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Graham Griffin
Graham Griffin
Articles (195) 

Value Investing Live Recap: Jeff Auxier

Key takeaways and questions

December 16, 2020 | About:

GuruFocus had the pleasure of hosting a presentation with Jeff Auxier (Trades, Portfolio), the president of Auxier Asset Management LLC and founder of the Auxier Focus Fund.

Prior to forming Auxier Asset Management in 1998, Auxier spent 16 years at Smith Barney, formerly Foster Marshall American Express, then Shearson where he was on the portfolio management advisory board and the chairman's council. He also served as senior vice president of investments and senior portfolio management director. Auxier graduated with honors from the University of Oregon with a degree in finance and an emphasis on accounting. Auxier and his family choose to live far from the influence of Wall Street, on a hazelnut farm just outside of Portland, Oregon.

Watch the full presentation here:

Key takeaways

Auxier kicked off his presentation with a story about starting his career in investing. He called the legendary Warren Buffett (Trades, Portfolio) on a Saturday in 1982 three weeks before Forbes released the first of their annual 400 list that ranks the country's richest individuals.

Buffett took the time to answer his questions and Auxier soon became an avid attendee to the Berkshire Hathaway (NYSE:BRK.A) (BRK.B) shareholder meetings. He developed a clear focus on the power of compounding and an aversion to loss.

For Auxier, he believes that taking a focus on analyzing a business rather than the market has created a great deal of success over the last several decades. Generating cumulative knowledge by learning every day has allowed him to mitigate risks for himself and his clients and maintain high compound returns.

In his eyes there is no substitute for hard, dedicated research. This year alone, the firm has talked to more CEOs than any years prior in his career. He has seen many bubbles throughout history, even as far back as Isaac Newton's investment in the South Sea Company in 1720, and believes he maintains the resolve to avoid investing in popular companies.

His team likes to look for companies that will provide high returns while maintaining low levels of capital expenditure, but he recognizes that many of these businesses are overpriced in the current market. They seek to maintain a finger on the pulse of businesses that interest them and jump on times where others might shy away from bad headlines. In many cases, a small business has provided a much better investment than a business that everyone knows.

Ultimately, Auxier's investment strategy boils down to sticking to the basics. He believes that outworking the competition by digging deep into research and truly understanding a business before investing will lead to success. An investor must understand accounting to avoid falling into the trap of investing mania and running into accounting errors that could ruin an investment.

Stocks

During his presentation, Auxier used many different stocks as examples of both successful and poor investments. He drew on stocks that were popular during past bubbles and companies that he has spoken to personally this year.

The first example he looked at in the presentation was Intel (NASDAQ:INTC) during the tech bubble at the turn of the century. He described the price as skyrocketing during those few years and talking with Intel executives during the whole process. While sitting on the sidelines, he watched as the price jumped upwards of $70 dollars. Now he feels a sense of satisfaction at avoiding what was popular as the stock has settled around $50 20 years down the road.

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A more recent example he turned to came from CAE Inc. (NYSE:CAE). CAE operates as leader in training pilots across several different markets. The company took a beating in the pandemic as the airline industry saw profits tumble. Being in direct contact with management, Auxier was able to calmly watch the stock price plummet before returning close to pre-pandemic numbers.

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Questions

Auxier started off the question-and-answer section by taking a question looking back to the call he made to Buffett in 1982. He explained that Buffett gave him several books to read and multiple names of people to talk to that Auxier has kept in touch with over the years. His main takeaway came down to having what he describes as independence of thought.

During one conversation with Buffet, as Auxier called him multiple times, Auxier inquired about getting an MBA degree from Columbia. Buffett told him to not get that degree and get as far away from Wall Street as possible. His suggestion was to go live on a farm and Auxier took things to heart. Moving away from everything allowed him to think for himself and make sound decisions based upon his own research.

Another question came to Auxier regarding how his philosophy and strategy have changed over the years. He explained that being overly disciplined has actually hurt the team over the last few years. In many cases, not paying for certain companies has kept them from making money on stocks that have skyrocketed in recent times.

They do have some exposure to more recent technology stocks that have done well, but it all comes down to finding a balance between flexibility and discipline. Their discipline has allowed them to avoid getting killed by anything over the years, but he still believes there are times when they could have done a better job at playing the game.

Disclosure: Author owns no stocks mentioned.

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