Money Life Podcast Interviews Portfolio Manager Christopher Sargent

Christopher Sargent, portfolio manager at BFS, recently appeared on “Money Life with Chuck Jaffe,” a podcast focusing on business, personal finance and investing hosted by the MarketWatch columnist.

During the “Market Call” guest segment, Chris delved into BFS’s investment strategies and market outlooks, discussed current and future market trends and shared insights on promising opportunities in the industrials, technology and energy sectors.

Chris closed the episode playing a game called “Quick and Dirty,” where he provided rapid-fire analysis and insights on various stocks of interest to the audience.

Below are some key highlights from the conversation.

Listen to the full episode here and on Apple Podcasts, Spotify, or wherever you listen to podcasts. The interview with Chris begins around 40:15.

“The important thing about BFS is that we are long-term investors, we’re focused on higher-net-worth individuals that have a long time horizon. I think our edge is really taking a longer-term time horizon and finding these really quality companies that have a competitive advantage and are taking market share, still growing quickly if they’re mature, or a newer company, and finding a spot in the portfolio for that. Our core is the fundamentals, and it really comes down to our research team, who is really dedicated to spending 99% of their time just looking at new companies and updating old companies. We have this approach where we do the initial screening, look for companies, but we take it a step further, doing the initial deep dive and then going to see the companies in person and talking to them online.”

“I think it’s a challenge and opportunity at the same time. If you don’t own the Mag Seven, it’s a lot harder to outperform the market. But it also gives an opportunity where we’re looking for stocks that haven’t had that Nvidia run yet, or aren’t as mature as Microsoft or Amazon and can still double or triple over the next five to 10 years. I think that’s the unique thing, not chasing the ones that are winners, but looking for the quality companies that will be winners over the next few years, and being able to find them at a price that hasn’t yet taken off.”

“On the industrial side there’s this company called Eaton Corp (ETN), and they’re focused on power management across electrification. We think that’s a good trend with just the general electrification of the world, and it checks a lot of our boxes in terms of quality, high free cash flow, good management team, and a long-term horizon. I think a big highlight for them is the data center area. AI has been something that everyone’s seen, but we kind of look for no second derivative of that, and that’s Eaton, where they provide the whole power management, from transformers to wires to power converters to the entire system. They lay it out like an architect lays out a home for that data center. They’re winning a lot of market share on the big Amazon and Microsoft data centers, and we think that longer term they’ll be able to continue to grow, even though the hype is here now. We say this is one that’s going to stay for a long time.”

“We think that there’s been a decade of underinvestment in the industry. We don’t think peak oil demand is here yet, we still believe in shifting to a kind of more green renewable energy, but we’re not there yet, and we still need energy while we get there. And these energy names are cheap. My favorite name, it has run a little bit expensive, but it’s Diamondback Energy, and they’ve run because they’re going through this acquisition of Endeavour Energy, which is this huge private company. But once the merger goes through, they’re going to be just a Permian giant with this disciplined management team returning a lot of cash to shareholders. And even though in the midterm we might see kind of a pause of that as they’re going through the acquisition, if you look at a couple of years, we think that the management team will return to very high cash return to shareholders.”

“I think the biggest thing is if our thesis didn’t play out and this is more for newer ideas but also for long-term ideas. You want to recheck your thesis, and that’s a big part of our process at BFS. We have weekly investment committee meetings with all investment professionals at the firm, 30 people or so of portfolio managers, traders and research. We talk about new companies or existing companies and what’s changed, and so I think the biggest thing is you looking for these thesis breakers, whether it’s short term or long term.”