Cordaro has been with RegentAtlantic for 25 years, starting out doing pure research and analysis, and he says he was in part responsible for bringing the quantitative focus to the firm.
"Being quantitative is gonna force you to look at ugly stuff that you would otherwise not look at," says Cordaro. "And it's going to force you to move pretty stuff out of the portfolio that you might be in love with otherwise." This was a very difficult pitch to make in the '90s, he says, in other words, to argue that an investment was worth the present value of future cash flows. "The argument there was that future cash flows were infinite in high-tech stocks," he says. "And it was hard to keep grounded. It was hard to stick to your knitting."
He says he bought Apple when it was selling for less than $10 a share, before the iPod, simply because "it was an ugly stock. Hell, it was a dying breed. Before Steve Jobs came back it was a very cheap stock. And we bought it because it was a cheap stock. And then we sold it in the 40s because it got really expensive. OK, so we sold it a little early. But I'd rather do that than ride something back down." Or take Dell Computer during the tech boom. "To justify their price-earnings multiple it would have meant that within two or three years they would have had to sell computers to every person on the planet. And you just looked at that and said 'This just doesn't make sense.'"
The Center for Financial Planning
Southfield, Mich.
Melissa Joy, Partner
In a perfect world, investing would always be an objective, scientific endeavor, yet there's a lot of personality in salesmanship that goes into the mutual fund business, just as there is in selling encyclopedias or Girl Scout cookies. That's a lesson Melissa Joy learned early in her 13-year career at the Center for Financial Planning in Southfield, Mich. When she joined in 1999, she says the firm already had a culture of distrusting fads, such as the tech boom, and the highly valued stocks that became its hallmark (and later its downfall).
Joy's perception, like that of so many others, was shaped by that giddy era. "I got the opportunity to [meet] some of the mutual fund managers who were the darlings of the go-go late '90s. I can think of a manager named Ken Corba who was at Eagle [Asset Management], which was the proprietary fund company within Raymond James, and made kind of a higher profile move to Pimco and Allianz. He typified kind of that 'growth at any price' kind of manager and brought a lot of charisma to the group." But ultimately, she says, "the price mattered."
She contrasts him with Jonathan Simon, a value manager with J.P. Morgan who runs J.P. Morgan Mid Cap Value and Value Advantage funds, among others. "I met him in the early 2000s and he didn't bring a lot of dynamism to the room. He was kind of boring. But he had a process that was much more easily articulated. There was a value discipline. And more than that, there was true desire for accountability to his ultimate investors. So I think there was a lesson learned there. Personality isn't everything."
Joy, a former poli-sci major at the University of Michigan, says she "stumbled into the business" after working in a summer job at a mortgage firm, and later becoming an assistant to a financial planner; eventually she got a taste of, and passion for, investment research after joining the center, where she became a research analyst.
She says that one of the lessons she has learned is to continue to think long term, and be careful not to move away from an investment too early just because you're overly cautious. She says she has some sort of contact with managers two to four times a week, either through phone calls or meetings. The firm has six asset-allocation models; the asset-allocation decision comes first and then these are populated with investments. But since Joy's job is to work from the bottom up, she's more focused on investment opportunities on the ground, keeping her eyes open for a time, sometimes years, before she pounces on an opportunity. In those unique cases, the individual securities might drive a client's discussion rather than asset allocation.
For most of the past decade, she says, the firm has had a pretty significant allocation to international investments, but has moved back somewhat to U.S. stocks. Over the last 12 months especially, she says the firm has been underweighting small- and mid-cap stocks and looking at more alternative investments to eschew style boxes.
"We have for the past several years been trying to think about what quality means in terms of stock investments," she says. "Any investor could have a different definition for quality. ... You could point to whatever P/E ratio you use and say that's it. The quality is a little bit more difficult to articulate and it means different things to different people."