This article is authored by MOI Global instructor Douglas Ott, founder and chief investment officer of Andvari Associates, based in Atlanta, Georgia. Doug is an instructor at Best Ideas 2018, the fully online conference featuring more than one hundred expert instructors from the MOI Global membership community.
When someone asks an investment professional what type of investor they are, the quick response is typically “value” or “growth.” In my mind, the classical value investor is someone who looks for businesses trading at low multiples to book value or free cash flows while the classical growth investor is someone who looks for businesses with high current and future rates of growth, often with little regard to valuation multiples. At the beginning of my career, I would have described myself as a value investor because this was the term used by (and to describe) many great investors like Warren Buffett and Ben Graham (Buffett’s mentor). Who wouldn’t want to align themselves with these titans?
However, as the years have gone by, I’ve grown to dislike these simplistic labels. First, I’ve slowly learned that value and growth are one and the same. Second, investors who submit to this false choice of value or growth ultimately limit their opportunities to generate outstanding returns because they might exclude from consideration opportunities that conflict with their chosen identity as value or growth investor.
What is most important to remember is that successful value and growth investors are all attempting to buy shares of a company for less than their estimates of intrinsic value. Thus, until I think of a better way to describe my investing style in a nutshell, I’ll simply call myself an “underwriter of business value” or “handicapper of investment returns.” By adopting a more expansive description of what I do as an investor, I’ve opened myself to a wider variety of opportunities which in turn has led to a portfolio with a very interesting mix of companies and situations.
For example, in the “value” category, we are shareholders of companies with lower than average multiples like hospital operator HCA or cable company Charter Communications (via Liberty Broadband). Some Andvari holdings that might fall into the “growth” category are companies with high multiples like Visa, Constellation Software, and Roper Technologies.
One of Andvari’s latest investments is Keywords Studios plc, a company that provides outsourced services to the world-wide video game industry. It’s line of services includes art creation, audio production, translation and localization, quality assurance testing, engineering, and customer support. Keywords has grown revenues and profits at 55%+ for the past two fiscal years (the organic growth rate has been in the 20s and acquisitions have contributed the rest) and the share price has followed.
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