VALUE: After Hours (S07 E16): Constructivist Investing and Board-Level Activism

During their recent episode, Taylor, Carlisle, and Steven Wood discussed Constructivist Investing and Board-Level Activism. Here’s an excerpt from the episode:

Tobias: Are there any names that you can talk about publicly that you can give us just as an example of your process and how it works?

Steven: I think I can talk about everything in our portfolio. So, the first company I went on the board of was CTT in Portugal, the postal operator. It had not grown for decades before. Revenue flat. What that meant was margins were compressing. We had a whole list of initiatives for the management team to do. It was a very polite series of meetings, but apparently, nothing was getting done. And so, I asked for a board seat. They welcomed me on in 2019.

To be honest, we worked with most of the existing managers there and existing board members and started a process where we attacked the weakest parts of the business. But the real vision was to turn the company into an e-commerce company. Most people don’t know this, because the US Postal Service is not a publicly reporting entity, but the postal companies generally capture most well over a majority of the e-commerce related deliveries because of the density that they have.

Portugal and Spain to an extension is at 1/5th, 1/6th of where the US is even today. I mean, it’s growing fast but– And so, we took this owner approach. We do have a few new managers. Well, now we have quite a few managers since 2019. But it’s that customer first approach and invest in the business. The company’s revenue went from basically zero to close to 10% since we’ve been involved and the margins have inflected materially.

The thing that I’m proudest about is the net promoter score which we’re going to disclose actually in a few months with the Capital Markets Day. But the net promoter score went from deeply negative to it is the best in the industry. We still have issues. When I go on Twitter, people still reach out to me and say, “My delivery man sucks.” We do a DM, I say, “Give me your address, we’ll fix it.” [chuckles] Because that’s how an owner thinks. It’s always sort of what’s the customer experience like. And so, it all starts with that.

But to be honest, even though this is special situations because there’s M&A, there’s some… assets that we’re doing, we’re selling expensive assets and we’re redeploying reasonably priced assets. There are typical special situations type buzzwords. But really our approach is I think at the end of the day, we will make a lot of money if the earnings reflect the progress.

And so, it’s a long and patient approach to the business. But instead of trying to get a valuation to return to the mean or something like that, we just want to build great assets that people want to own, because they’re actually fast growing and supported by earnings.

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