Equity Investing in High-Quality Growth Companies

Elana Margulies-Snyderman:

Hello and welcome to the EisnerAmper Engaging Alternatives podcast series. I'm your host, Elana Margulies-Snyderman and with me today is Mark Vitelli, Senior Portfolio Manager at Compass Capital Management, a Minneapolis-based asset manager that focuses on equity investing in high-quality growing companies. Today, Mark will share with us his outlook for his investment strategy, including the greatest opportunities, challenges, how the firm integrates ESG, and more. Before we dive into the conversation with Mark, don't forget to hit that like button and subscribe to EisnerAmper, wherever you listen to your podcasts. You can also find us on YouTube at EisnerAmper.  Hi, Mark. Thank you so much for being with me today. 

Mark Vitelli: 

Thanks for having me, Elana. I'm really pleased to be here. 

Elana Margulies-Snyderman: 

Absolutely. So, to kick off the conversation, tell us a little about yourself and how you got to where you are today. 

Mark Vitelli: 

Well, when I was an undergraduate in college at the University of Minnesota, learned through some classes more about finance and the capital markets. And just decided I thought it would be a really interesting career, that it would never be the same thing all the time. It would never get boring. I had no idea how true that was when I was thinking that 30-some odd years ago. But been fortunate enough to work under some wonderful mentors at a few firms in Minneapolis and then joined Compass Capital here in 2011, so I've been here for about 14 years now. 

Elana Margulies-Snyderman: 

Great, Mark. So, that segues nicely into the following question I have for you. Given Compass's focus on equity investing in high quality growing companies, I would love to hear your high-level outlook for this space. 

Mark Vitelli: 

We believe the outlook in the long term is quite favorable for investing in high quality growth companies. This has been borne out through history, both longer term capital market history and the last 35 plus years that Compass Capital has been around. Of course, I would be negligent to not acknowledge that there are some near term uncertainties in the market right now, due to coming off of a strong growth run for the economy and for this space. And then, also, the numerous tariffs and other policy-related uncertainties that we don't know the outcomes of yet at this time. But we also believe that along with those uncertainties and that volatility, usually out of that there are opportunities created for investors to buy high-quality growth companies at more attractive valuations than they otherwise normally might be able to. 

Elana Margulies-Snyderman: 

Mark, more specifically, what are some of the greatest opportunities you see in your space and why? 

Mark Vitelli: 

Well, one of the things the last couple of years... 2023 and 2024, the market was heavily driven by anything that investors perceived real or not so real, as being a beneficiary of the artificial intelligence boom. ChatGPT really came into our conscience in about 2023. And there are numerous companies that are good, solid companies and have a long-term future as being investable companies, but they really took off and led the market. They were dubbed the Magnificent 7 by many in the financial media. And those drove 50% to 60% of the return in the S&P 500 in 2023 and 2024. So, with that in mind, where we really see a lot of opportunities are in the areas that are not part of that group of AI, AI-focused stocks. Particularly, we see a lot of opportunity in industrials and in health care right now, due to the policy-driven uncertainties in this new administration. Industrials more specifically tariff-driven. And health care, partially tariff-driven, and partially the market and investors trying to ascertain the focus of the new health and human services secretary and what sort of policy changes might be coming in our health care landscape. 

Elana Margulies-Snyderman: 

Mark, on the other hand, what are some of the greatest challenges you face in your space and why? 

Mark Vitelli: 

One of our greatest challenges, especially the past few years here, has been as more and more information becomes available, as there are more uncertainties in the marketplace, making sure that we have the staff and we're organized well enough to keep on top of all of the information that's out there. Make sure we understand what really matters, and what really may affect the companies we own, and what of all of that information is nothing but noise that we should just ignore, and look past, and continue to look to the future. 

Elana Margulies-Snyderman: 

Mark, to shift gears a bit, ESG has been an important topic for some investors, and I would love to hear how Compass is addressing this. 

Mark Vitelli: 

ESG, here at Compass, it's rather interesting. Since our inception as a firm, we have as part of our strategy always looked at the impact a company has on the world and the community around them, how they operate, making sure management and quality management teams are really a big part of our process. So, that governance piece has always been a big part of what we do. And then for a variety of other reasons, there are certain industries we've just never felt comfortable investing in. Mining, energy drilling, and companies of that nature just have not been something we've invested in. So, we like to say we were unintentionally ESG before ESG was on a lot of people's radar. 

Elana Margulies-Snyderman: 

Mark, we've covered a lot of ground today and wanted to see if you have any final thoughts you would like to share with us. 

Mark Vitelli: 

Sure. One of the things I would encourage investors to do that are invested in the equity space, having a patient long-term view and owning high-quality businesses will provide these long-term outcomes you are looking for. There will be short-term noise. The markets are always going to provide short-term challenges. That has been the case as long as we've had our capital markets here in the United States. But in the long-term, owning high-quality equities should be a part of investors' allocations, as it will reward them in the long-term. 

Elana Margulies-Snyderman: 

Mark, I wanted to thank you so much for sharing your perspective with our listeners. 

Mark Vitelli: 

Thanks for having me, Elana. 

Elana Margulies-Snyderman: 

And thank you for listening to the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business. 

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