Jeff Ubben is an absolute legend in the investment business. Not only is the founder of ValueAct – an activist investment firm with a pedigree of great returns – he also has accomplished his success by taking a different path. He is a constructivist. Instead of being a ‘Barbarian At The Gate, he has chosen to work with companies in a gentler way. His results speak for themselves.
Although his transition away from ValueAct is not a surprise, his departing comments definitely are.
Here is an excerpt from the FT article.
“Finance is, like, done. Everybody’s bought everybody else with low-cost debt. Everybody’s maximized their margin. They’ve bought all their shares back . . . There’s nothing there. Every industry has about three players. Elizabeth Warren is right.”
In a way, he is right. The corporate profit maximization game is done. Not only has the cost-cutting pool been sucked dry, but the political and social climate has also turned on these types of games. Therefore, the public company activism game has nothing left in the tank. The profits are gone. It is a high risk, low reward investment; from here on out. No wonder Jeff Ubben is taking his ball and going elsewhere.
But is finance done? Is investing done? What I have seen in the past few years is the rise of a new type of company. A Company that is hell-bent on innovation at break-neck speed. This Company is aggressive in reinvesting its profits to improve their technology. A company that is investing in its people and their skill sets. These types of companies are growing up fast, growing revenues, and will be tremendously profitable over a longer period as their end markets mature and their growth slows.
If you think of investing in a long enough continuum, the internet is just getting started. The technology revolution is just getting started, and we are likely to see a tremendous amount of creative destruction. It will not be good for static companies that are worried about quarterly profits. These dinosaurs have depleted their coffers worrying about short term results.
So yes, the old way of Finance is done. But an exciting new era is getting started. It will be a different type of Finance. Long live the new Finance!
At least, that is what I believe.
What do you believe?
I think the next frontier for investors will be “values based,” perhaps like Finny Kuruvilla follows at Eventide mutual fund.