Hubert Goyé founded Graphene Investments in 2016. He used to manage flagship funds at BNP Paribas Asset Management and was head of the international equity management division (since 1996). From 1990 – 1996, Hubert worked as head of index management and as specialist on quantitative techniques and development of a selection model for American stocks. He received his degree from the Ecole Nationale des Ponts & Chaussées.
Graphene Investments is a boutique investment house founded in 2016 by Hubert, who spent
almost twenty years at BNP Paribas Asset Management, heading the International Equity team and personally managing its two flagship strategies. The firm is specialized in managing US and Japanese equities and aims to be the “neighborhood” portfolio manager of European investors who understand the benefits of these overseas investments. They offer active strategies driven by stock-picking. Investment ideas are pre-selected though an extensively researched quantitative screening and then studied in detail. Robust rules and systems guarantee investment discipline throughout the process. The US strategy (US Essential Growth) is an active bottom-up approach whose objective is to beat the S&P 500 index (with net dividends reinvested). Securities are selected from a universe, of 500 – 600 large, liquid, well-covered stocks.
How does Graphene Investments fit into the Paris-based investment community?
It is a slightly different animal to the large institutions in Paris like Amundi, which tend to do
absolutely everything, or smaller firms which focus on European or global products, mostly for retail investors. Our focus is primarily institutional investors and markets not covered by competitors – so the US and Japanese markets. There is no point setting up a new investment management firm and doing the same as everyone else!
How does it differ working for an investment boutique rather than somewhere like BNP Paribas?
It is our company (we are two co-founders plus an external minority shareholder) so we are
extremely motivated to succeed but there is more stress! As a company manager, a smaller firm
allows decisions to be made more quickly: if we don't like something, we just change it. As a fund manager, it doesn’t make a big difference, I have less resources but it’s the same job. You learn to really focus on what is going to make a difference. We have outsourced all tasks that are not fundamental to performance and client satisfaction.
Current AUM? Target figure for AUM?
Currently very small at just over $150 million but we are growing very fast. No target but in my
previous role, we grew a similar strategy to $10 billion in US equities. It’s a question of time. We
need to gain recognition and convince clients. At BNP Paribas for example, I even used to manage US equities from Paris for US institutions.
Why US and Japanese equities only?
We couldn’t ignore these two markets, which together represent 70% of the world’s market
capitalization. Moreover, it’s always better to have specialties that set you apart from the crowd,
and where your credibility is backed by a very long track-record.
All long only?
You are a team of three fund managers, do you split sectors?
No. Two of us do fundamental analysis and one, quant.
You use a combination of quant and qualitative screens – please elaborate
As we don’t want to depend on luck to find investment ideas, we use a quant tool to help us identify them. Every week, the model, an enhanced version of the one I developed at BNP Paribas, produces a short but diversified list of stocks it finds attractive, in any sector. There are less than 50 stocks in the portfolio, turnover is low, so we study a limited number of companies each month and we take our time. Both my colleague and I study all Buy candidates. We challenge each other with our conclusions so the final decision is made jointly.
Is ESG a consideration?
ESG is a consideration, but I feel there is a lot of hogwash around ESG. A lot of FMs are not doing the research they say they are doing, or they follow principles rather than facts. So, we pay attention to ESG, but our conclusions are not always consistent with those commonly required by ESG labels.
Any sectors you can’t invest in?
We strictly exclude manufacturers of cluster munitions, or chemical/biological weapons. As regards other activities, such as thermal coal, palm oil or tobacco, we typically avoid them for risk control reasons. We have no such restriction on oil & gas, nor coking coal, because we need to be pragmatic: the world is not ready to live without fossil fuels nor steel. This is why we can hold Halliburton despite its involvement in fracking technologies.
Do you vote your proxy for US stocks?
I believe you mainly focus on S&P 500? Minimum market cap?
Our universe is not exactly the index as we look at size, liquidity and analyst coverage. $3 billion
market cap is our minimum but in practice we mainly hold much larger stocks. We look for at least 5 analysts covering a stock. A positive for the US – there are lots of sell-side analysts.
Microsoft – it is the only FAANG stock in our portfolio where we are overweight vs. the index. Apple is the second largest holding in our portfolio, but it is only a 4% position for example, yet it is 7% of the index. We are not against FAANG stocks, but we are active managers, and our clients don’t need our help to buy the largest five companies in the world.
Average length of holding?
2.5 years. Half of our portfolio we’ve held since we launched in July 2017. We are long term
managers, we buy companies for the quality of management, the strategy and their ability to
implement it and deliver.
Any sectors you currently favor and why?
We prefer growth stocks to value so we are typically overweight technology, healthcare and
Name some of your favored holdings (US) and explain rationale for holding?
Given what’s going on with Ukraine, we have L3Harris – as we like its exposure to the defence
Onsemi – we studied it 6 months ago (Fall 2021) and spent a lot of time on the management,
business model and strategy and the way they were redesigning the company. What they planned for the company made us change our mind (as we didn’t want to increase our semi exposure).
Bath & Body Works – we bought this as LBrands in the summer of 2019. We hadn’t held it for years as we didn’t think it was well managed, but a new management team came in and after studying it in detail, we decided to trust them. At the start, the performance was poor, but we were extremely confident in the investment case, and it started to do well in 2020 and 2021. It’s been weaker this year, but we still believe in the investment case. There is a lot of growth in the pipeline.
Gap – a similar story to LBrands and a recent buy. It’s a management story so we always want to
understand the strategy and how management will execute – that’s key for us.
What’s your benchmark?
S&P 500. We have a growth bias, but we can modulate it so, we also do reasonably well in value
Buy-backs or dividends?
Buy-backs as they are less of a commitment for management, and I like management to have
flexibility. If the dividend needs to be cut, it sends out a very negative message to the market, but nobody really notices if a buy-back program is slowed. Also, if we invest in a company, it means we trust management (to allocate capital).
Do you have to meet management before you buy a stock?
We like to meet management, but it is not always possible. We are still small and are not on many IRO’s priority lists! We accept very few meetings anyway as we want to prepare them well. If we are not going to ask our own, original questions, we'd rather read a conference call transcript.
Preferred method of meeting management – virtual, in-person, conferences, one-on-one, groups?
All of these are suitable if they allow us to talk to the management at a convenient time. The Nasdaq conference (held in London in June and December) is also of interest. Conferences are a convenient way to have lots of meetings.
MiFID II – has it affected you? How do you work with sell-side analysts?
We read analysts’ reports, but it doesn’t mean we trust their investment opinions. We like analysts’ reports for the factual information they contain. For example, as a generalist it is difficult for me to determine the potential of a new drug that is being developed and a pharmaceutical analyst can inform us how large the addressable market is, for example. I only look for factual information. I don’t even check if they have a buy or sell on a stock. Indeed, if we really feel comfortable with a stock, we will buy it regardless of sell recommendations, and wait for analysts to change their mind.
Any tips for companies about investor communication?
We like companies to provide as much information on their websites as possible. It is very helpful to have access to documents used during earnings results or from Capital Markets Days.
Why the name Graphene?
Graphene* is a material which was discovered at Manchester University in 2004. It is a robust
material which is stiffer, yet lighter, than steel. It is transparent yet flexible. So, robust, flexible,
(asset) light and transparent – all the things we try to be!
*Graphene described as a “wonder material” that “could change the world” conducts electricity better than copper. It is 200 times stronger than steel but six times lighter. It is almost perfectly transparent since it only absorbs 2% of light. It impermeable to gases, even those as light as hydrogen or helium, and, if that were not enough, chemical components can be added to its surface to alter its properties.