10 Questions with Alex Sweet
UK-based fund manager and Substack author
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1. Hi Alex! Thanks for participating. Can you tell us briefly about your background and how you ended up working as a fund manager?
You’re welcome! I started out as a Treasury civil servant under Gordon Brown, but quickly switched from policy analysis to equity analysis. Bernstein on the sell side was my first finance job, which gave me a thorough grounding in high quality research.
In 2007 I joined Highclere, a long-only international small cap boutique, just a year after it was founded. I spent the next 16 years covering companies across Europe and Asia, first as analyst and latterly as portfolio manager, responsible for the $2bn International Smaller Companies fund.
2. What types of stocks did you focus on at Highclere and how did you generate ideas given the massive scope of your investment universe?
The universe was indeed huge, at 6,000 or more possible companies. I concentrated on the quality businesses that could deliver sustained profitable growth. Luckily, this narrowed it down to just the top 10-20% or so, a more manageable number to choose from. I also enjoyed discovering unknown names that were improving and would transition into the top tier in time.
3. In your view, how has investing in Asia been different than in other regions? Which is your favorite market? Any pitfalls we need to look out for?
Global investing makes sense for diversification. Japan in particular sometimes moves in the opposite direction from other developed markets.
As a stock picker, I love the depth of Japan, Taiwan and Australia, all with so many small-cap names and such inefficient coverage that gems and bargains can be found amidst the dross.
Corporate governance pitfalls vary by country. E.g. poor capital allocation in Japan, abuse of minority investors in Korea, occasional excessive remuneration schemes in Australia.
4. How do you think about portfolio management, trading and deciding how much to allocate to an individual position?
I like a sensible degree of diversification, which delivers steady returns despite volatility at the individual name level. Idea generation is my strong point, so I can come up with around 50 to 80 really good ideas globally. My time horizon is three to five years, and portfolio turnover would correspondingly be 20% to 40% per year.
5. Any tips on how to conduct management interviews? Favorite questions that you like to ask them?
My approach is to understand the history and background in order to see where the company is headed. So when meeting a company for the first time, I will start by asking them to tell me the story in their own words.
I love to hear managers talk about other listed companies, whether as suppliers, customers or rivals. It’s invaluable to learn which names are admired – or the reverse – within the industry.
6. What advice would you give someone who wants to get into the fund management industry and eventually become a portfolio manager?
Keep an open mind about exactly what route to take! If the real passion is analysing businesses, then management consultancy, accountancy, and of course investment banking have proved to be alternative routes into the industry, alongside the scarce direct entries into equity research.
7. Earlier this year, you started a Substack newsletter called “Sweet Stocks”. What’s the focus of your Substack and what's been your experience writing on Substack so far?
After I left Highclere, I needed to invest my own portfolio in a disciplined manner. Writing up my ideas and offering them out for scrutiny and feedback has accomplished this.
I set myself a challenging goal to publish a new write-up each week. It’s been exhilarating, and has also reaffirmed to me how much I enjoy researching companies and wrestling with stocks.
8. Out of the Asian ideas on your Substack － including Katitas, Kobe Bussan, SITC, Daiwabo, Iwatani and USS － if you had to put a large percentage of your portfolio in any of those stocks, which one would it be, and why?
I own five of these names. Kobe Bussan (along with its franchisee partner G-7) is the biggest weight, as I expect their Gyomu discount supermarkets will keep taking market share for many years to come.
Daiwabo and Katitas are solid holdings, while SITC and Iwatani are starter positions that I am considering when to increase. For USS, I held back due to the rather low long-term growth outlook.
9. What are your plans for the future, both in terms of your Substack, investing and perhaps running a fund in the future?
I’d like to keep sharing my research on the Substack for the foreseeable future.
This exercise has proved to me that investing is my passion. Therefore I am open to taking on a new institutional role, if the right opportunity arises. That could be joining an existing high-quality team, and / or offering a new global all-cap strategy alongside great partners.
10. How can people follow your work or get in touch with you?
You can find me on the Sweet Stocks Substack, on X with the username @sweetstocksblog, and also on LinkedIn.
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It’s impressive how deeply he dive into researching companies. I hope to reach that level of enthusiasm in my own work someday.