Through this crisis, we have seen significant changes in consumption patterns from the cancelation of sports and live events to a large scale increase in eCommerce and contactless transactions. While some of these will revert after time, others likely represent wholesale shifts in consumer preference and behavior.
As a part of my series about “Investing During The Pandemic”, I had the pleasure of interviewing Jacques Jenny.
Jacques is a Portfolio Manager and the Head of Equities at Infusive Asset Management. Jacques started his career at Goldman Sachs where he provided corporate finance and strategic advisory services to a range of global clients across the financial institution and consumer verticals. He later joined Bridgewater Associates where he focused on portfolio construction and implementation strategies for pension and sovereign wealth fund clients. He holds a degree in economics from Middlebury College.
Thank you for doing this with us! Before we dig in, our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?
Despite growing up in a rural town in Wyoming — about as far from Wall Street as one can get — I was drawn to finance and investing at an early age. My first investment was a single share of Exxon at the age of 12 or 13 (paid for with a summer’s worth of mown lawns). One conversation that sticks with me to this day took place with a close family friend and long-time Investor — when asked what stocks I should invest in, he encouraged me to invest in what I knew and the companies that provided the goods and services that my friends and I liked. A few decades later and not much has changed. A clear parallel exists between that simple piece of advice and the body of work that has become Infusive’s consumer-focused strategy, which is about identifying and investing in the brands that people know, love and repeatedly buy into.
Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?
It has been particularly rewarding to watch Infusive grow over the past 6 years. The polished investment manager that you see today is the product of a constant and hard-won evolution across all aspects of the business. While painful and often marred by a distinct lack of sleep I can’t help but smile when reflecting on those early days. Loosely molded as a startup (which is to say we often found ourselves on the cheap side of frugal), Infusive was a sharp departure from the larger institutions where I had worked previously. At times this was liberating, at others frustrating; in both cases it made for a number of amusing stories.
An example of these humble beginnings, took place on a hot summer day in 2015 while building out our relationships with various trading counterparties and sales coverage. One such professional, based in London (and according urbane), was in New York for a few days to meet with clients and made the effort to drop by our office in person. At the time, Infusive operated out of a one-bedroom apartment on the fourth floor of a self-stylized startup incubator in lower Manhattan. Charming in every detail — from the full bath and shower off the conference room to the sloping floors forever afraid of the mere idea of “level. One such quirk was the clockwork-like precision with which the Italian restaurant on the first floor dragged a series garbage bags out of the basement, leaving a healthy sheen of fish remains across the floor of the shared elevator each morning. On hot days, one was well advised to take the stairs for the hour or two it took for the mess to be cleaned and smell to subside. Unfortunately, this “local color” wasn’t something our visitor could have anticipated. Already confused by the lack of reception and opulence typical of her other stops that day she hurried into the elevator only realizing her mistake as the doors closed. Not exactly the Joyous first impression that we strive to make with investors and business partners. To her credit, she took the fragrant welcome in stride, soldering through the subsequent meeting, and giving us all something to laugh at in subsequent trips (following our move to more traditional space).
Are you working on any exciting new projects now? How do you think that will help people?
We’ve recently released our ESG policy which we see as an opportunity to share how we handle environmental, social, and governance matters not only within our investment process but also as a company more broadly. We’re signatories to the UN of Principles of Responsible Investing and we are proud to support of Room to Read, a global charity that focuses on improving children’s education. We think it’s an increasingly important topic and therefore strive to engage with our investors, spark conversation, and share our perspective.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?
I had the good fortune of knowing and working for Forrest E. Mars Jr.; initially, as a ranch hand, building a fence and cutting hay over the summers on his ranch in Wyoming, then as a more traditional CPG employee at one of Mars’ primary production facilities in the US, and finally as a mentor and friend. As anyone who had the pleasure of knowing him would agree, he was a character. Incredibly bright, blunt, ornery, and with one of the strongest work ethics I have ever known. Those attributes aside, he was fiercely loyal to his people and companies — I once had my entire lunch tossed out of his truck because it included a Nabisco product. Over the years he took a direct interest in my career and, more importantly, my professional education, providing insight and often an improved perspective when I found myself at a crossroads. If I were to narrow it down to a single lesson or story it would be the importance he put on management and/or investors understanding a business from the ground up (as opposed to on paper). To that end, he personally saw to it that I spent my initial month at MARS as an hourly employee on the main production line. Not the impactful consulting role I had envisioned, but upon reflection, an invaluable experience that would ultimately shape my understanding of large scale consumer business. I would later discover that this was quite intentional, with both he and his brother have started their careers in the same role when it was their father’s company.
Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?
Maintaining communication with family and friends. I think the first step is to acknowledge that these feelings are normal and that we aren’t alone. Personally, I find much of the distance and loneliness can be blunted with the various digital communications tools at our disposal today. Between video chats and phone calls to friends and family I have oddly felt more connected than usual in recent days. While we all look forward to the day social distancing is behind us, I genuinely hope that the current level of connectedness (particularly with those far away persists). Perseverance is a beautiful aspect of the human condition. We will make it through this and the adaptations we adopt will likely have a permanent impact on how we live our lives. Aside from the general, this is particularly true for the consumer and a key focus of Infusive at the moment. Through this crisis, we have seen significant changes in consumption patterns from the cancelation of sports and live events to a large scale increase in eCommerce and contactless transactions. While some of these will revert after time, others likely represent wholesale shifts in consumer preference and behavior.
Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing $500 every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?
I wouldn’t fault anyone for dollar-cost averaging or investing in broad-based equity indexes — both are fine strategies for normal investors in normal market environments. The S&P 500 is highly liquid and a reasonable proxy for “equity” exposure generally. Long-term investors can also consider an alternative that benefits from both global demand and the consistent outperformance of certain brands over time. Infusive’s consumer-focused strategy is to invest in these types of companies, whose goods or services bring people joy and create a deeper emotional connection (something we call Consumer AlphaTM). Market timing remains difficult. While it is possible markets trade-off again over the near-term, the broad-based corrections in February and March likely offer a reasonable amount of cushion for companies in our portfolio, particularly as the government’s start easing many of the restrictions implemented in recent months. This is particularly true for investors with long-term investment horizons, like our selves.
Eventually, the economy will recover and rebound. Certain sectors, like travel and hospitality, might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?
Three long-term consumer themes that we see accelerating as a result of the current pandemic are: 1. the transition from traditional retail to eCommerce and digital payments 2. focus on personal health 3. streaming of digital content. In addition to the year-to-date outperformance that we have seen in names benefiting from these themes (eg Amazon, Alibaba, Netflix, Visa), we expect these trends to accelerate (for example the elderly or less health-conscious).
Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?
Yes, longer-term we see meaningful opportunity in high-quality consumer franchises that have some combination of levered balance sheets and exposure to on-premise consumption, travel, and traditional retail. A few examples would be travel retail and online booking companies (particularly those in China) global quick-service restraint franchises, and off-price retailers in the US.
Are there alternative investments that you think more people should look more deeply at?
Joy. Individuals are drawn to goods and services that make them happy. We believe that this dynamic creates consistent demand, and ultimately, provides pricing power and steady profit growth. At the macro level, there are more consumers today than ever before and they are spending more than ever before. As populations continue to grow, we expect this trend to continue. Rain or shine; pandemic or business as usual — people will always consume the products they love. The challenge from an investment perspective is understanding what categories benefit from this dynamic and how those consumptions patterns change. This dynamic, and understanding how it evolves over time is the core of Infusive’s Consumer AlphaTM strategy.
If a person in their thirties and forties came to you today and said that they have $10,000 that they want to put away today for a long term investment what would you advise them to do with it?
I would recommend something similar to our Consumer AlphaTM strategy — a diversified global equity exposure, preferably focused on high quality, cash generative consumer and digital products and businesses that will compound over time.
Ok, thank you! Here is a more general finance question. You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing what would you say? Can you please give a story or an example for each?
Don’t underestimate emotionally driven consumption or the power of compounding in a portfolio, never fight demographic trends or the Fed, and always be a student of markets.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
“He who asks a question is a fool for five minutes; he who does not ask a question remains a fool forever” One of the most rewarding aspects of investing is the access provided to various management teams and the ability to learn, from the source, how a company or industry operates. Despite this opportunity, I can’t tell you how often I see Analysts and Investors afraid to ask a question due to how it might make them look; or worse, not hear the answer because they think they know more.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂
I would champion universal education. Not the rote memorization of facts from a book, but the teaching of future generations to think critically and for themselves. From this base comes responsibility for our actions, empathy for our fellow man, and desire to find a cause higher than “me” or “mine”. In fact, Infusive is a proud supporter of a charity called Room to Read, an organization dedicated to building schools for kids in the most economically challenged parts of the world.
Thank you for the interview. We wish you only continued success!