#88 - Eric Clark - “I Still Believe that Alpha is Available and Possible, and Beating a Benchmark is Possible"

49 minutes

In Episode 88, we welcome portfolio manager, Eric Clark.

As usual, we start with Eric’s background, which spans 25 years in the investment industry. After working for an asset manager, Eric realized he wanted to do something passion-based – a “timeless equity strategy.” So, when he felt he had the answer, he created a suite of consumption-based brand strategies.

Meb asks about these brands and how they play a role in Eric’s portfolio construction.

Eric tells us he tasked himself with identifying some stable, persistent themes he could anchor to (for the purposes of building a portfolio). He tells us that “nothing is more persistent than a consumer’s propensity to spend.” With this in mind, he looked at the U.S. economy, and what drives it. Eric tells us that the consumption component of GDP has annualized at about 3.5% a year for 50 years. And of that, about 70% of our GDP is consumption. Now, take these two pieces together – “if consumption…is predictable then how do I build a strategy that taps into that?” The answer points toward buying great consumer brands.

Next, Meb asks about the framework. Eric says you need an index. Therefore, they created the Alpha Brands consumer spending index. The goal was a broad universe, tracking a lifetime of spending. For instance, a Millennial spends differently than someone from GenX. So, the idea was to create an index consisting of the most relevant and recognizable brands that track a lifetime of spending.

Meb asks how it works going forward? For instance, how would Eric see companies like GE and IBM? Are they great buying opportunities or dead brands?

Eric points toward IBM as a brand they’ll likely hold onto, as it’s still a powerful B-to-B brand. But he tells us the food packaging industry, for example, is coming under pressure. That’s because the type of food we buy is changing. He identifies Kellogg as a company facing challenges.

The conversation bounces around a bit, referencing valuation, where this brand-based type of investing fits into a broader portfolio, and how this type of strategy might be expected to hold up during a recession. Eric speaks to this last point by discussing consumer discretionary versus consumer staples, including the risk of rising rates.

There’s plenty more in this episode – where Eric believes the market is going in 2018 (he mentions some thoughts on earnings)… how international sales affect the brands-strategy… how the asset management industry seems to be moving toward the commoditization of portfolio construction, where advisors just want to own everything (in response, Eric tells us “I still believe that alpha is available and possible, and beating a benchmark is possible if you understand a bunch of things”).

We wrap up with Eric’s most memorable trade. It involves an ill-timed attempt to short banks in July ’09.

Hear all the details in Episode 88.

More episodes from The Meb Faber Show

#251 - Robert Jacobson, Space Advisors - It’s Not Just One Vertical, It’s More Like An Ecosystem With Lots Of Different Dependencies…The High Ground of Space Being The Overarching Theme

In episode 251 we welcome our guest, Robert Jacobson, entrepreneur, advisor, and founder of Space Advisors, a strategic consulting firm for space …

#250 - Kevin Gibbon, Airhouse - We’re The Operations And Logistics Platform For Direct-To-Consumer, Digital-First Brands

In episode 250 we welcome our guest, Kevin Gibbon, co-founder and CEO of Airhouse. In today’s episode, we’re talking about easing the frustration of shipping, operations and logistics for …

#249 - Ben Savage, Clocktower Technology Ventures - Financial Services Has Had A Smaller Share Of Venture Capital Dollars Pointed At It…Since The Inception Of The Venture Capital Industry

In episode 249 we welcome our guest, Ben Savage, Partner at Clocktower Technology Ventures. In today’s episode, we’re diving into VC and innovation …

The Best Investment Writing Volume 4: Anil Rao and Raman Subramanian, MSCI – Game of Homes: Is winter coming for the domestic-equity bias?

Last year we brought listeners the entire volume of The Best Investment Writing Volume 3, in audio format, right here on the podcast. Listeners loved …

#248 - JC Parets, All Star Charts - The Sooner We Can Find Out We’re Wrong The Better…Then We Can Go Move On To Something Else

In episode 248 we welcome our guest, JC Parets, Founder and Chief Strategist of All Star Charts. In today’s episode, we’re talking technical analysis, and what’s going on in the markets …

#247 - David Oates, Curtsy - Our Number One Best Selling Item To-Date Is Active Wear…Lululemon Leggings, Lululemon Shorts, Nike Shorts

In episode 247 we welcome our guest, David Oates, CEO and Co-Founder of Curtsy. In today’s episode, we’re talking about running a company completely designed around making it easy for …

How you can listen to this podcast

You can listen to episodes right here on the website, or if you prefer, in a podcast app. Listening in an app makes it easier to keep track of what you’ve already heard, listen without using your data plan and many other conveniences.

Recommended apps
Start listening to #125 - Tom Barton - The Biggest Problem Investors Have is Things Change...and They Don't Change
1:24:56
Start listening to #125 - Tom Barton - The Biggest Problem Investors Have is Things Change...and They Don't Change
1:24:56