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The stock market provides a real-time scorecard; you always know if you are winning or losing.”
Daniel Brazeau has been investing since his teenage years. His father had a brokerage account and encouraged Dan to invest, just for fun, along with him. He didn’t make a fortune–the commissions were so high in those days that they ate up all the profits–but he did get hooked on the intellectual rigor and competitive challenge of stock picking. "There is a real-time scorecard," he said. "You always know if you are winning or losing." Dan has honed his craft for the past 17 years at Weatherbie Capital, a subsidiary of Alger. As a portfolio manager, he now spends his time studying companies and the people who run them to identify possible winning investments for clients.
Was your father a stockbroker?
No. He was an accountant, but he dabbled a bit in the markets on the side. Studying the numbers with him felt much like analyzing baseball statistics though I wasn’t doing any hardcore analysis on the stock-picking side. One of the first stocks I picked (via my dad) was Jaguar because I liked its cars. I didn’t drive at the time, so it seemed exciting and whetted my appetite.
You grew up in Pittsfield, Massachusetts, a town once dominated by General Electric. Did you learn any investment lessons watching GE shrink its presence there so dramatically?
The biggest takeaway was don’t put all your eggs in one basket. That’s what the city did and when GE picked up and left, it took a big toll on the people and businesses that relied on the company.
Early in your career, you had a few different finance-related jobs. What did you take away from those experiences?
I started my career in the project finance department of a company that developed natural gas-fired and wood-fired powerplants. It was interesting and I leaned on my financial education, but I quickly knew I wanted more so I pursued an MBA. From there, I ended up at a large investment firm, which had a great environment and reputation. But the biggest drawback was the size of the firm. They sliced and diced the investment universe into very small pieces. I covered one of three subsets within the media business sector, which felt very limiting. While I learned a lot, I realized that I wanted a place where I could look across the landscape to make more of an impact on portfolios as opposed to just sticking to a regiment and segment. Weatherbie gave me that chance. We are a small, collaborative, and creative team. We are all about finding what we believe are the best ideas for the portfolio and helping our clients achieve their financial goals.
Speaking of small, you and your colleagues focus on small- and medium-sized companies. What makes that appealing?
If you are looking at a well-known large cap name, there are probably 25 or 30 analysts publishing research. If you are looking at some of the names we follow or invest in, there might be three or four analysts covering them. Sometimes there are none. These companies are much less scrutinized and we’ve found more opportunities in these areas when we do our research well.
You are also a portfolio manager on a fund that has the ability to short or bet against individual stocks. What’s the thinking there?
We spend our time looking at companies to invest in, but sometimes we come across one where we say, "This is a broken business," or "This is a company people think is a growth business that really isn’t." Shorting gives us an outlet for those ideas. Our investment process makes us skeptical and I believe better investors. When you look at a company, you ask different questions. How would a short seller look at this company? Where are the cracks? That same mentality helps when you are meeting with management teams because they are often very optimistic. You don’t want to invest with people who are so optimistic that they don’t see the downside. You want management teams that are humble. They can have big goals, but they have to know it is going to take hard work to reach them.
You are active managers at a time when many investors are opting for index funds. How do you and your team add value?
We start by looking for inefficiencies in the market. Then we concentrate on our top ideas. Historically those ideas have performed strongly. We do not try to hug a benchmark. If we happen to be overweight in a sector because we have found better stocks there, we are happy to do that. Finally, we are not trying to trade day to day. We have a long-term view. All of those things help us in our quest to add value.
How do you spend your time outside of work?
I love to read–mostly for entertainment, and perhaps for a little bit of knowledge on the investment side. I mostly enjoy non-fiction, specifically history. I recently read the autobiography of Jackie Robinson and a book about some of the pioneers of aviation like Jimmy Doolittle. Every once in a while, I’ll read business books as well. Shoe Dog, by Phil Knight, which is the Nike story and Bad Blood, the book about Theranos by John Carreyrou, are the types of books that might help you think about different ways that companies succeed or fail. If I was looking at one of those companies, would I have picked up on some of these things they talk about? I also spend time with my kids, reading with them and participating in their sports adventures, including coaching my older son’s basketball team. Soon I would like to take them out west near Yellowstone. Years ago my father, brother, and I went fly fishing in Wyoming and Montana and it was incredible. I’d like my kids to see the wildlife and how breathtaking that part of the country can be. It is something you can’t experience where we live in the metro Boston area.
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