Boring-Is-Good Fund Manager Finds Market’s Rebound ‘Crazy’


(Bloomberg) -- Mawer Investment Management Ltd.’s motto is “Be Boring. Make Money.” That means even now, according to portfolio manager David Ragan, who can’t get excited about the stock market’s recent rally.

With stock valuations “incredibly high” before the pandemic struck and many obstacles still ahead for businesses, the sharp rebound in global equity markets since late March is “tough to rationalize,” said Ragan, who manages the Mawer International Equity Fund and the new Mawer EAFE Large Cap Fund, which is being introduced on Friday. The Calgary-based firm manages about C$60 billion ($44 billion) in total.

“Buyers are giving up on the idea that central banks and governments are ever going to really let the stock market correct down,” Ragan said. “They’re saying, ‘That’s never going to happen. This is the best I’m going to get. Buy.’ That’s rather crazy to me.”

For Ragan’s funds, the pandemic prompted him to trim a little from holdings of stocks like Unilever NA, Nestle SA and some Japanese equities that had held up well during the downturn. The International Equity Fund is down about 4% this year, beating 70% of its peers, according to data compiled by Bloomberg.

Mawer’s new EAFE fund had been under development internally for more than a year and is now being made available to the public with 57 securities in the portfolio. Among its top holdings are:


The French luxury-goods seller is the new fund’s top holding. While Ragan says the company may have an “ugly” time in the near-term, it’s the best-managed in its industry, with a stable of brands -- many of which have hundred-year histories -- that present a significant barrier to entry.

He’s also optimistic that the company’s pending $16.3 billion Tiffany & Co. acquisition will boost results.

“I’m pretty confident they’ll see where they can extend this brand and use that heritage and use how people relate to it to drive better sales while maintaining that luxury exclusivity,” he said.

Assa Abloy AB

The Swedish lock-maker is the fund’s second-largest holding and a good example of the firm’s boring-is-good ethos, Ragan said. The company’s products sell at full prices with good margins and benefit from the reliable trends of people both replacing old or broken devices and upgrading to newer technologies like biometric identification and mobile-device-based access.

“Good economy or bad economy, if your front-door lock breaks, you’re changing it,” Ragan said. “At a hotel, if one of its locks breaks, they’re replacing it.”

Intertek Group Plc

The U.K.-based testing-services provider is the fund’s third-largest holding. The company checks everything from whether an iPhone meets Canadian radio-signal standards to whether a toy truck is coated with lead paint, Ragan said. The industry is concentrated among only three big global firms, making for a relatively non-competitive business.

“If you flip over a bunch of things in your house, especially something that has electronics in it, you’re going to come across the Intertek stamp,” he said.

Essity AB

The Swedish personal-care product company, which Ragan calls “the Kleenex of Europe,” has leading positions in markets all over the world. The management team has a track record of integrating acquisitions in emerging markets and helping them “run more efficiently, build better brands and reinvigorate growth,” he said.

“This has provided some growth to what people think would be a no-growth business,” he said. The company is also benefiting from the focus on better hygiene during the pandemic.

Longer term, Ragan sees the pandemic creating “huge, structural changes” that will weigh on travel and commercial real estate while benefiting online retail and payments. However, he’s not optimistic that the crisis will change incentive structures that encourage short-sighted decisions by management and leave companies vulnerable to disruption.

“There is always going to be a decent portion of businesses that choose to be weak and can only survive while times are good,” he said.

©2020 Bloomberg L.P.

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