13 Questions for Walter Scott’s Loudon and Scott

Which
Sector
Shows
the
Biggest
Promise
in
2023?

Our
investment
team
at
Walter
Scott
are
fundamental
bottom-up
stock
pickers,
meaning
that
in
our
day-to-day
research,
we
aren’t
looking
at
the
merits
of
a
sector
or
geographical
region,
but
instead
we
identify
the
best
companies
that
strengthen
our
portfolios.
This
approach
can
be
counter-cyclical;
however
we
invest
on
a
long-term
horizon
and
seek
out
world-class
companies
that
we
consider
to
be
capable
of
generating
superior
real
return
for
the
coming
five
to
ten
years
–
and
beyond!

What’s
the
Biggest
Economic
Risk
Today?

Lindsay
Scott:
One
area
I
think
there
is
unanimous
agreement
is
the
complete
economic
disaster
that
would
arise
from
a
military
conflict
across
the
Taiwan
Strait.
Given
Taiwan’s
significant
presence
in
the
global
semiconductor
supply
chain,
the
manufacturing
of
products
where
semiconductors
are
used
–
vehicles,
industrial
equipment,
medical
supplies,
and
smartphones
–
would
be
decimated,
not
just
in
China
and
Taiwan,
but
globally.

Paul
Loudon:
Looking
back
over
the
past
year,
it’s
the
abrupt
nature
of
rate
increases
we’ve
seen
globally
and
the
multiple
lagging
impacts
that
have
yet
to
emerge,
which
are
concerning.
We
obviously
saw
stresses
in
the
global
banking
system
earlier
this
year,
but
it’s
hard
to
say
what
hidden
risks
and
headwinds
are
still
lurking
beneath
the
surface.

Describe
Your
Investment
Strategy

Over
the
course
of
our
40-year
history,
our
philosophy
as
bottom-up,
non-benchmark-led,
research-backed
investors
remains
the
same.
The
BNY
Mellon
Long-Term
Global
Equity
Fund,
in
particular,
aims
to
provide
investors
with
a
favourable
long-term
real
rate
of
return
by
investing
in
a
concentrated,
high-conviction
portfolio
of
40-60
quality
companies.
Across
our
strategies,
we
invest
with
the
intention
to
buy
and
hold
stocks
on
a
long-term
investment
horizon
to
tap
into
the
power
of
compound
growth,
and
provide
investors
exposure
to
the
best
quality
companies
that
global
markets
have
to
offer.

Which
Investor/s
Do
You
Admire?

LS:
I’ve
been
at
Walter
Scott
&
Partners
for
twenty
years,
and
I’ve
learned
everything
I
know
from
the
firm’s
founders,
Walter
Scott
and
the
late
Ian
Clarke.

PL:
Chuck
T.
Akre,
François
Rochon
and
Peter
Seilern
are
three
career
investors
that
have
a
philosophy
of
long-term
quality
growth
investing,
similar
to
our
own,
and
I
enjoy
reading
up
on
what
the
three
of
them
have
to
say.

Name
Your
Favourite
‘Forever
Stock’

LS:
Novo
Nordisk
is
a
specialty
pharmaceutical
company
powered
by
a
strong
pedigree
in
research
and
development.
This
year
marks
the
company’s
100-year
anniversary,
and
during
its
history,
it’s
been
a
pioneer
in
the
diabetes
space,
a
legacy
which
is
being
continued
today.

 PL:
Edwards
Lifesciences
is
an
American
medical
technology
company
that
thinks
very
long-term,
reinvesting
a
high
percentage
of
its
sales
back
into
research
and
development.
The
company
is
looking
to
solve
a
problem
which
is
still
very
much
under-penetrated
by
treating
aortic
stenosis,
a
disease
that
will
only
rise
in
prevalence
as
ageing
populations
grow
worldwide.

What
Would
You
Never
Invest
In? 

We
would
never
invest
in
companies
that
are
loss-making
or
that
aren’t
currently
growing.
Ultimately,
we’re
not
looking
to
invest
in
a
company
that
doesn’t
have
a
proven,
profitable
business
model
or
good
attractive
unit
economics,
in
the
hopes
that
one
day
the
company
‘might’
become
profitable.

Growth
or
Value?

At
our
core
we
are
growth
investors.
However,
like
many
other
investors,
you
might
say
we
maintain
a
GARP
or
‘Growth
at
a
Reasonable
Price’
mentality,
as
we
do
always
look
for
businesses
that
demonstrate
quality
growth
that
is
sustainable
over
the
long-term.

House
or
Pension?

Pension.
A
house
is
a
really
important
asset
and
for
many
people,
represents
the
most
significant
asset
they’ll
own
during
their
lifetime.
However,
if
you
had
extra
cash,
you
wouldn’t
look
to
buy
a
spare
house.
We
would
always
reiterate
the
importance
of
re-investing
that
money
back
into
the
stock
market,
and
optimising
the
pension
contributions
available
to
you.

Crypto:
Brilliant
or
Bad?

We
want
to
be
optimistic
about
future
disruptors
but
crypto-assets
are
not
yet
well-regulated,
there
isn’t
enough
trustworthy,
accessible
information
out
there,
and
there
remain
bad
actors
in
the
space.
From
an
investment
perspective,
crypto-assets
have
also
not
proven
to
be
good
inflation
hedges
or
stable
stores
of
value.
While
blockchain
is
a
fantastic
technology
which
absolutely
has
a
place
in
the
financial
landscape,
it
too
hasn’t
yet
found
its
footing.

What
Can
be
Done
to
Improve
Diversity
in
Fund
Management?

We
feel
it’s
all
about
education,
and
it
really
has
to
be
at
the
grassroots
level.
Ultimately,
open-minded
hiring
can
only
go
so
far
if
a
significant
portion
of
the
current
working
population
still
aren’t
comfortable
talking
and
learning
about
investing.
The
concept
of
investing
can
be
really
scary,
and
investment
management
can
seem
like
a
whole
other
universe.
So
we
think
it’s
important
to
talk
to
young
people
in
schools
and
colleges,
from
all
different
backgrounds,
about
investing
and
the
great
opportunities
anyone
can
access
through
a
career
in
fund
management.

Have
you
Ever
Engaged
with
a
Company
and
Been
Particularly
Proud
(or
Disappointed)
in
the
Outcome?

Our
20-person
team
debates
extensively
to
ensure
that
only
businesses
which
meet
our
stringent
investment
criteria
and
standards
are
added
to
the
portfolio,
so
we
generally
only
invest
in
companies
that
already
have
excellent
ESG
profiles.
That
said,
we
do
proactively
engage
when
there
are
clear
opportunities
to
effect
positive
change.

What’s
the
Best
Advice
You’ve
Ever
Been
Given?

LS:
“If
you
don’t
understand
it,
don’t
invest
in
it.”
No
one
will
pat
you
on
the
back
because
you
invested
in
a
complicated
company,
there
are
always
opportunities
to
be
successful
by
investing
in
straightforward
companies.

PL:
Taking
inspiration
from
Benjamin
Graham’s
allegory
of
“Mr.
Market”,
I
like
to
think
of
the
market
not
as
an
all-knowing,
all-consuming,
incredibly
rational
machine
but
instead
it’s
helpful
for
investors
to
interpret
the
market
as
a
manic
depressive
agent,
swinging
rapidly
from
wild
euphoria
to
completely
irrational
pessimism.

What
Would
You
be
if
You
Weren’t
a
Fund
Manager?

LS:
I
was
close
to
going
into
medicine
when
I
was
applying
to
university
but
decided
to
focus
on
Biology
instead,
and
as
a
generalist
investor,
I
now
have
the
opportunity
to
meet
with
pharmaceutical
companies.
Outside
of
investment,
I
love
learning
about
the
pharmaceutical
space
and
I
find
the
progress
we
are
making
in
science
just
astounding.

PL:
Thinking
realistically,
I’d
likely
follow
in
the
footsteps
of
both
my
parents
who
are
practicing
lawyers,
but
if
I
let
my
imagination
run
wild,
I’d
love
to
be
a
professional
golfer.

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