Hidden Value Stocks issue for the third quarter ended September 30, 2023, featuring an interview with Beech Capital’s portfolio manager Melvin Beech.
Interview With Beech Capital’s Melvin Beech
Could you tell us a bit about your and Beech Capital’s background?
I set up Beech five years ago after losing interest in how the institutional fund management industry approached managing money for clients. I’ve tried to build a business based on achieving the best outcomes for clients – to do that, I’ve found myself doing the opposite of what I was trained to do at my previous employers.
Q2 2023 hedge fund letters, conferences and more
So far, the figures suggest I’ve made the right choice. I founded Beech with funds earned during my career and the backing of one wealthy family. From a few million dollars at inception, today, we manage over $100 million for clients worldwide and have earned 17%per annum on our longest-running strategies (and yes, that wealthy family continues to support us and has added to their allocation at Beech).
How would you describe your investment approach – how do you differentiate yourself from other funds?
Unlike other small funds, we employ several analysts rather than solely focusing on the founder’s views and direction.
The stock pitch process at Beech may seem intimidating to new analysts, as their ideas are subjected to rigorous evaluation and critique.
Every Tuesday morning, the investment team meets formally to review new stock ideas. During this meeting, the analysts present their reports, which include a brief background on the business and management, valuation models, growth forecasts, and an analysis of management’s history and trustworthiness. These reports are thoroughly scrutinized, with the entire investment team trying to identify any potential flaws in the arguments presented. The team then votes on whether the stock should be added to the watchlist.
But while we employ a team of analysts to help uncover and break down ideas, we don’t pay much attention to macro factors.
With a time horizon of five to seven years, Beech assumes that the economy will eventually reach a “normal” level. This approach allows us to construct portfolios not heavily influenced by extremely positive or negative economic forecasts. For instance, during the uncertainty surrounding the COVID-19 pandemic, our belief in the eventual return to normalcy influenced their investments in travel-related businesses.
