Value Investing Live Recap: Jason Crawshaw

Key takeaways and questions

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Graham Griffin
Apr 14, 2021
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GuruFocus was pleased to host a presentation with Jason Crawshaw, portfolio manager at Polaris Capital Management LLC.

Crawshaw joined the team as an analyst in January 2014, became an LLC member in 2015 and was named an assistant portfolio manager in early 2016. He was promoted to portfolio manager in January 2021. Crawshaw is a generalist and conducts fundamental analysis of potential investment opportunities. He brings 19 years of investment industry experience to the firm.

Crawshaw was previously a portfolio manager with Liberty Square Asset Management, where he co-managed international long and long-short equity funds and helped direct Liberty's research effort. Prior to joining Liberty, he was a portfolio manager with Brait Specialized Funds U.S., where he managed a U.S. long-short, small-cap equity hedge fund. He served in a similar role at Equinox, a spinoff from Coronation Securities. Early in his career, Crawshaw was an equity analyst responsible for small- and mid-cap research for a proprietary fund at First Rand and Coronation Securities of South Africa. Crawshaw obtained his master's in business administration from University of Notre Dame and graduated magna cum laude in 1994. He received his undergraduate degree from Middlebury College in 1992.

Polaris Capital Management LLC is a leading global equity manager, serving the investment needs of institutions and individuals since 1995. Polaris has one of the longest global and international equity track records of any firm presently in operation and continuously managed by the same individuals. As of Dec. 31, the firm managed $14.3 billion for a growing number of institutions, retirement plans, insurance companies, foundations, endowments and high-net-worth individuals.

Watch the full presentation here:

Key takeaways

Crawshaw kicked off the presentation with a brief description of Polaris Capital. He explained the company has been in business since 1995 and operates as a boutique firm focused primarily on investment. They take a global approach that is agnostic to any specific region or sector. The overall goal is to find the best investment opportunities around the world to construct a portfolio that generates above average returns at lower than market risk.

The team at Polaris focus their investment strategy on finding businesses with a sustainable cash flow. This is the heart of their investment strategy. The team has developed their own proprietary cash flow calculation through what they call maintenance capital expenditures. In short, maintenance capex boils down to the amount that a company must reinvest into their operations to maintain their cash flows.

The team also operates under the assumption that long-term equity investments should be returning, on average, around 7%. Adding in what they call an active management premium of 2% brings the total to approximately 9% that the team must beat on their returns before factoring in different country risks.

As with most investors, the team's process starts off with valuation screens used to narrow down companies. Crawshaw estimates that these screens cut down investment opportunities by half before they even start to consider cash flow. In the end, the process narrows down opportunities to around 2,000 total that could work within their portfolio.

Stocks

Crawshaw used two different stocks to highlight the different types of opportunities that Polaris is able to find that differ from their competitors. The first company he chose to look at was Williams Companies Inc. (

WMB, Financial), which operates as a midstream energy company. He explained the company had been impacted by the 2015 energy infrastructure bust and was lumped into a basket with free cash flow negative businesses. In his opinion, the company offers up a future of strong cash flow generation, which should provide good returns.

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The second company Crawshaw used for an example was BanColombia SA (

CIB, Financial), which operates as a financial services provider in South America. He explained the company has been negatively impacted by several different factors like commodity prices as well as the Peso being under pressure, which provides a unique value investment opportunity.

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Questions

After his presentation, Crawshaw took the time to answer several questions from the audience that looked directly at his presentation. One question that was particularly interesting asked him how many positions that Polaris takes on average each month due to their long investment horizon.

Crawshaw explained that, on average, excluding the unique opportunities they saw in 2020, the company is looking at 10 to 12 investments that are getting added to the 75-position portfolio at maximum each year. This puts the portfolio between 15% and 20% turnover. Based upon their team of nine, this means that most people are finding one, maybe two, great ideas each year that end up making it into the portfolio.

The last question that Crawshaw answered asked him about the considerations surrounding industrial growth in Colombia and surrounding countries when selecting the position in BanColombia (

CIB, Financial).

Here he reiterated the firm tries to remain completely agnostic in regard to sectors and geography. Each investment opportunity has to stand completely on its own based upon its merits.

When making the decision on BanColombia, the team traveled to Colombia and visited the area and learned as much as they could about the company. They did the same with other competitors and weighed the pros and cons of each opportunity. By looking at all these competitors, Crawshaw explained that the team was able to create a "mosaic" of information that allowed them to pick the best option for their portfolio.

Disclosure: Author owns no stocks mentioned.

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