With over $25 billion in assets under management, including a stable of eight mutual funds, Davis Advisors has all the trappings of a successful boutique New York investment management firm. But a unique investment philosophy, and the fact that it’s been honed by three generations of one family, makes it far from typical.

Back in the 1950s, Shelby Cullom Davis made his fortune by buying the stocks of reasonably priced growing companies. His son, Shelby Davis, carried on that tradition when he founded Manhattan-based Davis New York Venture in 1969. Christopher Davis, his son, manages several of the firm’s equity funds, while his brother Andrew has the helm of its real estate fund.

In contrast Danton Goei, who runs the $557 million Davis Global Fund, has little in his lineage to suggest his eventual career path. Born in Germany and raised in France by his father, a physician, and his mother, who owned a clothing store, he had little indoctrination into the world of investing during his childhood. But his interest in both topics accelerated when he was chosen to represent his high school in a regional economics competition, and later when he attended the University of Pennsylvania’s Wharton School.

By the time he met Davis at a job interview at Davis Advisors in 1998, he had worked in several positions with larger firms as an investment analyst. “What drew me to Davis was an ability to look at an industry on a global basis,” he recalls. “No other money managers were taking that kind of world view.”

He also liked the fact that the firm paid attention to value and held stocks for several years at a time when rapid-fire trading and sky-high valuations were the rage. And he was encouraged that managers and employees had a lot of their own money in the funds, and that their compensation was based partly on how well those funds performed over the long term.


Though the firm tries to treat analysts  as equals, over time Goei became first among equals. Early on he made some propitious calls, such as advising portfolio to avoid newspaper stocks before the industry was completely disrupted.

Until last year, Chris Davis oversaw management of the firm’s global equity fund, which invests in a mix of U.S. and foreign stocks. That changed in 2016 when Goei took the reins of the Davis Global Fund, becoming the only equity fund manager currently at the firm to serve as a sole manager. He also manages the Davis International Fund, and co-manages the firm’s flagship $11 billion Davis New York Venture fund.

Although Goei’s latest appointment is fairly recent, he has co-managed Davis Global since 2004, the year it was launched. Over the years, several analysts ran sleeves of the portfolio under Davis’s oversight, and Goei’s slice of the pie proved to be the most profitable.

“There used to be more cooks in the kitchen here,” noted Morningstar analyst Dan Culloton in a report. “Now there is one top chef.”

Even with a crowded kitchen, Davis Global has managed to beat its world stock peers over numerous time periods, and has outperformed its benchmark (the MSCI ACWI Index) since inception. While it’s also been a bit more volatile than both its category average and the index over short-term periods, it has beaten both its peers and benchmark in 100% of the rolling 10-year periods, observed Culloton.

Like other Davis funds, this one takes a highly active approach and has little regard for benchmark parameters. It owns just 55 stocks while the index holds 2,470, and its country and market cap weightings are markedly different. A newly launched, actively managed exchange-traded fund, Davis Select Worldwide (DWLD) takes a similar high-conviction, unconstrained approach. “We think the fund and the ETF are good complements to top-down indexed strategies,” says Goei.

Once a stock is added to the portfolio, it typically remains there for several years as its manager waits for his long-term investment thesis to pan out. “We’re not just interested in the next quarter’s earnings numbers,” he says. “When we talk to management we want to find out things like how they plan to allocate capital and what their plans are for the future.”

The fund defies easy categorization as a growth or value investment; it contains a broad mix of companies ranging from staid value stocks such as J.P. Morgan Chase to stakes in a privately held Chinese ride-sharing upstart. That’s because the fund eschews traditional metrics such as price-to-earnings ratios, which Goei says can be easily manipulated and do not reflect obligations such as unfunded pension liabilities. Instead, the firm uses as its key metric “owner earnings,” which measure the excess cash a business generates after reinvesting enough to maintain current capacity and competitive advantages, and which adjust cash flow for items such as depreciation and stock options. Other considerations are enterprise value, or the price someone would realistically have to pay to own the business, and growth rate assumptions. Companies in the fund must also have proven management, financially strong business models and a sustainable competitive advantage.

Although Goei is a bottom-up stock picker who focuses on company-specific metrics, he also considers long-term trends when deciding what to buy, and just as important, what to sell. He learned how important both disciplines are back in the early 2000s when several of the firm’s funds owned stocks of three newspaper companies whose advertising revenues were in sharp decline.

“The investment team had to decide whether the problem was due to the cyclicality of the recession, or because of more lasting secular trends brought about by the internet,” he says. They decided on the latter, sold the newspaper stocks, and bought internet upstarts such as Google. The move paid off as stocks of old media companies sank and their new-era replacements rose, even though having internet stocks in a fund that wasn’t classified “growth” raised some eyebrows.

These days, three secular tailwinds, the emergence of a global middle class, aging populations in the U.S., Europe and Japan, and ongoing technological advances provide the backdrop for the fund’s investment decisions. In line with the first theme, most of the fund’s China holdings are in consumer-related companies. This represents a marked shift from the fund’s strategy several years ago, when the migration of rural populations to cities drew the focus to stocks related to commodities and infrastructure build-out.

With much of that migration slowing down, the country’s growing urban consumer base and its buying power is now driving the selection process. “Only 37% of GDP in China is consumer-driven, versus 68% in the U.S., so there is still a lot of growth potential,” he says. “And even though annual economic growth has settled in the 5% to 7% range, that’s still a growth rate we’d love to have in the U.S.”

In line with that consumer theme is fund holding Didi Chuxing, which has a share of more than 90% of China’s nascent ride-sharing industry. Founded in 2012, the privately held company is now a top 10 holding in the fund. Goei believes that investors in the company, which include Apple, Tencent and Alibaba, will want to monetize through an IPO within the next couple of years. “With a sizable urban population, poor public transportation and [a] low level of car ownership, China is particularly well suited for this type of business,” he says.

Even though Japan represents a sizable chunk of the benchmark index, the fund has no holdings in that country. Goei believes company practices in the country aren’t friendly enough to shareholders, although he says he’s keeping an open mind about investing there should that change. On the other hand, U.S. companies represent a sizable portion of the fund at 54% of assets, while those based in Asia account for another 27%.

Stocks from other areas include South African multinational Naspers. The company, which has a massive $70 billion market capitalization but is virtually unheard of to most investors, owns a diverse array of media and internet holdings in emerging markets. Its satellite TV business is the largest in Africa, and its online classified ad business operates in 31 countries including Brazil, Russia and India. In 2010, Naspers became an early investor in China internet portal Tencent Holdings, and today the company’s 33% stake alone is worth $80 billion.

In the U.S. sleeve, United Technologies is a holding with a durable business, innovative culture and attractive price based on owner earnings. Its business segments have highly familiar brand names such as Pratt & Whitney jet engines and aerospace parts, Otis Elevator and Carrier heating and ventilation systems. Its innovative products include a jet engine that significantly reduces fuel consumption, environmental emissions and noise levels during takeoff and landing.

Energy companies make up around 13% of the portfolio. At almost 6% of assets, Canadian oil and gas producer Encana is by far the largest holding in the group. Goei usually avoids commodity producers because they are capital intensive and driven by commodity prices, but he’s impressed by Encana’s low-cost production, ample reserves and management focus on shareholder returns. The company should benefit from an increase in energy prices, which Goei believes is likely to continue as global demand grows.