How the WCM Select Global Growth Equity Fund identifies the DNA of great businesses

In this video, Sanjay Ayer, portfolio manager of WCM Select Global Growth Equity Fund, shares the fund approach to finding companies on a trajectory to becoming great businesses.

Can you explain what makes WCM’s philosophy different to other managers?

I think the two core differentiators to WCM'S philosophy, the first one is what we call moat trajectory, which is just a fancy way of saying “is a company's competitive advantage growing over time?” A more colloquial way of saying it is, we'd rather own the good businesses that are becoming great rather than the great businesses that are becoming good.

The second component is corporate culture. We spend a lot of time thinking about the company's DNA, does the culture set the foundation and the incentives for behaviours that help propel the moat forward, that helps a company execute on a strategy to grow its moat. So those are the two dynamics we really focus on is: can a company grow its competitive over competitive advantage over time? And does its corporate culture support that growth in the company's moat?

Is today still a good entry point for global equities?

We think it is, I think there's this colloquial saying of bear markets create strong companies and then strong companies create bull markets.

And I think if you do the work and can find those strong companies that are becoming stronger, there's plenty of alpha to be had in the markets. Philosophy and process haven't changed. You know, we are still steadfast, heads down, focused on finding those growing moats with those strong corporate cultures. What has changed is where we might be finding those opportunities we are seeing in a post COVID higher interest rate environment. There are pockets of the market that look like they're getting stronger. These days, you think about areas like insurance, aerospace and defense, pockets of big pharma. Those are areas that have been maybe challenged for a variety of reasons over the last five, 10 years. But we're seeing seeds where these businesses and industries might be getting better. And on the converse, some industries that were doing great are looking a little less good on the margin.

The notion for us, and the focus for us, is really focused on the trajectory part of moat trajectory.  So the philosophy has remained the same, but where you might be finding those opportunities on the margin might be shifting.

Why does a company’s culture matter even more in times of uncertainty?

We’ve significantly expanded our culture team in recent times. And we're just finding a lot of examples where culture is paying off in this market, where there's no shortage of uncertainties around many, many macro factors. We think those companies with those great cultures that have kind of proven their stripes in the last three years, those are the types of companies we want to award capital to as opposed to the companies that are on playing defense, maybe pointed to excuses around macro dynamics, supply chain issues. There is a sub to the companies that's really navigating this environment extremely well. And to us that's a sign of a true growing moat and a strong corporate culture.