- Value Investing Classes Guest Speaker
- Mar 18, 2021
After Professor George Athanassakos published his article "Enerflex at the head of the class for undervalued stocks" in the Globe and Mail, the President and Chief Executive Officer of Enerflex, Marc Rossiter, contacted him with an offer to speak, virtually, to Ivey's students. On March 18th, Mr. Rossiter was virtually welcomed by Dr. Athanassakos to the Ivey Business School and to the event.
Dr. Athanassakos kicked off the event with the following comments:
CEOs perform two roles. One is that of an operator and the other is that of capital allocator. Most CEOs focus on managing operations and tend to be good at that. They acquired the skill of managing operations through years of working in various functions within their organization. And they have risen through the ranks of their organization because they excelled in this role. Capital allocation, however, is a skill that most CEOs do not learn and so they become CEOs without mastering capital allocation. And this, according to Mr. Buffett, “can create big problems for a business because the CEO will often not know how to make critical decisions that will maximize shareholder value”. In his celebrated book titled “Outsiders”, William Thorndike, refers to capital allocation as “a CEO’s most important job”. Moreover, Mr. Buffett recently stated that “... it would be a terrible mistake if capital allocation were not the main talent of his successor”.
What exactly does it mean to be a good capital allocator? It means for the CEO to have the skills necessary to take the cash that the company generates and deploy it to the best value maximizing opportunity for the company, be it buying another company, buying back shares, paying higher dividends, reinvest within the company and so on. These are all investment decisions. In other words, the best CEOs are those who are good value creators, as well as good value seekers. To be a good value seeker, the CEO must be a good investor, more importantly to be a value investor.
My research shows that the best CEOs are those who not only are good operators, but also good asset allocators and this means good investors. The best CEOs are also value investors.
We're here today to find out how the CEO of Enerflex finds value creating opportunities and how he creates value for shareholders, as well as what process he follows to allocate capital.
Following the above comments, Mr. Rossiter gave a valuable and informative virtual presentation followed by a highly engaging Q&A session that was kicked off by Dr. Athanassakos' value investing students Eric Bogodist, Zen Jain, Aditi Nimbalkar, Hemaka Priyanatha and Cheryl Wu who had put together the Enerflex project mentioned in Dr. Athanassakos' article.
After the presentation, Dr. Athanassakos thanked Mr. Rossiter for taking time out of his busy schedule to interact with students and other invited guests and for providing such a memorable experience for his value investing students.
In his closing remarks, Dr. Athanassakos mentioned that he normally has value investors speak to his classes, as beyond the numbers he wants his students to also understand the personality and temperament of successful value investors and internalize the character development he tries to instill in them. However, the same thing can be said for CEOs; it is character that makes the difference. Therefore, henceforth, Dr. Athanassakos may also invite CEOs to present to his classes, as value investors want to find companies that create value, and these are companies run by CEOs who understand what creates value and make their companies attractive to investors. Value Investors and CEOs are two sides of the same coin.
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"Marc Rossiter’s talk provided real-life context to the accounting, ethics, macroeconomics, and decision making that I am learning in my Ivey MBA. Rossiter’s comments on corporate culture and celebrating colleagues who demonstrate core values were particularly powerful. Rossiter ended the talk by sharing his biggest lessons, both professionally and personally, and his vulnerability and openness provided a wonderful learning opportunity for those who participated. Thank you to Marc Rossiter for his time, and all those at Ivey who made his virtual visit possible." ~ Parker Bollmann, MBA 2022