Marty Switzer

Investors traditionally seek to understand a companies’ financial results, earnings, business metrics and other figures before investing.

However, over the past half-century, intangible factors, such as corporate culture, are a far more important factor measuring and driving a company’s market value.

Most of the stock market value of an organisation today is derived from assets that are not on the balance sheet, says Ocean Tomo[1], a US-based research and ratings firm. Approximately 84% of the market value of the United States S&P 500 equity index is in ‘intangibles’ – assets not captured on the balance sheet.

That leaves only 16% of the market value of a company to be ‘tangible’. This portion includes traditional earnings, ratios, estimates, cash, receivables, plant, property, equipment and inventory.

Intangible assets are not physical in nature. They are the results of human intellect and include intellectual property (items such as patents, trademarks, copyrights, business methodologies), human capital, reputation, brand recognition and customer relationships.

“Corporate culture is an intangible factor. It is often described as the ‘DNA of the organisation’ and shapes interactions with internal and external stakeholders,” says Marty Switzer, CEO of Contango Asset Management. Contango distributes WCM’s Quality Global Growth Strategy to Australian investors via the WCM Quality Global Growth ETMF (ASX:WCMQ) and the WCM Global Growth Limited LIC (ASX:WQG). The strategy has a unique corporate-culture focused investment approach.

“Corporate culture is as important to a company’s health and future as any financial indicator. I’d also argue that culture is the single best predictor of long-term performance and viability,” he said.

The recent revelations of misconduct from the Royal Commission highlight the need for investors to garner greater insights into the corporate culture of the organisations in which they invest.

“Unhappy banking clients affected by the fees-for-no-service scandal joined disgruntled shareholders and have seen their shares fall in value by more than 20% over the past five years in some cases. In contrast, companies that are famous for their focus on culture, such as Netflix among others, have seen their share price rise more than 450% over the same period. While not a like-for-like comparison these are not isolated examples,” he said.

He notes studies demonstrate that companies with a positive workplace culture consistently deliver superior investment returns.

Mr Switzer says an increasing number of investors want to know what the CEO of an organisation has learned from other great leaders, what the firm’s core values are and how they are integrated throughout the organisation.  “Corporate culture is as important to a company’s health and future as any financial indicator. Companies with a positive workplace culture consistently deliver superior investment returns. Engaged employees keep customers happy and generally deliver consistently on business objectives. This can translate to more innovative products, higher sales, lower costs from staff turnover and lower financial volatility.

“When you have nearly identical businesses in the same industry there can still be big differences in business performance – due to differing corporate cultures. In the financial services sector, when a company culture is poor, this can lead to numerous issues which can affect the customer experience and the company’s long-term financial performance.”

The post Investors urged to put a greater focus on intangibles when investing    appeared first on AdviserVoice.

Marty Switzer

Kylie Jenner and ETFs – two things you never thought you’d hear in the same sentence.

Australian investors have had limited exposure to stocks shares such as Shopify, the e-commerce platform which powered the launch of Kylie’s makeup line.

Shopify is in the top 10 holdings of WCM Quality Global Growth Fund (ASX: WCMQ), an ETMF currently launching on the ASX. The fund, launched by local Contango Asset Management and managed by Californian-based WCM Investment Management (WCM), has already received over $10 million in allocations in its first 10 days of being open to local retail investors.¹

Marty Switzer, CEO of Contango Asset Management, says: “The Canadian-based Shopify helps small businesses set up and manage their online stores.

“The reason that WCM likes them is because of their corporate culture. WCM’s investment process is based on the premise that corporate culture is the biggest influence on a company’s ability to grow its competitive advantage.”

Mr Switzer notes: “Recent revelations of misconduct from the royal commission highlight the need for investors to garner greater insights into the corporate culture of organisations.”

“Great companies tend to have great cultures. And that tends to be great for investors.

“Factors relating to the quality of people and the relationships among them – the corporate culture – can be up to twice as important as the numbers.

“There are a range of investment opportunities offshore and Kylie Jenner’s favoured e-retailer Shopify is just one,” adds Mr Switzer.

Paul Black, co-CEO and portfolio manager at WCM, adds: “Similar companies with identical business models can have vastly disparate performance. The difference in many cases is culture.

For instance, any organisation can have the greatest products, a robust brand and reputation, effective policies and processes and a long history of trading – but if the culture is poor, it is much less likely to succeed when compared with a business that has a healthy culture.

“Despite those good products, you might find that many customers have complained about slow delivery, or poor service, or rude employees. These are all indicators of the health of a company’s culture.

“In contrast, companies with great service and employees that go the extra mile rarely have complaints made against them. And if their customers are not making complaints, then customers will return to those better businesses, leading of course to better business results.”

The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The read should not assume that an investment in the securities identified was or will be profitable.

1. WCM has been available to local institutional investors for the past five years.

The post Invest in Kylie Jenner’s success appeared first on AdviserVoice.

Having spent more than a decade at global financial services firm UBS, Ms Morfis brings a highly acute level of regulatory experience and expertise to the recently re-listed investment house.

Her most recent in a range of legal and compliance roles at UBS was Executive Director, Head of Compliance for the Wealth Management Australia operations.

Contango Managing Director and Chief Investment Officer George Boubouras said that Ms Morfis’ appointment is a major milestone, with the business poised to embark on a busy new phase of its growth strategy.

“A high quality addition the likes of Hari is very significant news for the business, our clients, partners and shareholders,” My Boubouras said.

“Having worked with Hari in the past I have had close exposure to her impressive range of skills, and I’m thrilled we’re able to bring her on board at Contango.

“We have made it very clear that we are committed to a high degree of regulatory scrutiny and compliance as we take this business forward. With some new products and services on the horizon Hari’s guiding hand is going to be vitally important.”

Ms Morfis said she was delighted to be joining Contango, attracted by both the ambitious growth strategy and the opportunity to work with its high quality team.

Ms Morfis added that the focus on the long term alignment of the interests of staff, shareholders and investors via an equity and dividend scheme, in place of staff rewards and bonuses, was a compelling factor in joining Contango.

“I’m delighted to join Contango Asset Management. It’s an established business with a very experienced Investment Team and great culture and values – but with a really exciting path ahead,” Ms Morfis said.

“The alignment between the team, investors and shareholders, via the remuneration structure, establishes a strong foundation to support a dynamic and vibrant venture.”

Contango Asset Management Limited is a boutique wholesale and LIC fund manager, with mandates across the entire market capitalisation spectrum.

The post Hari Morfis joins Contango Asset Management appeared first on AdviserVoice.