In the face of growing competition from exchange-traded funds, investors who want to demonstrate their value would do well to take a more hands-on approach to analyzing companies. This according to a recent Bloomberg article.
The article shares the view of veteran stock picker Peter Elam Hakansson, founder of Stockholm-based East Capital AB: “Being an active owner takes both time and resources and that will be one of the best differentiating factors for successful fund managers.” He adds, “We always want to see how companies are run. The most important thing is also to meet the owner. We always try to get to know who is behind the company.”
When the Russian markets first opened to foreign investors in the late 1990’s, there was very little reliable earnings information available, so Hakansson had to figure out another way to gain intel. He devised what the article called a “foolproof way of rooting out the good companies from the bad. He visited their offices in winter to check if they could afford heating.”
Data shows that his approach was successful—between 2000 and 2010, East Capital’s first Russia-focused stock fund earned a 2,098% percent return, the article reports, “about a third more than the average of peer funds tracked by Morningstar Inc.”