A.U.M. Alex Fitch - Eliminating Ego and Finding Value
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May 6, 2025 In this conversation, Alex Fitch, Director of US Research at Harris Oakmark and Portfolio Manager, shares his expertise in value investing. He reveals the psychological challenges of overcoming ego in investing and the necessity of recognizing mistakes. Alex discusses the unique team-based research process at Harris, emphasizing the evaluation of management teams and the importance of mid-cycle earnings. He dives into specific companies like Alphabet and Lithia Motors, showcasing their strategic approaches and how market shifts present new opportunities. A must-listen for aspiring investors!
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Mid-Cycle Earnings For Cyclicals
- Valuing cyclical companies requires using mid-cycle normalized earnings rather than volatile single-year results.
- Mid-cycle earnings reflect average expected outcomes smoothing over good and bad periods for better valuation.
Disciplined Sell And Mistake Process
- Harris Oakmark sells stocks when price hits intrinsic value, better opportunities arise, or fundamentals deteriorate significantly.
- A rigorous mistake-management process involves re-assessment, bear-case research, and potential transfer of coverage before selling.
Evaluating Management Alignment
- Harris Oakmark judges management by alignment of incentives, skin in the game, and off-script conversations revealing true goals.
- Managers must share both upside and downside outcomes with shareholders for effective capital allocation.
