In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they’d never buy.
This week our interviewee is Mike Seidenberg, lead portfolio manager of the Morningstar 5-Star Allianz Technology Trust (ATT).
Which Sector Shows the Biggest Promise in 2023?
Companies needing to move their businesses into digital remains a big opportunity. There is real tipping point around hybrid and electric vehicles and what this means for the likes of semiconductor companies. I think we’re finally at a point in the United States where we’re seeing people buy EVs and hybrid vehicles on a large scale, and there’s a lot of talk about combustible engines being a thing of the past in the next five to 10 years. The Wall Street Journal reported in January this year that US EVs grew by 66% in 2022, and they now make up 5.8% of all vehicles sold. Owning this supply chain is a massive opportunity for investors.
What’s the Biggest Economic Risk Today?
The risk to the consumer as economic times become more difficult. I’ve often told myself, how goes the consumer goes tech, because these people are the ones buying tech products and services in their jobs, and when they’re feeling good about their own situation, they’re more likely to be buying for their businesses.
Describe Your Investment Strategy
We are bottom-up investors with a top-down overview – we don’t invest in a vacuum. We are focused on creating a mosaic driven by a variety of inputs – customers, management, competitors, system integrators, designers, and talking to Wall Street analysts. This creates a picture of the company’s world which we turn back against the business model and ask ourselves: what should operating margins look like in a competitive structure?
Which Investor Do You Admire?
I had the privilege of working with Walter Price, who ran the trust before me, who is just a great investor. Having spent twelve plus years with him, Walter really ingrained an intellectual curiosity and honesty which is the mantra that I try to run the trust by today. Walter really is one of the godfathers of tech investing.
Name Your Favourite “Forever Stock”
I don’t really think about forever stocks as things can and do change, however I’ve covered Netflix for going on 18 years now, and I was there for the transition from DVDs to streaming. I have the utmost respect for the way they have run their business and how the management team have executed. They’ve done a phenomenal job at becoming a part of pop culture, which can be really profitable for investors. If I could roll the clock back and find another Netflix, I would!
What Would You Never Invest In?
I would never invest in a sector that I don’t understand after doing the work. If you take your time and you still can’t see why something is valuable, you should really avoid it. The key for investors is your capacity to think through logically when there is a problem with a business, but if you don’t understand a sector then the path of least resistance is to sell it – we really try to avoid these situations.
Growth or Value?
I’m a tech portfolio manager, we’re interested in companies that grow and create value is the way I would describe our style. Technology is becoming more immersive in our lives, not less, so by definition, I’m a growth investor.
House or Pension?
Over time, the stock market has been a better place for your money. However, I do always tell my kids, a house is a unique asset that you get to enjoy every day (some days more than others depending on the repairs situation!), but for long-term growth, you’re better off having your money in a pension, because compounding is such a beautiful thing.
Crypto: Brilliant or Bad?
We’ve done a lot of research on crypto and never invested in it. We’re much more interested in blockchain and the applications of this underlying technology for other interesting sectors.
What Can be Done to Improve Diversity in Fund Management?
It starts at making sure doors are open to people that haven’t been as well represented in this industry. It requires people to be talking to a variety of candidates and not having preconceived notions about who is the best fit for a particular job. I think it’s getting better, but we have a long way to go as an industry. The greater range of ideas and thoughts you have as a team, the better outcomes this creates as investors.
Have you Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?
I’ve had disappointments where I really thought a company has the vision to become major player but ended up not delivering. We had that situation with a company during the pandemic who did a large acquisition that didn’t work out. This resulted in another acquisition, and they missed their window of opportunity. The reality of business is many companies are competing to solve similar problems thus good ideas are a dime a dozen, but execution around the idea is what creates great companies. Conversely, I get to be around amazing entrepreneurs and watch their companies grow – it can be a real privilege as an investor.
What’s the Best Advice You’ve Ever Been Given?
Do more listening than talking. Somebody once reminded me that you want to be the least smart person in a room and make sure you surround yourself with talented people. You need the ability in this job to say “I’m wrong” – being introspective and knowing when to cut your losses is a real skillset for investors.
What Would You be if You Weren’t a Fund Manager?
I think I’d probably be at a software company in a managerial role – I love operational challenges and being surrounded by creative people. But something I am just passionate about is cooking. I don’t know if I would have been a professional chef, primarily because the hours are just incredibly gruelling on families, but I love the feeling you get of feeding people, and I have the utmost respect for the industry.
