Alan Torry is one of London’s most experienced fund managers, having been on the buy side since 1972. Today he’s head of technology and US investments at SG Asset Management (SGAM) UK and responsible for managing equities worth $430 mn, which includes SGAM’s three global technology funds, worth approximately $200 mn, and its US funds, worth around $230 mn.
How would you describe your investment style?
We try to identify the key cycles in technology. Satellite navigation is one of our themes at the moment and it stretches from software and hardware to semiconductor companies. Those themes are far more important than weightings in sectors.
Why so optimistic about the outlook for technology?
The consumer has saved on technology in the last few years. Consumer demand never really existed a few years ago; it was corporate demand. Then the key was playing the cycles: mainframe to mini-computers to PCs, and so on. Now the consumer is probably 50 percent of the demand for technology.
That rate of growth will slow because we think the American consumer is a bit stretched so we are looking for corporations to pick up some of that slack. We are getting close to the trigger point but we are not quite at the stage where companies say, ‘We need more equipment to grow our businesses.’ I think that is the next leg.
How many companies do you meet with a year?
In tech, typically 60 a quarter but if Hugh [Grieves, co-manager of SGAM’s technology funds] and myself are out at conferences or on the road, that figure will be higher. I would say between 250 and 300 a year.
I prefer companies coming in to see us. I might want to see them when they don’t have a story to tell; they might want to see me only when they think they’ve got something to say. Hugh and I each go to the US twice or three times a year, and to the Far East every year or every other year. We also visit UK, European and Israeli companies.
How does meeting management help you?
When you meet with a company you spend time understanding its business because that is the key reason you are seeing the company, but you also get an enormous amount of value asking it about suppliers, and who it respects in the industry.
Even with Reg FD, management can say an awful lot about the industry so the value in those snippets of information if you ask the right question is extremely valuable.
Who do you want to see?
In most companies you want to see the CEO – and the smaller the company, the more important the CEO is. As the companies get larger, divisional heads become important. For small and medium-sized companies, you need to understand what motivates the CEO.
I’m happy to see the CFO, though I’m more skeptical about seeing IR. Some of the big companies have IR that is designed for PR rather than IR, and I think they damage
themselves. They should tell it how it is.
If the company explains its problems you have more confidence that management knows the way out of those problems. But if management glibly goes along and says everything’s wonderful, you do not know what risks you are taking – and understanding the level of risk you are taking is crucial in this business.
Do you invest in companies if you haven’t met with management?
Yes, but not often. We write notes for every company we hold and every company we meet, and if we haven’t met a company in the last year, we’ll have to do a holding note. That’s rare. We therefore get fairly close (90 percent) to seeing every company we own once a year, minimum.
