We’re big fans of Invest Like the Best, tuning in each week as Patrick O’Shaughnessy interviews the best and brightest of the investing world. Recently, Patrick sat down with Canalyst client Ryan Cope, Portfolio Manager at American Century Investments. The full interview spans the firm’s unique history to their small cap value strategy – and everything in between, including how Canalyst makes them more competitive.
Small Cap Opportunity
American Century Investments is a 60+ yr old asset management firm with offices across the world. Started as a growth shop, they introduced the value discipline in the late nineties, which is where they live today. Managing over $225 billion, the firm employs all types of different strategies and asset allocation models. Portfolio Manager Ryan Cope started on the value cap strategy team in 2012.
“We get excited about small cap value stocks. I’m confident that there’s going to be a place for active management in the small cap value space indefinitely, because there are significant inefficiencies.”
Ryan affirms that it’s fundamentals that drive stock prices and his ability to efficiently analyze those fundamentals is what gives American Century Investments their edge in the small cap value and small cap income teams.
“One of the other great aspects of the small cap universe is that it’s so large, so there are always more stones to turnover.” When Ryan and his team begin analysis of a company, they start by pulling up historical financials to assess if the business is profitable and high quality. Could Canalyst leverage their time at this crucial part in the process?
The human touch that Canalyst adds is very valuable.
At first, Ryan was skeptical that Canalyst’s data quality could be trusted. “We used lots of data providers over time, and — especially when you get down to the smaller companies — nobody is fact-checking.”
That wasn’t the case with Canalyst. “One thing that we’ve found very valuable is that human touch that Canalyst adds, and [as a result], we’ve found their data to be significantly more reliable.”
When Patrick asks Ryan to elaborate on the ‘human’ element of Canalyst and why it adds value, Ryan responds: “There’s a number of things. The first is the reliability of the data. Second — and maybe more important — is the drivers sections of Canalyst models. [Canalyst analysts] really understand what is driving them.”
Canalyst opens up time for our PMs and analysts to do the most value-add aspect of our daily work.
The Freedom to Do More
Of Canalyst’s tools, Ryan names the Updater as his favorite. Before Canalyst, earnings season could be overwhelming. Now, when a company reports, Canalyst software updates their custom, working models with all of the data and key metrics at the click of a button.
“You can imagine the benefit of saving roughly an hour per company each quarter, by not having to input that data.”
Ryan goes on to explain that Canalyst frees up his PMs and analysts to do the most value-add aspect of their daily work, which uncovers opportunities in the vast small-cap universe.
“With thousands and thousands of companies out there, any more time that we get to do what we love as small cap value investors — which is finding new and interesting businesses that the market doesn’t appreciate — is extremely valuable time for us.”