Tom Russo on Global Investing and Mental Models in a Changing World

The Latticework Podcast, presented by MOI Global

Thomas A. Russo joined Gardner Russo & Gardner LLC as a partner in 1989. In 2014, he became the Managing Member of the firm. Gardner Russo & Gardner LLC is a registered investment adviser under the Investment Advisers Act of 1940, and is not associated with any bank, security dealer or other third party. Mr. Russo serves as Managing Member of Gardner Russo & Gardner LLC and of Semper Vic Partners GP, LP, which oversees two “global value”, long-only, equity investment partnerships, the first of which Mr. Russo founded in 1983. Mr. Russo oversees more than $12 billion distributed between Semper Vic partnerships and separate accounts managed in parallel fashion. Mr. Russo looks for companies with strong cash-flow characteristics that generate large amounts of “free” cash flow. These industries typically have included branded food and beverage, tobacco, and advertising-supported media. Mr. Russo’s portfolio companies tend to produce high rates of return on their assets and have strong balance sheets. The challenge comes in finding these obviously desirable investments at compelling valuations. Mr. Russo commits capital to leading global consumer products companies whose brands enjoy growing market shares in parts of the world undergoing economic growth and enjoying increasing political stability. He prefers companies with sufficient cash flows from existing operations, combined with balance-sheet strength, to underwrite investments designed to activate emerging markets. Mr. Russo backs rare management teams willing to invest to secure robust future returns even when such investments burden current reported profits. Mr. Russo believes that managements of family-controlled companies have the “capacity to suffer” when investments intended to build long-term wealth are ill-received by short-term focused Wall Street analysts. Mr. Russo believes that such “capacity to suffer” leaves family-controlled companies often uniquely well positioned to bear short-term burdens on reported profits in pursuit of long-term gains in intrinsic value. Accordingly, he often invests in public companies where founding families still retain control and significant investment exposure, to reduce management agency costs and to align owner interests. Mr. Russo’s goal is one of an absolute return rather than a relative return. He pursues a long-term investment objective of compounding assets between 10 and 20 percent per year without great turnover, thereby deferring capital gains tax on unrealized gains. Thomas Russo is a graduate of Dartmouth College (BA, 1977), and Stanford Business and Law Schools (MBA/JD, 1984). Memberships include Dean’s Advisory Council for Stanford Law School, Dartmouth College’s President’s Leadership Council, and California Bar Association. Mr. Russo is a charter member of the Advisory Board for the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School. He serves on the boards of the Winston Churchill Foundation of the U.S., Facing History and Ourselves, and Storm King Art Center. In May 2017, he was awarded The Graham & Dodd, Murray, Greenwald Prize for Value Investing.