Patricia Barron and Mark Giambrone talk Dallas as a destination, when IR-only meetings work and how often the investment management firm likes to meet before it buys in
As companies eye Texas – and Dallas in particular – as a roadshow destination, the Lone Star State has been pushing forward its business-friendly appeal with the new Texas Stock Exchange poised to begin trading next year, listings already in place on NYSE Texas and new legislation.
Patricia Barron, executive director, chief operating officer and head of risk at Barrow Hanley, and Mark Giambrone, the investment management firm’s executive director, head of US equities and portfolio manager, share thoughts and insights with IR Impact about why value serves the firm so well, what companies should do when considering a Dallas roadshow and why Barrow Hanley companies will find the firm ‘commitment to active engagement’.
With a combined 72 years of industry experience, Barron and Giambrone are also long-term members of the Barrow Hanley team, having joined the firm in 2000 and 1999 respectively.
How would you sum up the Barrow Hanley investment style?
PB: Barrow Hanley is a value-oriented investment manager, focusing on identifying undervalued securities, with the potential for us to have a differentiated view, leading to significant appreciation. Its investment philosophy is grounded in fundamental analysis and a disciplined, long-term approach to investing.
How does that feed into company engagement?
MG: Barrow Hanley’s value-oriented style involves active engagement with the companies we invest in and is welcomed due to our long-term view and potential significant ownership position. This engagement helps us understand the company’s strategy, management and potential risks and opportunities, which in turn informs our investment decisions and supports our goal of optimizing shareholder value.
What is it about value investing that serves the firm so well?
PB: Value investing is all we do and we have a deep, knowledgeable team that serves Barrow Hanley well because it allows us to capitalize on market inefficiencies by identifying undervalued securities. This approach has historically provided strong returns, especially during periods when value, stock selection and earnings matter and value stocks outperform growth stocks.
How many funds do you have and what’s the geographic and market cap spread? Which is your best performing fund?
PB: Barrow Hanley manages assets for a diverse range of clients in approximately 20 funds and separate accounts across various asset classes and regions. We have funds focused on US equities, global equities, non-US equities, emerging markets, fixed income, bank loans and CLOs [collateralized loan obligations]. The geographic spread of our investments includes the US, Asia, EMEA, Australia and New Zealand and Canada. Our best-performing fund varies over time, but we have a strong track record in our large cap value, global value, mid cap value, emerging markets, small cap value and high yield strategies.
How many times do you typically need to see a company before you take a stake and how often do you like to meet with your holdings?
MG: Barrow Hanley typically needs or wants to meet with a company multiple times before taking a stake. We value ongoing engagement and prefer to meet with our issuers regularly to stay informed about the company’s performance and strategic direction.
How do you like to meet management and when are IR-only meetings appropriate?
MG: Barrow Hanley prefers face-to-face meetings with company management to build a deeper understanding of the business. IR-only meetings are appropriate when discussing specific investor relations topics or when management is unavailable, but we often meet with the C-suite executives and insist on those meetings if appropriate.
Engagement with management is critical to our investment process and to that end we have had 339 C-suite meetings this year, with holdings and potential holdings, either in the office or on Zoom.
What are some of the themes you find exciting at the moment?
PB: The current themes that we find exciting include AI, infrastructure, market capitalization ranges below the top 20 percent and value investing opportunities in global markets.
Which screens do you use?
PB: Barrow Hanley uses a variety of fundamental and quantitative screens to identify potential investment opportunities. These screens help us filter for undervalued securities with strong fundamentals and growth potential.
Do you look at ESG scores when considering investing and which providers do you use?
PB: Yes, ESG issues and risks can have a financially material impact on a company’s share price. Barrow Hanley manages socially restricted strategies for clients in Europe and Australia. We integrate financially material ESG factors into our research and valuation analysis and have developed a proprietary system to assign an ESG composite score. We use third-party data from Sustainalytics and MSCI.
What’s your active share ratio?
MB: The active share ratio for our strategies varies, but we generally maintain a high active share to ensure our portfolios are differentiated from the benchmark.
And your minimum market cap?
MB: The minimum market cap for our investments depends on the specific strategy. Our equity strategies typically focus on companies with a market cap above $1 bn.
What’s your average holding period?
MB: Barrow Hanley has a long-term investment horizon, with an average holding period of several years. This aligns with our value-oriented investment philosophy.
Can you tell us about some of your larger holdings and why you invested?
PB: Some of our larger holdings include companies in the technology, healthcare and financial sectors. We invest in these companies because we believe we are undervalued and have strong growth potential relative to their current valuations.
Which companies are particularly good at investor relations and what difference does that make to your engagement?
PB: Companies that excel in investor relations provide transparent and timely communication, which helps us make informed investment decisions. Experienced IR teams matter and those that can rotate among operating positions and investment-facing roles tend to be helpful. Sometimes someone with an investment background can help the company communicate and focus on critical issues. Good investor relations practices also facilitate better engagement and collaboration between the company and its investors.
We’ve been writing about the growing appeal of Texas – and Dallas in particular – as a roadshow destination. Are you seeing more companies coming to the state?
MB: As a large, long-term shareholder, Barrow Hanley hosts many executive teams each year. Founded in Dallas 47 years ago, we have been a roadshow destination for decades.
Still, there is no doubt Dallas is attracting companies to move significant resources or company headquarters to Dallas and that is also true in the financial services industry. Dallas is now home to 54 of the Fortune 500 companies
There has also been an increase in the number of companies coming to Texas for roadshows. This is driven by the state’s business-friendly environment and growing economy and we are thrilled with its development. The word ‘Texas’ means friend, and all are welcome!
For those looking to roadshow here for the first time, I think it would make sense to partner with a large sell-side firm and have them take the company to significant and appropriate accounts.
Finally, why should companies meet you?
PB: Companies should meet with Barrow Hanley because of our long-term investment approach, deep industry expertise and commitment to active engagement. We can provide companies with valuable insights and support for their strategic initiatives.
