· Does the manager have skill at selecting stocks in other sectors/industries of the market, or was their out performance simply a function of one large industry bet? Was it truly based on bottom-up, fundamental work? Or, was it based on a top-down, macroeconomic driven theme? Without answers to the questions above, and without answers to other questions that surfaced during our analysis, we cannot be certain (or, at least not with a high-degree of confidence) that the manager’s investment process consistently yields good stock picks.
In this instance, there were too many questions and too few answers to recommend client assets be invested with the manager and in this strategy.
While this post was far from a complete synopsis of researching and choosing an investment opportunity, it should provide insight into the steps I believe are imperative to complete prior to selecting an investment manager. Not surprisingly, knowing what you’re actually investing in goes a long way to managing expectations and avoiding disappointment!
Charles J. Batchelor is director of investment research for Cleary Gull.