Q&A with Equity Portfolio Manager Bill Hurt
After a long and distinguished career as a global equity portfolio manager, Bill Hurt is retiring this summer from Capital Group. In addition to overseeing investments, Bill has been a mentor to many research analysts and portfolio managers. In this interview, he offers his perspective on key economic and market issues, as well as the strategies he followed in identifying promising investments.
Given your many years of experience, how do you view today’s global landscape?
I think the world has never been in better shape, and the U.S. in particular has never been in better shape. That might seem to be at odds with some of the current headlines and challenges we face. But the world has shown throughout my lifetime that it is complex and adaptive. It is continually undergoing self-correcting transformations. To put it another way, daily existence is improving around the globe. We’ve never been better off than we are right now and never had so many opportunities. To offer just one example, smartphones have made it possible for the poorest person in India to take an online course at the best American university. Not long ago, that would have been unimaginable.
What are some of the strategies you’ve developed and lessons you’ve tried to impart to analysts over the years?
Always think outside the box. Step back and look at what’s happening in a big-picture sense. The natural instinct is to think narrowly, often too narrowly. I’ve always tried to focus on innovation and on what may be around the corner. By definition, the future is not plainly evident. You have to make a concerted effort to be on the lookout for it.
Along those lines, it’s also important to think about what can go right, in society and the world as well as with companies. It’s in our nature to focus on what could go wrong. Of course, you always want to be aware of the risks and potential downside in anything. But pessimism — focusing too much on what could go wrong — can crowd out an awareness of what could go right. And what goes right is where the future values are. I’m actually not an optimist by nature; I’m inherently a negative thinker. But I have structured the way I approach investing to force myself to look at what could go right.
Much has gone right in recent years for leading companies, especially in the technology sector. But there are concerns about high valuations in the equity market. What are your thoughts?
There’s no doubt that many of these companies are very richly valued by historical standards. But are they overvalued given their potential? I wonder whether people are spending too much time worrying when, in fact, these valuations may be justified given their prospects. These are companies that I believe are the most in tune with tomorrow, with the future. And unlike the dot-com bubble of 2000, these companies have strong underlying earnings.
Please discuss your approach to analyzing companies and selecting investments.
My objective has always been to identify good companies and to partner with them. When you buy the stock of a company, you’re effectively becoming its partner. I want to partner with creative enterprises that are going to create
I try to determine whether a company can create that wealth and, more important, whether management is willing to share that wealth with shareholders. Is management focused on taking the right long-term steps to grow earnings for the benefit of all shareholders rather than simply maximizing short-term returns for the enrichment of the executives themselves? Whenever I meet a CEO, I try to determine if he or she is trying to make me a partner or simply pitch me a stock. In many ways, it all comes down to the quality and intent of management.
How do you assess that?
I look at how realistic the person is about what can be done and can’t be done, and how creative the person is in thinking about tomorrow. Those are all qualitative sorts of things. I ask open-ended questions to see what people choose to say. It’s a bit of an art form. I look as much for what they don’t say as what they do. My definition of a good interview is 90/10, in which he or she spends 90% of the time talking.
When I meet someone, my first question is “Before we start, can you talk about yourself?” You can tell a lot from how they react. You can tell if they’re thinking, “Oh boy, how do I work that into the pitch I want to give?” With other people, however, their sincerity shines through. They’ll say: “Well, I’ve done this job and that job. Now I’m working with this company, and I have all these employees who are counting on me, and we have to solve this problem and that problem.” You know that person is real and genuine. That’s who I want to partner with.
The above article originally appeared in the Summer 2019 issue of Quarterly Insights magazine.