- Oppenheimer Global Fund, a $12 billion portfolio of large-cap global stocks, has outperformed its MSCI benchmark since 2008.
- But in picking what stocks go into the fund, portfolio manager John Delano pays little attention to what’s happening to the benchmark.
- “We have an acronym — MANTRA — which stands for Mass Affluence, New Technology, Restructuring and Aging,” he told Business Insider.
Ignoring your benchmark is one way to consistently beat it.
Sure, the portfolio of large-cap US and foreign stocks has recently benefitted from an overall resurgence in global economic growth. But John Delano, the fund’s co-portfolio manager, says a rigorous stock-picking process and a focus on five key themes also guide how its composed.
Business Insider recently spoke to Delano, who was recently nominated for Morningstar’s 2017 International-Stock Fund Manager award.
The interview was edited for length and clarity.
Akin Oyedele: What are some of the big-picture guidelines that guide your buy or sell decisions?
John Delano: We don’t look at a benchmark.
We’re very focused on just finding the best 70-80 stocks with the best return potential. Everything gets driven from a bottom-up as opposed to a top-down perspective. We’re thematic investors, so we’re looking for economic trends that will go on for five, 10, 20 years.
The turnover in the strategy last year was about 6% or 7%. You’re looking at a 15 year holding period on average.
We’re looking for companies with a management team that we believe in and really think about partnering with. They’ve got the financial capabilities to see some of the opportunities that may come along.
We have an acronym — MANTRA — which stands for Mass Affluence, New Technology, Restructuring and Aging.
As an example, with mass affluence, as the world continues to create more wealth and people are able to move from a needs to a wants category with disposable income, one of the things they naturally want is for luxury goods.
One of our biggest holdings is Louis Vuitton. LVMH [its parent] has been an acquisitive company. They’ve just bought Christian Dior and have bought some other names over the years. It’s one that has the brands and economic moat that gives them a chance to earn sustainable returns.
Oyedele: When you mentioned LVMH I thought about the broader retail sector. Luxury as a category has not always been lumped together with the rest of the sector, but do you get questions about what’s happening in retail, and do you see luxury as being different?
Delano: I do see it as being different. When I think about retail, I think about selling other people’s products. And luxury is really about selling your products. LV is a perfect example of this. They have 100% control over their distribution. So they’re really a brand that’s got a direct consumer connection.
Other retailers are really just trying to distribute products that they don’t own. So the margin opportunity is drastically different.
When you think about retail in general, and in an Amazon world where the efficiency, cost to distribute, and pricing keep coming down, it’s a very different situation. If LV was selling somebody else’s product, somebody else could sell that even cheaper. That makes it very difficult. But when you’re the one selling your product and you’re competing on that exclusivity, it’s a completely different economic situation. We own really no retail from that standpoint.
Oyedele: Apart from LV are there any other luxury brands that you’re betting on?
Oyedele: Outside of retail, are there any other companies that you find particularly interesting right now? You mentioned earlier that you’re not trying to mimic a benchmark. Are there any that you see yourself as contrarian on, but confident in?
Delano: Frankly a lot of them are less controversial now than they have been, but I can touch on a couple.
Delano: We’re invested in Facebook, we’re not invested in the others. [Alphabet is the fund’s biggest position.] And it’s really about where we find that the valuation is compelling for our shareholders.
Oyedele: Facebook and Google share something in common in that they have recently come under regulatory scrutiny, especially with regards to the 2016 election. How much of a concern is that to you?
Delano: It’s a natural evolution. As these companies touch more people’s lives more often, the scrutiny they’re under will continue to grow. They matter more everyday. I don’t find it particularly unusual from that standpoint and it is something that they’ll have to address and be cognizant of.
But you have questions about Google from a regulatory standpoint in Europe that aren’t just about the 2016 election It doesn’t overly concern me, but it’s something that the company has to address.