Django Davidson - The Capital Cycle: Finding Opportunity Where Others Aren't Looking

**Tano Santos** (0:01)
Welcome to a new episode of the Value Investing with Legends podcast. I'm Tano Santos, the Robert Heilbrunn Professor of Asset Management and Finance at Columbia Business School, and the Faculty Director at the Heilbrunn Center. I'm here with my co-host, Michael Mauboussin, an adjunct professor at Columbia Business School, and a faculty member as well at the Heilbrunn Center. Michael, how are things?

**Michael Mauboussin** (0:21)
Doing very well, Tano, and I'm super excited by our conversation today. We're going to go through some very interesting analytical frameworks that should be of great value to our listeners.

**Tano Santos** (0:29)
I love intellectual and conceptual conversations, so I cannot think of a better way of actually finishing our Value Investing with Legends podcast season. This opportunity comes to us through a couple of our students, Christian Walter from the Value Investing program, and Alexander Nelson from the Executive Education program, and whom I met last week in London, both absolutely brilliant, and who were prodding me about the interesting investment philosophy of our guest today. And per usual, my answer was, well, I'm not so sure, or I don't know, so let's have a podcast. This is one of the advantages of having a podcast, is that you get to invite smart people to tell you things you don't know and explore the deeper issues in asset management. We're happy to welcome in the program today Django Davidson, who is a partner and PM at Hosking Partners, which is an asset management company founded by Jeremy Hosking in 2013
Django, who joined Mr. Hosking at inception, came from Gebris. I don't know if I'm pronouncing that correctly. The investment firm founded by David Serra. Before that, I believe, after graduation from university, Django worked at Deutsche Bank for seven years. Hosking Partners, as I said, was established in 2013 It's an investment management company, and it has about under $8 billion under management.
Django Davidson of Hosking Partners, welcome to the Value Investing with Legends podcast.

**Django Davidson** (1:52)
Thank you very much for having me on, guys. It's an honor.

**Michael Mauboussin** (1:54)
Django, we typically start these conversations getting to know our guests a little bit. Before we get into investment philosophy and even your professional career, tell us a little bit about your background, a little bit where you grew up, a little bit about your family and what you studied in school.

**Django Davidson** (2:08)
Well, I grew up in a very unfashionable area of the UK, Leicester. It's a kind of Midland's town. An American equivalent would be a kind of flyover state. But I was from a very kind of non-conformist background. My father was a musician, my mother was an academic.
Looking back, it wasn't a particularly economically bountiful upbringing, but in terms of ideas, tolerance for difference of opinion and learning to think independently, I was super lucky and I look back on it now and think there's probably a real advantage in having an unconventional background. It's been amazing to be able to deploy that into the investment world. That's been a great thing.

**Michael Mauboussin** (2:43)
It looks like you studied geography at university. A, is that correct? B, do you feel that that help or hindered you as an investor? If so, how and either way?

**Django Davidson** (2:53)
Geography is an academic discipline in the UK. In the US, I know probably a few eyebrows are raised when they see that on CVs. One of the great benefits of doing a UK geography undergraduate degree is this idea of being a kind of informed generalist.
With geography, you're looking at lots of different disciplines, whether it's geology, economics, sociology, politics, and kind of weaving them together with the kind of anchor that is placed to try and come to some sort of informed view. So it was actually quite a good training for investing because it just allowed you this kind of breadth of disciplines and kind of looking to mold in other ideas from other places, which, Michael, I know you're a great advocate of, given your work with the Santa Fe.

**Michael Mauboussin** (3:41)
So can I ask you about your first job right out of university? It looks like you joined the city and went to Deutsche Bank. Is that where you learned about equities and equity research?

**Django Davidson** (3:50)
Absolutely. And the kind of forging moment of that seven years at Deutsche Bank was the financial crisis, where I was working on the banks team. And what I learned was that in the land of the blind, the one-eyed man is king, I knew just a tiny bit more about banks than a lot of other people in this period of stress. It was just a great piece of luck to be doing banks at a time when everyone wanted to know about banks and suddenly started kind of asking what a capital ratio was.