Like many young people, James Harper had career aspirations that went in a decidedly different direction after his academic studies were complete. His visions of becoming an engineer—and even an astronaut—morphed into something different. While his job as an investment manager may not have the same “cool” factor for his children as building rocket ships or exploring outer space, his responsibilities today include keeping abreast of the latest new technologies, which helps him earn at least some credibility in their eyes. As executive vice president, research analyst and portfolio manager with Templeton Global Equity Group, Harper has the job of navigating the ever-changing global marketplace, and today, he says there is nothing else he’d rather do. Here we get to know more about James Harper and his approach to investment management.
What attracted you to a career in investment management?
Like many 21-year-olds leaving university, I wasn’t completely sure what I wanted to pursue as a career. I had finished my degree in engineering at Cambridge University and decided that I didn’t want to be an engineer. Fortunately, I had worked at Kleinwort Benson (a private bank and wealth manager) as a summer intern the year before graduation, and enjoyed my time so much I applied for a position and was lucky enough to get in. So I was intrigued by financial markets—and in particular how companies work, generate profits and are valued by investors—but it wasn’t until after a few years of experience in the early ’90’s that I realized that the ever-changing financial landscape had a hold on me. Every day was different, and you never stop learning. That’s an environment I wanted to be part of.
You have a master’s degree in engineering. How do you think this background benefits you as an investment manager?
I’ve always been very math and science based, so engineering was a natural choice for me at the age of 18, but I’m not convinced that the principles of thermodynamics have helped me on a day-to-day basis as an investment manager. That said, I enjoy solving puzzles, and engineering was a form of a puzzle—how wide does this nozzle need to be to achieve the perfect flow dynamics, for example. There was always an answer. I see investing in a similar light: Stocks are puzzles. The only difference is that there are so many variables that you will never be right all the time and even if you “found the answer,” the stock may not react the way you expected it to. So I have had to change my thinking somewhat over the years from expecting to find the solution, to knowing enough about a company to believe that there was a good probability that my call would be correct. Sometimes that still won’t be enough, but being analytical about the situation and understanding what went wrong (the practical side of engineering) can help build your knowledge and experience so perhaps your chances of success will be higher next time.
What is the most challenging part of your job—and the most rewarding?
The most challenging part of the job is deciding what to do when the chips are down—recommending or owning a stock that has fallen 50% (yes, it does happen). This is when you feel extreme disappointment and start questioning your rationale. What did I get wrong? Why is this stock trading at 4 times earnings? It can be very frustrating when what you thought was a good idea goes wrong, but the late Sir John Templeton always said that it requires fortitude to make the best investment decisions, so I have learned that if you do the work, keep a clear head and come to the conclusion that the market is being irrational (yes, that also happens) then you can ultimately be successful. That’s the most rewarding part of the job—keeping your cool, assessing the situation and buying when others are despondently selling, then (hopefully) seeing the share price double or triple from the bottom. It’s very hard to do and does go against our human desire to run with the crowd, but we’ve found this approach usually produces better returns for our investors.
Your research responsibilities include global technology hardware and peripherals, as well as global property and casualty, life and health insurance. What do you find exciting as an investor in these areas today?
I think of the insurance space as being similar to investment managers. They are allocators of capital, trying to write business where returns are highest, or in the current situation, acceptable, given that interest rates are so low, and capital is plentiful in the industry. Consequently, we favor restructuring stories at the moment, companies that have been very inefficient or suffered in the global financial crisis of 2007-2009. When we look to emerging markets, we see huge growth potential in the middle classes, so insurance for cars, life and health are all growing very fast. Not all companies meet our valuation criteria, but we do have exposure to emerging markets in our portfolios.
Technology is always exciting as it is constantly changing, whether it be the advent of the cloud, big data or the so-called “Internet of things.” Keeping abreast of changing technologies also keeps me vaguely cool in the eyes of my three children! It tends to be a sector that values successful companies very highly, meaning that opportunities for value investors like we are at Templeton Global Equity Group are not as frequent as we’d like, but we have had some success. It’s always rewarding when our contrarian views are vindicated.
You moved from London to Nassau in 2007. What prompted the change? And has your perspective changed in any way being in this new location?
I had always wanted to work abroad and first had the chance in 1998 when I worked in San Francisco for Dresdner RCM. Unfortunately, that lasted only a few months before they called me back to London, and so it was still an unfulfilled ambition. In 2007, I was a partner at a sell-side research firm called Redburn Partners, and I decided that I wanted to get back to investing; being a stockbroker was not what I wanted to do for the rest of my life. So I resigned and started the search for an investment management role. Fortune shone favorably on me and I was approached for a position at Templeton, based in Nassau. I was lucky enough to get the job and killed two birds with one stone, so to speak.
I think my perspective has become a little more insular since moving to Nassau. I don’t mean that I ignore other people’s viewpoints, but rather, I’m somewhat separated from the emotional turmoil that comes with the frenetic trading of Wall Street, and that can be a good thing. I don’t get as distracted by the day-to-day noise of the markets. I assess the situations and companies on my own, rarely relying on outside influences, and try to make decisions that are logical and rational.
Within Templeton Global Equity Group, you manage some incredibly diverse portfolios with large numbers of holdings around the world. How do you keep on top of things? And, is there such a thing as becoming too diverse?
Any portfolio manager with Templeton Global Equity Group is part of a very strong team. We have team meetings twice a week, regular peer review meetings and research meetings off-site twice a year. Our structure means that we are talking about companies each and every day, whether it be on a sector team call or by the water cooler with colleagues. So we all know what each other is thinking most of the time and if a few companies are not currently covered or should be, my colleagues are only a phone call or email away. It’s nearly impossible for me to know every detail of what’s happening every day at each and every company we own in our portfolios, but I know that my colleagues are on top of things, just as they know I am.
I’m also a strong believer in doing the work and making an informed decision. With that in mind, I’d rather make conviction calls on companies we believe will add value than buy hundreds of positions just in case some don’t work out. So yes, I do think we can over-diversify in our portfolios, but I don’t think we do; that’s a function of our analysts finding value all over the world and wanting to provide enough diversification on a geographic and sector basis to hopefully reduce volatility for clients.
Living in one of the world’s leading vacation spots, what activities or hobbies do you like to pursue in your free time outside of work?
I’m lucky enough to have three active sons (14, 12 and 8 years old) so to keep up with them I like to keep fit at the gym and occasionally go cycling with colleagues from the office—we completed the 100-mile Ride for Hope as a team a few years ago. I play tennis, swim in the sea, go fishing with friends—all the things you’d expect living in Nassau—but my main sport is golf. I played at university and have found that the good weather has allowed me to practice more, so I now play off scratch and won the Lyford Cay Club Championship in 2014 (that’s me playing in the final in the photo). Next stop, the US Open! (Just kidding!)
When you were a young lad in England, what career or job did you envision?
I have always been into math and science, so I wanted to be an astronaut. I actually wrote a letter to NASA asking them how I could become an astronaut and what degree I needed in order to get into their program! I’m still waiting for a response.
Was there a piece of advice that really resonated with you throughout your career?
I’ve never really had a mentor who took me aside and said, “Listen carefully, this is the secret to investing.” There is no secret, in my opinion. I have read some of the classics by Benjamin Graham, Sir John Templeton et al, but I particularly enjoyed reading author James Montier’s insights on behavioral finance. So my style and thoughts on investing have evolved over time and can probably be summarized as follows: Always remain humble, or you will be humbled; remember that the market is not always rational; and, if you do the work, assessing what is likely to change and why the valuation is inappropriate, you will likely succeed more often than you fail.
If you could give a piece of advice to young people interested in a career in investment management, what would it be?
You have to love what you do in any career. I love my job and can’t think of anything I’d rather do if I wasn’t doing this. So I would ask them, “Do you love investing?” Does the constant challenge of a changing financial environment excite you? Do you like to solve puzzles and assess whether companies are undervalued? If you do and you’re prepared to work hard, investment management can be a fascinating and rewarding career.
James Harper’s comments, opinions and analyses are personal views and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The information provided in this material is rendered as at publication date and may change without notice, and it is not intended as a complete analysis of every material fact regarding any country, region, market or investment.
This information is intended for US residents only.
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