CIO Scott Klimo Highlights Saturna's Investment Philosophy on Money Life with Chuck Jaffe Podcast
Saturna Capital’s chief investment officer features as a guest on financial advice podcast
May 28, 2021 – Scott Klimo, chief investment officer and portfolio manager at Saturna Capital, made a guest appearance on the podcast Money Life with Chuck Jaffe. In a segment titled “Market Call,” Jaffe and Klimo discussed the Saturna’s investment philosophy and how the pandemic affected fund performance. Klimo also participated in the following segment, “Quick and Dirty,” where podcast listeners submitted the names of stocks they were curious about, and Klimo gave his opinion on each one.
Jaffe, who in addition to hosting the podcast is a syndicated financial columnist, asked Klimo about the investment methodologies used for the Amana, Sextant, and Saturna Sustainable Fund families at Saturna.
“Despite the fact that one might think there are three separate methodologies, there’s really one investment philosophy behind all of them,” Klimo answered. “Our investment philosophy is one that is informed by attitudes that our founder had when he first started in this business, and it’s long-term investments, buying in quality companies with good cash generation, and solid balance sheets. And that fits in perfectly into the sharia aspect, but we also follow that in our other funds because it’s equally applicable.”
Jaffe followed up by asking Klimo to describe the kind of metrics that he uses to choose investments. “What we are looking for is an identifiable and sustainable investment theme, and a competitive advantage that this company demonstrates within that theme,” said Klimo. He added, “Good management connects with integrity, but also with creativity, and takes advantage of the opportunities that come along.”
The host then asked Klimo whether the pandemic forced him to re-evaluate his investment philosophy. “I wouldn’t say that the pandemic in and of itself forced us to do re-evaluation, but we are always evaluating and re-evaluating all of our positions and the investment thesis and ensuring that it remains intact,” said Klimo. “But it’s interesting, the process that we take, it tends to provide pretty good downside protection during times of market disruption and not always keeps up entirely during boom times. And that’s pretty much what was represented during the pandemic.”
Klimo went on to explain the kinds of securities that the Sextant and Saturna Sustainable Funds could invest in that Amana could not. While the Amana Funds may exclude financial services companies, or companies with a total debt to market capitalization over a certain limit, Klimo said, “in terms of what we’re looking for in investment themes—strong balance sheets, good cash generation, quality management, sustainable, identifiable, competitive advantage, all of that—applies across all of the Fund families.”
“You don’t have high turnover; you don’t sell often. So, what does a company have to do for you to change your mind about it?” Jaffe asked.
“Any kind of malfeasance,” Klimo said, briefly referencing Wells Fargo’s account fraud scandal in 2016. “These things never exist in isolation. They are always representative of a deeper disease that is affecting the corporate body… That’s the first thing that will get you knocked out immediately. Secondly is if we interpret that there’s just been a change to the operational thesis that originally got us invested in the stock… Nobody’s going to be right one hundred percent of the time, and sometimes you might have situations where evolution overtakes what initially seemed to be pretty good.”
Scott Klimo, CFA®, Vice President and Chief Investment Officer, joined Saturna Capital in 2012. He manages Amana Developing World Fund and Sextant Growth Fund.
As of March 30, 2021, no Saturna-advised fund owned any securities of Wells Fargo and Company nor any securities of its subsidiaries.