The music world has lots of great musicians who never achieve broad popularity. Is this a conspiracy by the "suits", the executives who run the business? No. The music industry is a business, and the executives who run the giant music labels would rather focus on mega artists. Mega artists sell mega recordings, concerts, T-shirts, etc. It's the prevailing industry model to seek out the next Justin Bieber, Bruno Mars, Beyonce, Rihanna, Nicki Minaj, etc. Megastar equals mega-appeal. But in my humble opinion it's not necessarily great artistry. Sorry, Bieber fans.
Artists flying below the megastar banner-a few of my favorites include Badly Drawn Boy, Neko Case, Leonard Cohen, Camera Obscura, The Go-Betweens, and Lucinda Williams-don't feed the music industry machine with monster hits. Their reward is to live in relative obscurity. Of course, some artists don't crave stardom first and foremost, but are content to churn out great music, and will take whatever fame comes their way-or doesn't.
Similarly, some corporate CEOs prefer to focus on running their businesses, and don't focus on promoting their company. Since they spend more time managing the business, they're more effective than promotional managers. As you might guess, we prefer the former to the latter.
How to tell one from the other? Does the company make lots of investor presentations, or is the CEO constantly on CNBC? Does the website gush about the company's greatness? Is the annual report full of glossy pictures, including a large, prominent photo of Mr. CEO? Does the CEO sit on multiple corporate or non-profit Boards of Directors? If so, when does Mr. CEO have time to actually manage the company?
In contrast, we find low-key executives and companies to be interesting, precisely because they spend most of their time managing the business, not promoting the stock to Wall Street. Less hype also means less investor notice, which allows us to invest at attractive valuations. As in the music industry, the less promotional the company, the harder it can be to find. But as with music, it can be worth the search.
You could, of course, hire us to play "A&R man" for you...that's Artists and Repertoire in the music biz-the guy trolling the clubs night after night looking for new talent. We scour the landscape seeking the corporate equivalent of "artists" who focus primarily on running a quality business. Unlike the music business, it's not glamorous, but with a disciplined approach and a little hard work, we think it pays off. When it comes to investing your capital, we'll take hard work over glitz and glamour any day.