I recently had the pleasure to sit down with Dale Harvey of Poplar Forest Capital, a firm that takes pride in going against the grain when it comes to investing groupthink. In fact, he values that philosophy so highly that Poplar’s mission statement is ‘Contrarian. Selective. Patient’. In our conversation for the Namastir podcast, we discussed what it takes to be a lone voice of dissent, maintaining a positive growth outlook, and steeling yourself against the possibility of failure.
Just Because Everyone is Doing it Doesn’t Mean They’re Right
If you’re new to investing, you may only have one conceptual idea of how the stock market works. You look at a list of companies, you try to decide which will deliver better than average returns over a certain period of time, and you buy their stock. This is called ‘growth investing’ and it’s how most laypeople understand stocks.
This is not how Harvey understands it. A value investor, he instead focuses on finding companies that he thinks are undervalued by the market. Says Dale, “Value investors like me got dropped on our heads as a child or something. There’s just something in our wiring because the essence of value investing is looking at things that are unpopular. We’re all susceptible to peer pressure and are supposed to fit into the group. But I have always been most comfortable being out of the mainstream.”
Despite a strong bull market over the last several years where growth investors often saw handsome returns in their portfolios, Harvey stuck to his principles as a value investor, a strategy that his clients appreciated. “For me it’s not about worrying what the trend is in the market. If I’m buying good companies and I have confidence in their earning power, I feel like things will work out in my favor,” Dale says. “Most importantly, I don’t get pressure to change – quite the opposite. My people tell me ‘You’re sticking to your discipline and that’s what I hired you to do. If you change, then we’re going to have a problem.’”
Utilizing a Positive Growth Mindset to Swim Against the Current
As one would suspect, it hasn’t always been easy for Dale to believe in a philosophy that doesn’t generally fall in line with the popular way of doing things. To help him succeed, he realized that a strong and connected team was key in keeping a positive attitude and giving him the confidence to show his clients that their investments were safe with Poplar Forest.
“Most of the team has been on board for 10 years or more. It’s a very stable team and everybody likes each other too. That’s important when you’re trying to establish the kind of culture you want,” Dale explains. “I remember when I was coming out of school and you’d hear a lot of stories about ill-tempered portfolio managers. There was one famous guy whose slogan was basically ‘If you come here, you need to be prepared to get yelled at every day’. That’s not interesting to me.”
A crucial component of being able to maintain a positive growth mindset is being in a position that you are not only good at, but also one that you love. If you don’t love your job, positivity will only last for so long. “Don’t open a steakhouse if you’re a vegan, because you’re going to be eating those steaks,” Dale says. “If you don’t like it, don’t do it. I love what I do every day. Even in the early days when we weren’t making money, I was still having fun. It’s fun to build a thing and put your fingerprints on it. That sense of accomplishment is important.”
Don’t Let Failure Consume You
Many entrepreneurs have difficulty controlling their excitement – and expectations – at the prospect of beginning a new venture. Despite history being littered with the graves of untold numbers of failed businesses, it’s hard to look at business success stories and not think “That’s gonna be me.” So when adversity rears its ugly head, many have a hard time coping and moving on. For Dale, failure is just another part of doing business.
“Prepare for things to not go remotely according to plan. We started a week before the market topped out in 2007. Suffice it to say, my plan did not have the market tanking 50% in the first 18 months we were in business,” Dale explains. “But the good news is we were down less than the market average. We were up more the next year. And that set us up for over-performing for the next 5 years. So if you’re an entrepreneur, you have to expect these kind of things, no matter how careful you are.”
For much more of this in-depth conversation with Dale Harvey, and other chats with industry luminaries and thought leaders, check out the Namastir Podcast here!