipline framework. Wealth creation and excellent management teams come first.
• While some believe the worst sell misses are the ones that have gone down considerably, Jeff believes the worst ones are actually the ones that go nowhere.
• It is important to weigh the inductive evidence a little bit more than the deductive evidence, but this can be difficult to do when it's a company that has done well.
• Warren Buffett once said that the preferred holding period is forever. However, not everything in life goes as you’d prefer, and that’s where sell discipline comes into play.
• Checklists and trigger points are a great way to think systematically and to slow down the process, helping take the emotion out of sell decisions.

Host: Rob Campbell, CFA, Institutional Portfolio Manager
Guest: Jeff Mo, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/from-buy-to-bye-sell-discipline-and-overcoming-behavioral-biases

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com. Follow us on social:

Twitter - https://www.twitter.com/Mawer_Invest

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

This episode, our CIO Paul Moroz considers the potential themes and catalysts that are driving negative interest rates, what that may mean for investors, and whether those signal a new, longer term paradigm shift.

Featuring insights from the fourth quarter from Balanced and Global Balanced Fund co-manager and Asset Mix Chair, Greg Peterson.

Director of Research and Canadian equity lead manager, Vijay Viswanathan, discusses risks and opportunities in Canada, the cannabis industry’s value chain, and potential transformations to the food retailer business model.

This episode, we interview our Head of Information Security and Infrastructure, Dwight Pratt, and Equity Analyst, Karan Phadke, on the ramifications of technical debt to businesses and investors.

Lead portfolio manager, Peter Lampert, discusses the current environment for emerging markets and what opportunities and challenges we’re seeing for the portfolio.

Vice President of the Community Foundations of Canada, JP Bervoets, explains the UN’s sustainable development goals—and how individuals and corporations can get on board to make a difference.

Featuring insights from the third quarter from Balanced and Global Balanced Fund co-manager and Asset Mix Chair, Greg Peterson.

Equity analyst, John Wilson, shares how the team approaches separating signal from noise, why defensive business models make for a resilient portfolio, and the advantages of a “cookie-cutter” growth runway in a slowing market environment.

U.S. equity co-manager, Colin Wong, discusses the big picture backdrop (interest rates, U.S.-China trade war) and then dives deep into the investment thesis behind Microsoft, A.O. Smith, and AptarGroup. Bonus: how the team’s “bathroom list” review inspired an initiation in Hershey.

Calgary Foundation Board and Impact Investing Committee Chair, Bob Gibson, and Director, Investments, Lauren Frosst, discuss the Foundation’s definition of impact investing, why the foundation became involved, and how they got started.

In this episode, we explore the growing electricity demands of data centers stemming from artificial intelligence (AI) with Chris Silvestre, Analyst on the U.S. Equity Team. He shares insights from a recent research trip visiting data centers in Northern Virginia—the data center capital of the world—and discusses challenges around meeting demands given constraints of land availability, energy generation and transmission, and the significantly increased power demands required to develop large language models.

Key points from this episode:

• Electricity demand in the U.S. has been relatively flat for a decade but is expected to increase 25% by 2050 due to electrification, ESG goals, and data center expansion to meet AI demand.

• For the same footprint and the same data center, you need 10 times more power for AI workloads than you did for the old-style data centers.

• Data centers cluster organically in hubs, such as Northern Virginia, to minimize data transfer costs, but this clustering strains power infrastructure.

• Meeting increased data center capacity demands faces land and energy constraints. While the U.S. has the ability to generate power, it may not have it in the right spots at the right time to support this new incremental demand.

• Businesses are proactively responding to increased demand by signing deals to secure data center capacity despite constraints, while governments are implementing policies and reforms to support AI development.

• With respect to AI or high-performance computing, there is a sense that this is a priority and will be a matter of national interest if not national security.

Host: Andrew Johnson, CFA, Institutional Portfolio Manager

Guest: Chris Silvestre, CPA, CFA, Equity Analyst

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/watts-up-the-challenges-and-opportunities-of-powering-ai-ep158

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore.

Visit Mawer at https://www.mawer.com.

Follow us on social:

Twitter - https://www.twitter.com/Mawer_Invest

LinkedIn -

https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

Lead portfolio manager, David Ragan, discusses some big picture risks (Brexit and U.S.-China trade wars) and then dives deep into the investment thesis behind LVMH and Bunzl.

Investing legend Martin Ferguson, pioneer of the award-winning Mawer Canadian small-cap strategy shares the lessons he learned over his 33-year career.

Equity trader, Jeff Wilson, delves into the in-house “B-E-E-P” framework the trading team has built: Best Execution, Education, and Process. “To achieve the most consistent amount of positive outcomes, you can't actually impact the outcome, but you can impact the process that develops outcomes.”

Featuring insights from the second quarter from Balanced and Global Balanced Fund co-manager and Asset Mix Chair, Greg Peterson.

Deputy CIO, Christian Deckart, discusses everything from big picture risks to company specifics on this global equity portfolio episode.

CIO, Paul Moroz, answers clients’ questions about the current economic environment and how Mawer is positioning its portfolios.

Equity analyst and previous biomedical researcher, Amit Shah, discusses the healthcare industry in the U.S.

Lead manager Jeff Mo discusses the psychology that drove the Canadian economy over the past 6 months, the correlation between Canadian and emerging markets equities, and what a holding “meeting our expectations” means at Mawer.

Featuring insights from the first quarter from Balanced and Global Balanced Fund co-manager and Asset Mix Chair, Greg Peterson.

Director of Research and Canadian equity lead manager Vijay Viswanathan discusses the overall Canadian economy, cozy oligopolies, and the amount of foreign exposure in the portfolio.

Portfolio Manager Karan Phadke discusses his views on the global markets and the performance of the global small-cap portfolio. He illustrates how businesses are adapting to and utilizing artificial intelligence (AI), highlighting the difference between the value-added reseller and IT consultant business models. Two portfolio holdings, CBIZ and Convatec, are discussed to demonstrate the team's focus on well-run, resilient companies that are trading at reasonable valuations.

Key points from this episode:

• The U.S. remains a strong outperformer, while Europe continues to see more sluggish growth.
• Current portfolio strengths include resilient U.S. companies, particularly in the professional employer organization (PEO) space with companies that provide outsourced HR functions.
• AI is impacting businesses in three main areas: hardware, software, and services. The team focuses on services, which is comprised of companies that help their clients acquire and integrate the hardware and software to use AI effectively.
• Regarding generative AI, there's still a very heavy lift involved at the onset to get the data clean and ready to use.
• When looking at the strategy from the top down, the team seeks out resilient businesses trading at reasonable valuations that are well-run with strong managers who are reinvesting capital intelligently.
• CBIZ exemplifies the strategy's focus on well-run companies with recurring business models while Convatec represents a business with solid management and long-term growth potential.

Host: Andrew Johnson, CFA, Institutional Portfolio Manager
Guest: Karan Phadke, CFA, Portfolio Manager

For more details and full transcript visit: https://www.mawer.com/the-art-of-boring/podcast/navigating-global-small-caps-in-an-ai-transformative-world-ep157

This episode is available for download anywhere you get your podcasts.

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Founded in 1974, Mawer is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com.Follow us on social:

Twitter - https://www.twitter.com/Mawer_Invest

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/ 

Equity analyst John Wilson discusses how decentralized organizations can maintain agility and operational excellence as a defense to the negative aspects of change.

Lead portfolio manager, Peter Lampert, discusses the investment thesis behind two Emerging Markets banks, the risk of shadow banking in China, Shanghai International Airport and Samsung Electronics.

On this episode, institutional portfolio manager, Rob Campbell, explores a few different types of business models in the travel industry and their respective risks and competitive advantages.