An Introduction to Global Focused Growth Equity

David Eiswert - Portfolio Manager, Global Focused Growth Equity Strategy

Hi. My name is Dave Eiswert, and I'm the portfolio manager of the Global Focused Growth Strategy.

So there are really two pieces we start with when we think about the strategy. The first is opportunity. So this product has the mandate to go anywhere, any cap, any country, any good idea.

When you build a portfolio like ours you take that opportunity and you drill it down and you make hard choices, so the second really beginning point for our strategy is this process of making choices, and we use our framework of investing to make the best choices for our clients to give them the best portfolio that we can.

I was asked once by a client when I originally took over this strategy as an investor what would you like to be known for. I said I want to run a product that focuses on insights, in finding great opportunities around the world to invest in.

So there's a couple of different pieces that go into building how we run the product. The very first one is a key competitive advantage for T. Rowe Price, and that's our platform. That's our analysts, our regional managers, our sector managers, our access to companies, the tremendous IT and risk management resources we have.

Next we get a little bit deeper into how do we use the platform to create a more concentrated product and that's about our framework, so we have a very specific framework. It's tried and true around how we pick stocks for that portfolio

Third is the team, so we're a product at T. Rowe that is built around a team. There's myself, there's the associate portfolio manager and two team analysts. That team's job is to use our framework of investing to interact with the platform, so we take the team, the team uses the framework, and then we leverage the great platform we have to build the portfolio.

The final piece of this is the actual portfolio and my job is to manage that portfolio, to think about the risks and correlations between the different names that we invest in around the world. So we build it up from the platform, the framework, the team, and then managing the portfolio to give our clients the best option in a global strategy.

So what's our framework? Well, after doing this for almost 15 years my basic conclusion in being an investor is that if I buy companies where economic returns improve over time I'll outperform. That's the basis of our strategy. We want to buy good companies where the businesses are getting better over time, and if we do that and if we understand what drives that getting better portion we think we can outperform.

The thing about figuring out if a business is getting better is havingan imagination, so it sounds funny to think about a financial analyst or an investor having imagination, but you really do need to imagine the future in terms of how a business will change, how regulation will change, how macro economies will change in order to uncover insights.

We like to understand product cycles early. Often companies invest to deliver a future product cycle and the market becomes very concerned with investment, with underearning as they preparefor a new product cycle. That can be a great time to invest in abusiness.

The second is industry structure, and I think this is one of the most powerful forces today in today's global economy. Industry structures post the financial crisis are undergoing rapid change.There's not a lot of growth and companies are looking for ways to take out capacity and improve pricing.

As an industry structure improves it's often overlooked by the market until you're right on top of it and you can see the returns improving dramatically. We try to figure out how industry structures are improving early. We always love companies thatgain share.

Gaining share creates economic value even with a limited growth in the end market, so understanding share gainers and being able to predict and imagine how companies will gain share is a key piece of how we pick stocks in the portfolio.

Regulation is another theme that maybe isn't as exciting as industry structure or as product cycles or share gains, but regulation can give an advantage to one company and take away advantage from another, so we look to try to understand and be on the right side of regulation in different markets around the world, and that can lead Page to higher economic returns over time.

Finally, self-help management is a critical part of our investing framework and strategy. We want to own businesses where management teams can make their own rain to a certain extent,where changing businesses slightly, selling a business or buying a business can create value in itself, so again looking to be on the right side of change of how management runs a company is very important.

We always ask ourselves what matters, what drives the relative returns, how can we get in front of that, how can we imagine how relative returns will improve before the market figures it out.

When you look back on investment thesises there's usually only one or two things that matter. If we can predict those things early, figure them out before the market does, we can deliver a lot of value.

You really want to think and understand value, and there's always multiple dimensions to value. So when we talk about valuation we always say -- we say valuation always matters, we care what something's worth, but when you're delivering alpha and running a portfolio valuation usually matters the most at extremes, so when something is extremely cheap or extremely expensive.

The rest of the time we want insight, so the rest of the time we're not interested in it used to trade at 18 times, now it trades at 16 times, this must be a good idea. That doesn't make a lot of sense to us. We want to understand the insight for why this company is going to produce better returns over time.

we always want to look at history, we want to look at what drives stocks, what matters to a stock, and a lot of times that shows up for us in the form of pictures, so understanding what drove a stock in the past can lead to understanding what will drive it in the future, especially if we have insights around how the future is going to change.

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