Recently, Granite Investment Advisors welcomed an old friend—Bill Hutchens—home with the assets acquisition of Hutchens Investment Management. A growth-based investment advisor and industry expert, Bill had worked with Granite Investment Advisors early in his career.
In bringing him back into the family of investment advisors here at Granite, we thought it would be great for our clients and community to hear a little bit about Bill’s journey through the years, and how he got to where he is today.
Tell us about starting out: where did you go to college?
I went to Hamilton College—I majored in history and psychology because I couldn’t go pre-med—organic chemistry was a filtering device. Every kid wants to be a veterinarian when they grow up—they love animals. But I was always interested in history, and by the time I was a Junior, I had completed my history major, and I had taken some psychology courses so decided to do a double major. It’s really unique in this business—I wasn’t focused on taking business courses at this point.
How did you get into investing?
After graduating with a degree in history and psychology, I was headed to law school. But before I did that, I wanted to take some time off, so I looked for a job in Boston. I ended up at State Street Bank where I was thrust into the investment world as an accountant on the Fidelity group of funds. I was instantly fascinated with the stock market—and just started digging in and learning about it.
I took courses at Harvard, Bentley, the American Institute of Banking, and The Boston Security Analysts Society. That’s when I started studying for my CFA, the Chartered Financial Analyst designation.
Tell us a little bit about your professional journey over the last twenty years.
After working at State Street for a couple years, I ended up at Wang Laboratories up in Lowell where they were setting up their own in-house investment operation. At Wang, I started directly managing money and analyzing securities.
After Wang, I spent about three years in institutional investing and consulting with The Hannah Group in Boston. At Hannah, we handled very large clients: pension funds for large union plans, cities, and towns here in New England. We were involved in selecting the investment managers to fulfill the investment policy of these large pension plans.
While at Hannah I had the opportunity to study investment management and learned about all kinds of ways to manage money—but I really love—and missed—direct investment management.
It was at this point—around 1994—that I was at the point where I really wanted to get back to investment management as opposed to doing consulting work. I joined Granite Investment Advisors (at the time, the firm was called Tailor Investments) and I worked as an Investment Advisor for about two years.
Then the entrepreneurial itch hit me—and I started my own business: Hutchens Investment Management—the company that we merged into Granite Investment Advisors late 2017.
What gets your excited about investing?
It changes EVERY day. At the end of the day—week—month, you know how you did—there’s no question. You did well or you did poorly. You’re graded all the time, it’s a challenge, and I like that challenge—and I like the change.
It’s new every day. You wake up in the morning and the President has tweeted something about Syria, and the market is down 300 points.
Have you always focused on growth-based investing?
I’ve done both value– and growth-based investing. It seems that my personality is better suited towards growth. Growth is more exciting, dynamic, and interesting. We get to analyze companies that are changing the world.
What do you look for in growth?
Speaking of, we typically invest in sectors across the marketplace. whether we’re comparing ourselves against the S&P 500, the S&P Growth or the Russell 1000 Growth, you start by looking at the sectors or the index you’re being compared against for performance purposes.
For example, the S&P 500 has about 25% technology, 15% in finance, 15% in consumer, etc. Within each of these categories, I’m looking for companies that are growing their sales better than expectations—better than the average, have great business models, and have moats built around their business so they can sustain that growth. On tech, think Amazon, Facebook, and Google—all securities that we own for our clients in our growth portfolio on the technology side.
What are the traits of a client who’d be a great growth-based investor?
The more risk-oriented, long-term view, outside-the-box thinkers are great. You need people who believe in the innovation engine of this country—and of course around the world. We tend to invent things here and people leverage that—build upon it—elsewhere.
There are secular changes going on. Think retail and Amazon. Just look across the board—especially in technology where tech is disrupting practically every industry.
I must say: you really need to have a mix. You should have part of your portfolio that is more conservative—less volatile. But you need to have some part of your portfolio where you can have more risk/volatility so you can make more money—if that’s what you want to do.
Besides value- and growth-based investing, what are other approaches to investing?
Those are the two main approaches. You also have small-cap and mid-cap, and international. For example, here at Granite Investment Advisors, we are considering an international product. There is a need in the institutional marketplace for international managers and we believe we are uniquely positioned to fulfill that need. It is still in the very early stages.
In developing a new product like the one you mentioned, what’s a key part of the process?
Backtesting. You come up with a premise based on how we want to invest, for example for international, we want global companies, 40 – 50 securities, we don’t want it to be too growth- or too value-based—we want it to be core, we want to keep the turnover (how often you buy and sell within the portfolio) low, and a variety of other variables that result in a product that outperforms the market.
We also want to make sure that the models make sense and then implementing that in real-life and creating a track record that can then be used to demonstrate that you’ve got something that can add value to their portfolio.
How do you work to stay on top of portfolio development and add value for your clients?
It’s important to have and follow a very disciplined investment process that is focused on fundamentals. I’m inspired by growth-oriented leaders in the investment market, particularly investment advisors who use quantitative analysis and investment technology to analyze the fundamentals to take the emotion out of the process.
What types of concerns do you hear from potential investors today?
There are always things to be nervous about. There are geopolitical events. There are political events. What’s going to happen with the Federal Reserve? What’s going to happen with the economy—or interest rates?
But there are personal variables that people have to deal with, too. Maybe people have a child who’s about to enter college. They’re stressed out about having to pay for education. Or… maybe they have an elderly parent who is going to need healthcare.
How do you ease their concerns?
What we try to do is encourage people to take the long-term view and to hire a firm that helps them take the emotion out of the process. They’re generally not going to do a great job if they’re emotional about their investments.
This is a profession. I tell people all the time: if you get appendicitis, are you going to take your appendix out yourself? Or are you going to go to a Doctor? You COULD operate on yourself, but would you trust yourself? We provide a service—we’re good at it.
What is challenging your model as an investment advisor?
Our industry is being disrupted as we speak. Artificial Intelligence, Machine Learning (algorithms), software robots that will invest for you. The fees are low, but there is very little human interaction.
It reminds me of the crash of ’87. There was a product called portfolio insurance. People felt that they could take all the risk they wanted because they could just throw out some portfolio insurance and we had the worst market downturn in a day on Oct 19, 1987—Black Monday—when global markets crashed. You need the human side—an adult in the room.
Why would we hire Granite instead of going it alone?
We provide a customized service that we’ll align to help you achieve your objectives. What we bring to the table is a great group of people who can help you meet those objectives. I think it helps to have someone explain what’s going on. It’s hard for some people to measure the value of having a trusted advisor sitting at the table explain what we’re doing, and why we’re doing it. It gives people comfort. It’s their money. They want to know what’s going on and feel that there’s a professional who’s handling their needs.
What’s one thing you wish people knew about investing that they don’t?
People don’t realize that typically over a 10-year period you could double your money in the stock market, and over a 20-year period – quadruple it. People don’t see this. If you did nothing but invest in stocks, on average you’d do this. We try to do better than this—it’s what we do. If you successfully add incremental value over the index, over a long period of time, it can be quite positive when you compound it.
One quick final question: do you still love animals today?
Absolutely. We have three dogs: one is a yellow lab, and the other two are mixed rescue dogs. These are our first two rescue dogs: one from Florida and one came from a shelter right here in New Hampshire—an Australian Cattle dog.
Would you like to learn more about our approach to Growth-based investing? Call us today at 603-226-6600 or learn more about your own risk tolerance with our riskalizer.
Past performance is no guarantee of future results. Returns are presented net of management fees. There can be no assurance that any of the securities referred to herein were produced for or remain in portfolios managed by Granite Investment Advisors. A complete list of all Granite Investment Advisors’ recommendations within the preceding year is available upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities described herein.