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Capital Allocators – Inside the Institutional Investment Industry

May 7, 2018

Paul Black is Co-CEO and portfolio manager at WCM Investment Management, a $26 billion manager of global equities that he joined when it was a $200 million boutique in 1989.  With so much of the institutional world, including my own training, focused on value investing, I was pleasantly surprised to learn about a large, high performing growth stock manager located in a non-descript building in Laguna Beach, California.

Our conversation starts with Paul’s trial-by-fire entry into the business and turns to growth stock investing, including defining a great growth company, searching for widening moats, assessing a culture tied to competitive advantage, creating a positive culture, learning from mistakes, identifying tailwinds, and protecting the downside.

Paul embodies the principals he preaches and offers some tasty food for thought.


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Show Notes

2:54 – How Paul got started in the business

4:52 – Lessons learned in the early years of his career

            5:56 – Common Stocks and Uncommon Profits and Other Writings

            6:01 – Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor

            6:05 – The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

7:49 – What works about growth stock investing

9:01 – What constitutes a great growth company

13:47 – Defining and measuring a company’s competitive advantage

17:50 – How does he assess a company’s culture

            19:41 – The Culture Cycle: How to Shape the Unseen Force that Transforms Performance

20:26 – Questions that help assess company culture

21:57 – Any data to back up claims that companies with good cultures perform better over time

22:46 – Culture aligning with competitive advantage

24:30 – Looking at WCM’s moat and culture

31:23 – The landscape for active management

33:53 – Weathering tough periods for the firm

37:02 – How do they think about culture in other countries

39:01 – Why does growth stock investing work when the data shows otherwise

40:47 – What is he excited about in growth stocks

43:45 – Tailwinds at the sector level

45:10 – Downside protection in the portfolio

46:38 – Patterns of positive and negative allocator behavior

48:35 – How do they manage the change in the portfolio going from 200 million to 26 billion

49:53 – Closing questions