Skip to Content
Morningstar

Opportunities and Pitfalls for Bottom-Up Stock-Pickers

Brown Capital's Keith Lee, Artisan's Dan O'Keefe, and Invesco's Meggan Walsh discuss where they see value, and where they don't.

This analyst blog is part of our coverage of the 2016 Morningstar Investment Conference.

At the final Tuesday session at the 2016 Morningstar Investor Conference, three well-regarded bottom-up, fundamental stock-pickers offered their views as to where they currently see opportunities in this challenging market environment.

On the panel were Daniel O'Keefe, comanager of

The managers were asked how top-down views played into their investment processes. O'Keefe stressed the importance of finding companies with solid management teams, good balance sheets, and high normalized earnings, but said current valuations in the global economy are giving him pause. Walsh said that her team embeds macroeconomic information into sales and profit-margin assumptions. Lee, being the only growth manager on the stage, added that he has some cyclical growth firms in his portfolio, but his long-term investment horizon causes more weight to be placed on company-specific factors.

O'Keefe and Walsh were asked why machinery manufacturer

Lee was asked about Carbo Ceramics CRR, a hydraulic fracking firm that dropped substantially amid falling oil prices. Lee talked in detail about the firm's strategy to increase gas and oil well yields, but the team sold the firm in early 2015 when it obtained new information. Walsh added that although her team makes mistakes--such as with

The managers discussed whether or not they saw value in

The managers also discussed their thoughts on financials, specifically banks. O'Keefe believes that banks are an extremely important economic engine and thinks regulators will begin to become less strict after several years of cracking down, noting such examples in the United Kingdom. Thus, it's not surprising that his funds are currently overweight banks. Walsh disagrees--her fund is underweight banks--believing that there may be upcoming weakness in consumer credit and commercial real estate businesses. Lee countered by saying in his 25 years he has never owned a bank due to his small-cap focus and the difficulties in analyzing small, regional banks' loan portfolios.

Finally, the managers were asked about their thoughts regarding shareholder activism amid criticism from politicians such as Bernie Sanders and Elizabeth Warren. In 2015, O'Keefe engaged with the board of directors at

More in Funds

About the Author

Andrew Daniels

Associate Director
More from Author

Andrew Daniels, CFA, CAIA, is associate director of equity strategies for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He helps oversee Morningstar’s U.S.-based equity strategies team and is responsible for qualitative research on prominent equity strategies, including those offered by Harris Associates and Artisan Partners.

From 2018-21, Daniels was based in Morningstar’s Hong Kong office, conducting qualitative research on global emerging-markets and Asia-Pacific equity strategies, in addition to helping on the delivery of manager research services in the region.

Before joining Morningstar in 2015, Daniels worked in corporate finance for Caterpillar and in portfolio management for Evanston Advisors.

Daniels holds bachelor's degrees in finance, economics, and marketing from the University of Iowa, where he graduated with distinction. He also earned a Master of Business Administration from the University of Chicago Booth School of Business. Daniels holds the Chartered Financial Analyst® designation and the Chartered Alternative Investment Analyst® designation. He is also a Certified Management Accountant.

Sponsor Center