This week, we speak with Chris Davis, Chairman and CEO of Davis Selected Advisors, which has over $25 billion under management. Davis also sits on the Board of Directors of Coca Cola, and is Vice Chairman of the American Museum of Natural History.
We discuss the firm’s early days, when it was running separately managed accounts (SMAs) in 1969, and moved into mutual funds after being asked to do so by several clients. Four decades later, similar requests from client led the firm into ETFs. The firm’s four main strategies included Concentrated versions of US, International, Global, and Financials funds.
Davis notes that most value investors are too narrow in how they consider the issue of price and value. He uses Google as an example. When they first began using the search company for client acquisitions, it cost GEICO about $2 per new lead via Google. The next nearest customer acquisition vehicle was late-night cable television, at a cost of $30 per client. That enormous differential explained why Google was poised to take so much market share in advertising from everyone else. It also suggest that it was less expensive on a valuation basis than the traditional P/E ratio implied.
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Chris Davis’ favorite books
Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou
Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World by Tom Wright and Bradley Hope
Americana: A 400-Year History of American Capitalism by Bhu Srinivasan
Books Barry mentioned