David Samra

David Samra’s journey in finance started far from Wall Street’s gleam, in Medford, a working-class suburb of Boston. Raised by blue-collar entrepreneurs, Samra’s first exposure to business was hands-on, watching his parents build their small business. He enrolled at Bentley University, then a trade school focused on accounting, but found his passion leaning toward finance rather than the CPA track most of his peers followed. This early pivot set the stage for his eventual success in value investing.

After graduating, Samra dabbled in accounting jobs but quickly shifted gears. While working as a certified financial planner, he partnered with a few friends to form an informal investment group, pooling their money each month to buy stocks and experiment with options.

Samra’s burgeoning interest in investing led him to Columbia Business School, where he was the last student admitted to the class of 1991. Though the famed value investing program led by Bruce Greenwald hadn’t yet been established, Samra's time at Columbia became formative. He interned under Mario Gabelli, a renowned value investor, whose teachings about the discipline of investing would influence Samra for the rest of his career.

Post-MBA, Samra joined Montgomery Securities’ asset management division, one of the few firms at the time exploring international markets. There, he honed his skill in international equity research, adopting a practice of visiting the companies he was analyzing1—an approach that became a cornerstone of his investment philosophy. His time at Montgomery taught him the importance of seeing beyond just numbers, of meeting with human beings running the companies and understanding a company’s culture.

Samra’s reputation grew, eventually landing him at Harris Associates, where he worked under the legendary David Herro at Oakmark Funds, who runs International Equities (Herro’s U.S Equities counterpart, Bill Nygren, is equally legendary.) While Herro was known for more of a traditional value investor, Samra began to develop his own style. He became a firm believer in owning good businesses at reasonable prices, rather than just seeking out the cheapest stocks. This evolution would define his career and lead to the founding of the Artisan International Value strategy, where Samra’s emphasis on quality businesses with sustainable growth has continued to deliver consistent outperformance.

More to come:

• Founding Artisan International Value

• Philosophy, idea generation and research process

• Team profile

• Nuances of investing in non-U.S. companies

Founding Artisan International Value

In the early 2000s, David Samra ventured out on his own, building a strategy that set him apart from traditional value investors. Many peers were stuck buying mediocre businesses at cheap prices. Samra recognized that the higher margin of safety lay in owning high-quality businesses with growth potential, especially during inflationary periods, when many value investors struggled to outperform. His shift to growth-at-a-reasonable-price became a competitive advantage.

When Artisan Partners, a mutual fund company known for its decentralized investment strategy teams, sought to expand into international value investing, they hired Samra, despite his lack of a formal track record at Harris Associates. His collaboration with Daniel O’Keefe—whom he had worked with since 1997 at Harris Associate—led to the creation of the hugely successful Artisan Global Value franchise. The 2008 financial crisis allowed them to buy world-class businesses at bargain prices, and their fund's performance soared, surpassing Samra’s expectations for asset growth.

In 2018, Samra and O’Keefe split into separate teams, with Samra leading the Artisan International Value strategy and O’Keefe running Global Value. The separation allowed each to manage their own portfolios more autonomously. Samra’s team, based in San Francisco, focused exclusively on non-U.S. companies, while O’Keefe’s Chicago-based team ran a strategy that allowed ownership of both U.S. and international investments. The split not only broadened their client base but also empowered each manager to run their own show.

Investment philosophy

Finding an undervalued quality business is rare, but these companies possess several key traits. First, they grow over time, preserving purchasing power even in inflationary periods. Second, they have strong balance sheets, which allow them to weather downturns and seize opportunities for growth during recoveries, often taking market share from weaker competitors. Third, they have shareholder-oriented management. Finally, they have reasonable valuation. It’s hard to find all four qualities in one company, but opportunities can arise when businesses face challenges—like Ryanair during the pandemic, which capitalized on its cash pile and no leverage to put in plane orders and sign airport contracts to grow rapidly as the market recovered.

Research process

David Samra's team at Artisan operates as generalists, reflecting Samra's own career approach. Analysts cover vast geographic regions—European analysts cover all of Europe, while their Asian counterparts handle all of Asia. The goal is to develop well-rounded investors capable of evaluating diverse business models and identifying undervalued companies without being limited by themes, sectors, or country-specific biases.

The research process is rigorous, starting with public documents like annual reports, which are used to build long-term models to understand a company's normalized free cash flow generation—a crucial step, especially when accounting standards differ across regions outside the U.S. Samra’s team speaks with competitors, customers, former employees, and consultants to assess a company's normalized earnings power.

Corporate governance plays a significant role in their process, with a focus on shareholder rights, board composition, controlling shareholders, and executive incentives. This is especially critical in regions like Europe, where executive poaching is a risk due to pay disparities that can lead to talent loss to American firms.

Their valuation method centers on discounted cash flow (DCF), with a focus on free cash flow projections over a few years. For the terminal year, the team applies a multiple to capture sustainable earnings power, which is then compared against alternatives like the risk-free rate. This comparison is made by evaluating how much investors have historically earned from the risk-free rate over the past 30-35 years and determining the premium required to take on equity risk above that rate.

The team doesn’t engage in traditional activism, but Samra isn’t afraid to exchange notes with other investors or send public letters to management when necessary.

Idea generations

The team does use screens, combining traditional value metrics such as low price-to-earnings ratios, low price-to-book ratios, and high dividend yields with financial metrics such as operating margins and robust return on invested capital (ROIC). This dual screening approach helps identify not just quality businesses but those that have higher chance of being attractively valued.

In addition to quantitative metrics, the team actively looks for market dislocations. They set up automated alerts for publications and transcripts to identify key events like profit warnings, spin-offs, de-mergers, and rights offerings—situations that often trigger indiscriminate selling. These events can present opportunities to acquire quality companies at significant discounts.

Understanding the markets they invest in is crucial. Samra’s team dedicates time to visit companies in their assigned countries, often spending two weeks on the ground. During these trips, they typically evaluate around 30 businesses, focusing on those with dirt-cheap valuations alongside high-quality companies exhibiting strong profitability and ROIC.

They then monitor these companies closely until prices align with their buying criteria. When a company’s share price falls within 10% of their targeted buy price, an email alert is triggered within their system. The entire team then convenes to assess the situation and determine whether to proceed, all while remaining disciplined to their investment philosophy.

For portfolio management, the PMs size positions based on expected returns. For instance, a stock priced at 50% below its intrinsic value deserve more capital than one sitting at a 30% discount. This principle becomes even more pronounced during volatile market conditions.

Take, for example, Alphabet/Google. As the pandemic hit, Alphabet’s revenue took a significant hit, extending the timeline for its normalized earnings per share (EPS). If an investor applies a discount rate of 10%, and the stock experiences a decline of 20-25%, it creates a compelling entry point. Here, even if the intrinsic value of Google decreased by 10%, the substantial drop in stock price offers a potentially more attractive buying opportunity, aligning with the philosophy of capitalizing on undervalued stocks during market dislocations.

Team structure

If this team catches your attention, it’s no surprise—who wouldn’t want to work at a patient (20-30% annual portfolio turnover over the last 5 years), long-only strategy managing $40+ billion with 10 investment team members? Sadly, great places rarely see much employee turnover. Since 2021, the team has added only one new hire. The 3 PMs are supported by four analysts specializing in different non-US regions. There are two other PMs running a new strategy within the franchise.

The team does not prioritize investment banking backgrounds. Instead, they take an open-minded approach to qualifications: half the team holds MBAs, while the other half does not. Four members hold the CFA charter.

While an international upbringing isn’t a requirement, some of the team members have international lineage; for example, their Asia analyst is Chinese, and the most recent hire, who graduated from an European college, is likely covering European companies. Most team members have prior institutional public equity investing experience.

The team also has a strong culture of internal promotion. Benjamin Herrick, now an associate PM, and Joe Vari, a former co-PM under Samra, both started as analysts. This focus on promoting from within emphasizes the importance of aligning with the team’s philosophy, particularly in a strategy that navigates many idiosyncrasies. With Samra at the helm since the strategy’s inception, the commitment to developing talent and maintaining a cohesive culture is clear.

Beini Zhou and Anand Vasagiri, who rejoined the team in 2020, were previously analysts for Samra as well. They helped launch and now run the Artisan International Explorer strategy, which focuses on non-U.S. companies with market caps under $5 billion. The strategy has hit the ground running, outperforming its benchmarks. It’s another example of Samra’s willingness to let former proven analysts take on bigger responsibilities.

Unique dynamics of investing in non-U.S. companies

Investing in non-U.S. companies presents unique dynamics that differ significantly from the U.S. market. While the U.S. stock market is heavily oriented toward service, technology, and healthcare sectors, the non-U.S. landscape often leans more toward industrials and financials. This structural difference is compounded by the smaller capital pool available outside the U.S., which makes American dollars a significant draw for international stocks.

Navigating these markets involves overcoming various barriers, starting with language. Not every investor or company executive speaks English, which can hinder communication and understanding. Cultural barriers also play a role; in many non-U.S. countries, the treatment of investors can range from being regarded as partners to being seen as nameless sources of capital. This perspective is especially prevalent in regions with socialist leanings, where employee and societal interests may overshadow shareholder value. Additionally, while environmental, social, and governance (ESG) concerns have gained traction globally, they are often prioritized over shareholder value creation, leading to potential conflicts.

Corporate governance in non-U.S. markets introduces another layer of complexity. The principle of "one share, one vote" is not universally practiced; many companies have super-voting rights or dual-class shares that dilute the influence of regular shareholders.

For example, in the Netherlands, a separate board known as a stichting acts as an anti-takeover mechanism, while the U.K. mandates the separation of the chairman and CEO roles to enhance oversight. In contrast, Japanese companies often see the same individual occupying both positions, with minimal involvement from outside directors as the entire board typically consists of employees who work for the chairman and CEO.

Investing internationally also requires an understanding of currency dynamics. Currency fluctuations can impact both cost and revenue streams, necessitating effective hedging strategies. Furthermore, many non-U.S. markets exhibit lower growth rates and return on invested capital (ROIC), influenced by their relatively socialist structures. In Germany, for instance, a significant portion of the GDP is derived from privately owned companies, limiting publicly traded opportunities.

The U.S. market is characterized by a propensity for risk-taking, positioning American investors as the largest shareholders of many non-U.S. firms. However, liquidity challenges persist in international markets, marked by wider bid-ask spreads and lower trading volumes, complicating the investment landscape for strategies such as Artisan International Value.

Success in these markets hinges on strong relationships and a deep understanding of the companies involved. Knowing the operators, board members, and families behind businesses is crucial, especially as many international firms are family-owned. This requires building credibility through preparation, persistence, and on-the-ground visits to gain insights that go beyond mere financial analysis.

In conclusion, the journey to successful international investing is as much about understanding the people and cultures behind the numbers as it is about analyzing financial data. This becomes increasingly important as AI and the internet make information flow more freely, emphasizing the value of nuanced, context-rich insights in making informed investment decisions.

If you have additional insights on Artisan International Value, please let me know.

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