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Guinness Atkinson conference call, Monday, February 9, noon Eastern

We’d be delighted if you’d join us on Monday, February 9th, from noon to 1:00 p.m. Eastern, for a conversation with Matthew Page and Ian Mortimer, managers of Guinness Atkinson Global Innovators (IWIRX) and Guinness Atkinson Dividend Builder (GAINX).

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These are both small, concentrated, distinctive, disciplined funds with top-tier performance. Guinness reports:
Guinness Atkinson Global Innovators is the #1 Global Multi-Cap Growth Fund across all time periods (1,3,5,& 10 years) this quarter ending 12/31/14 based on fund total returns. They are ranked 1 of 500 for 1 year, 1 of 466 for 3 years, 1 of 399 for 5 years and 1 of 278 for 10 years in the Lipper category Global Multi-Cap Growth.
Why? Good academic research, stretching back more than a decade, shows that firms with a strong commitment to ongoing innovation outperform the market. Firms with a minimal commitment to innovation trail the market, at least over longer periods.

The challenge is finding such firms and resisting the temptation to overpay for them. The fund initially (1998-2003) tracked an index of 40 stocks chosen by the editors of Wired magazine “to mirror the arc of the new economy as it emerges from the heart of the late industrial age.” In 2003, Guinness concluded that a more focused portfolio and more active selection process would do better, and they were right. In 2010, the new team inherited the fund. They maintained its historic philosophy and construction but broadened its investable universe. Ten years ago there were only about 80 stocks that qualified for consideration; today it’s closer to 350 than their “slightly more robust identification process” has them track.

This is not a collection of “story stocks.” The managers note that whenever they travel to meet potential US investors, the first thing they hear is “Oh, you’re going to buy Facebook and Twitter.” (That would be “no” to both.) They look for firms that are continually reinventing themselves and looking for better ways to address the opportunities and challenges in their industry.

Matt volunteered the following plan for their slice of the call:
I think we would like to address some of the following points in our soliloquy.
  • Why are innovative companies an interesting investment opportunity?
  • How do we define an innovative company?
  • Aren’t innovative companies just expensive?
  • Are the most innovative companies the best investments?
I suppose you could sum all this up in the phrase: Why Innovation Matters.
In deference to the fact that Matt and Ian are based in London, we have moved our call to noon Eastern. While they were willing to hang around the office until midnight, asking them to do it struck me as both rude and unproductive (how much would you really get from talking to two severely sleep-deprived Brits?).

HOW CAN YOU JOIN IN?
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If you can't join but have questions for the guys, share them here. In general, either the managers will read them or folks from the adviser follow these discussions then brief them.

Hope you're all safe and warm,

David

Comments

  • Is the whole innovators thing just a marketing tactic? How are you different from a global fund seeking companies with sustainable growth?
  • What a coincidence, just bought this fund today after my FA showed me the fund, as a replacement for WAGTX, which used to be run by all the people now at Grandeur Peaks. I surmise its best days may be behind them , since so many of the people responsible for its great record are now gone. I was sure surprised to find IWIRX had such a strong short and long term record and never heard of it.

    Good work David on landing an interview, look forward to it.
  • i would like to hear more about GAINX. the fund has been around for over 2 years and doesn't seem as a resounding commercial success @ just $5.5mm. Thus here my questions, if i may:

    • Since the fund expenses are being heavily subsidized, for how long are they willing to continue without assets?
    • GAINX has “dividend builder” in its name. What if a current holding has an attractive yield – due to its share depreciation (not just in sympathy with the market movement, but due to the company-specific issues) – would they retain the holding?
    • Related to the above: Would they consider protecting ‘total return’ or do ‘dividends’ take priority?

    Thanks. fa
  • If I have this right, there's a British or Irish version of GAINX whose portfolio is essentially identical, so for tax purposes the managers (British citizens, I believe) would invest in the British version. I wonder if you could ask them the extent of their personal holdings in these funds? Thanks, these conversations are extraordinarily useful.
  • The prospectus says 40% of the holdings are to be global, how is that defined? Domiciled outside US, companies with significant portion of revenue outside of US ?

    How do they choose stocks, bottom up, top down or combination? Would be interested in their process of deciding what to buy and sell.
  • >> Guinness Atkinson Global Innovators is the #1 Global Multi-Cap Growth Fund across all time periods (1,3,5,& 10 years) this quarter ending 12/31/14 based on fund total returns. They are ranked 1 of 500 for 1 year, 1 of 466 for 3 years, 1 of 399 for 5 years and 1 of 278 for 10 years in the Lipper category Global Multi-Cap Growth.


    Interesting they lean on that, both the global category and the legacy timespan.Their US / non-US ratio in M*'s terms is higher than, say, the almost multicap FLPSX, and, as you note, the Brits (physicists) have been involved for the last 5 or 4 good years (the latter did join the firm 9y ago). More pertinent, since everyone loves (successful) innovation, yay, or comes to do so at least when it results in profitable sales --- the appeal as self-evident as motherhood and pie --- the second bullet is key to quantify: How, specifically, do they decide? What do they do that others do not do, macro trends or deep diligence or otherwise? Everybody wants to own winning innovators.

    Should be an intriguing conversation.
  • Why is there only one share class? Do they market the fund to any 401k plans or pensions or 529 administrators?
  • edited February 2015
    GAINX numbers through January...

    image
  • edited February 2015
    And for IWIRX...

    image
  • I'm hoping/expecting to join the call, but here are the questions I have so far.

    1. How do you weight the different aspects of innovation against price? For instance, does a longer history of innovation as you view it trump a particularly insightful innovation without the history? And how do you choose between a company that has been particularly innovative but also sells at a smaller discount to your estimate of intrinsic value compared to a company that may not be as innovative but sells for less?

    2. How would you describe the difference between the way you evaluate innovation compared to others who offer funds that are also pursuing innovative companies? (a duplication of davidmoran's question)

    3. Is your portfolio primarily large cap because your approach to innovation requires a company to achieve a size where they “need” to innovate? Or do you also try to find particularly innovative small or mid-size companies that have the potential to grow much bigger?

    4. When you look for innovative companies, or when you’re invested in them, how often is that innovation “people dependent” and how often is it built into the culture of the business? And, for example, if you viewed Apple as particularly innovative “because” of Steve Jobs, would his departure make you sell the stock?

    5. Your positions are mostly US companies currently and of your purchases in the last 2 plus years, they've also been two-thirds US companies. Is that balance primarily being driven by where you're able to find innovation or is it just where the price of innovation has been more attractive in the last few years?

    Thanks for arranging this! I own the fund thanks to reading about it on MFO and am looking forward to hearing from the managers.
  • My question concerns tax efficiency. According to Morningstar, IWIRX is very tax efficient particularly when one considers a portfolio turnover of 30%. Yet the prospectus does not mention tax efficiency. Is tax efficiency a consideration in the management of the fund? Will it continue? Is IWIRX suitable for non-tax deferred accounts?
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