Business bedfellows

In love as in investment, the dependable day-to-day stalwart is always better than the mercurial surprise artist. So argues our in-house ‘Romeo’, multi-asset portfolios fund manager Will McIntosh-Whyte.

By Will McIntosh-Whyte 14 February 2024

With the close of every January, the world stops trying to sell us new versions of ourselves (weight loss, fitness, mindfulness, etc) and moves to encouraging us to start thinking about our loved ones. To add to the cacophony, social media will no doubt be full of painful stories of people showing how far their other halves have gone to demonstrate their undying love.

I am not one for all the fanfare. Successful marriages, I think, are better built on solid day-to-day interactions rather than occasional big gestures. Something I also like to see in my portfolios. 

When you buy a company, like it or not, you are also getting into bed with its management. And you would do well not to take lightly who you get between the sheets with. Particularly if, like me, you’re buying companies for the long haul. The Warren Buffet school of thought of being able to put a company in the proverbial drawer and not worry about it for several years. Sounds good in practice, but in reality the world is a fast-moving place, with aggressive competition, changeable regulation, fickle consumers and technological breakthroughs. The best way to sleep at night in this complex world is to invest in businesses with high-quality managers who you can rely on day-to-day and who will keep the lines of communication open during tough times.


Whether you are analysing a potential partner or business, confidence is often an attractive feature. Arrogance is not. The rock star status attributed to and embraced by some CEOs can often go to their heads. 

It can lead to a perception of infallibility: underestimating the competition and overestimating their own abilities. We have previously met with management teams who showed a distinct lack of concern over the potential for rivals to enter their market, and subsequently our holding over this complacent attitude. Sometimes, this ego can go supernova, leading to autocratic decision-making or discouraging colleagues from voicing doubts. 

It can also lead people to take on too much. While Elon Musk is no doubt a huge talent, taking on Twitter/X at the same time as running Tesla and SpaceX, while having founded several other businesses, sounds like a very full platter. In the worst case, arrogance can lead to corporate fraud – with CEOs treating the company like their own personal bank account, jet-setting around the world pushing their own agendas and expensing it to the company – see Carlos Ghosn, the flamboyant ex-CEO of both Nissan and Renault – simultaneously – who infamously escaped Japan in a suitcase while awaiting trial for false accounting. Cult status creates risks for shareholders – sometimes even for those who would otherwise be viewed as excellent stewards of a company. See the recent issues at OpenAI (the artificial intelligence start-up which developed ChatGPT). When the board decided to remove Sam Altman from his position of CEO, half the company threatened to quit and follow him out the door. 

No surprises 

Communication is an absolute must, as is managing expectations. Generally, I don’t like surprises – in love or business. There will always be missteps along the way, but when mistakes are made or problems arise it’s key that management can clearly explain what the issue is, how it happened and the plan to remedy it. 

If you can’t have those open and frank discussions then maybe it’s time to move on. One business we no longer own had a profit warning after encountering some disruption when moving to a new distribution centre. Not so much a problem in itself – these things happen – but the big concern was that the company hadn’t actually told investors about the new distribution centre at all... 

The joint account

Financial priorities are probably more important for management than partners, but only just – money is a top-five reason for both marriage and divorce. Even companies can be guilty of wanting to keep up with the Joneses, overextending the credit card to do so and straining the relationship with shareholders. 

The investment and spending decisions of management are hugely important, defining whether cash generated in the business is used to pay down debt, returned to shareholders through dividends or buybacks, or reinvested into the business to generate future growth. Debt isn’t a bad thing (for couples or businesses), as long as it’s used sensibly. Leveraging to buy a strategic asset can be a great move long term, but your other half will baulk if their first notice is coming home to a mobile kitchen in the drive. Investors are just the same. Before any big new outlay they need to know the rationale, how it will be paid for and to have the pros and cons laid out. 

Chances are, if a big purchase comes as a surprise it’s because the asset doesn’t make sense and the buyer knows it. Rather than anything productive, it’s something to paper over cracks or distract from problems elsewhere. Of course, poor financial decisions aren’t unique to mergers and acquisitions – pouring good money after bad into management pet projects, or new ventures with poor or improbable returns on invested capital can be equally damaging to a business. “It’s the thought that counts” doesn’t cut it in the corporate world. We discussed Meta’s metaverse money-sink in our latest The Sharpe End podcast.

As for me, while I may not be in for all the fanfare, I will still mark Valentine’s Day with a little something for my wife. While my communication skills might need improvement, I’m sure nothing says ‘I love you’ better than a few shares in connections business Amphenol. 

Tune in to The Sharpe End — a multi-asset investing podcast from Rathbones. You can listen here or wherever you get your podcasts. New episodes monthly.