Capital Allocators – Inside the Institutional Investment Industry · Ted Seides – Allocator and Asset Management Expert

[REPLAY] Paul Black - Gratitude, Fun, and Growth Stocks

·56 min·5 clips

Paul Black was left to walk back to the office after criticizing his boss's performance over tacos.

Paul Black is co-CEO and portfolio manager of WCM Investment Management, a firm based in Laguna Beach, California that manages $26 billion in global equities with a focus on growth companies. He joined WCM in 1989 when it had $200 million under management and the current CEO, Sanjay Ayer, was not yet there. The unusual location in Laguna Beach is itself a kind of WCM calling card: deliberately removed from Wall Street culture, it reflects the firm's independent disposition. Ted Seides opens by asking how there is a $25 billion firm that most people have never heard of, and Black admits he does not fully understand it either, attributing the growth to hard work, good fortune, and learning from a full curriculum of investment mistakes. His origin story in investing begins at age 18 with a small inheritance from his grandfather, which an EF Hutton broker directed into South African gold stocks during the period from 1978 to 1982 when gold ran from $300 to $800 per ounce. Watching $500 appear every day on a position of 500 shares of a highly leveraged South African gold miner was intoxicating enough that Black switched his major from marketing to finance and never looked back. After working at Bank of America in San Francisco managing $200 million at age 25, he eventually joined WCM. The core of the investment philosophy is the concept of a widening moat: WCM seeks companies whose competitive advantage is not just large but actively growing over time. Static moats erode. Widening moats compound. Black argues that assessing culture is inseparable from assessing competitive advantage, because a company whose culture is aligned with its moat is more likely to expand that moat than one where culture and strategy are misaligned. The conversation covers specific characteristics he looks for: companies where the CEO is deeply embedded in the culture, where talent is recruited and retained based on fit rather than credentials, and where the organization actively studies what it does that makes customers unable to leave. Black discusses the emotional challenge of holding through volatility and drawdowns and how WCM has developed internal practices for managing the psychological pressure that drives most institutional investors to sell great companies too early.

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