25 JAN, 2023
By Constanza Ramos
Dan Davidowitz has been at Polen Capital for over 17 years, and took over as manager of the Polen Growth fund from the firm’s founder David Polen in 2010. Prior to joining Polen in 2005, Dan spent nearly five years as vice president and research analyst at Osprey Partners Investment Management. Before that, he spent one year as a research analyst at Value Line Publishing and more than four years at Memorial Sloan-Kettering Cancer Center, where he held various analytical positions. Davidowitz has a degree in public health from Rutgers University and an MBA from the Zicklin School of Business at Baruch College. He is a CFA charterholder and a member of the CFA Institute and the CFA Society of South Florida.
I started my professional career working in the healthcare sector where I worked in hospitals for 7 years, albeit in a finance-related capacity. I came to realise that I was most interested in the finance aspect rather than running a healthcare business. This was in the late 1990s when there was much excitement in finance during the technology bubble.
At Polen Capital we are always thinking about the long-term, which means that we don’t have to have constant change to reflect the immediate economic environment. Investing in companies with long-term durability makes our job more straightforward. We can focus on a business and its ability to be a long-term compounder – it’s the company that does the hard work. We need to make sure that the price we pay for this durability is acceptable.
In times of challenging performance or a confusing investment landscape we will aim to be overly communicative with our clients. We look to offer some clarity and make sure that our clients have access to as broad a range of our people as they need. Regarding managing emotions, it is important to orient yourself in fact and try not to speculate. You need to put your trust in your investment philosophy and process, which in the case of Polen Capital has been in place for over 34 years. We know that this process works over the long-term because companies will be properly valued the wider you set your investment horizon.
We have been long-term holders of both Mastercard and Visa, which are essentially a global duopoly in the payments industry. They have constantly taken market share from cash and cheques and we estimate that they are about 50% of the way in this journey. They have entrenched networks stretching back almost 50 years and have proven very hard to disrupt. To enter as a competitor, you need a confluence of three co-dependent factors: 1) consumers need to carry your cards, 2) banks need to issue your cards and 3) merchants need to accept them. It is nigh on impossible for a new entrant to do all three simultaneously. Steady growth is baked in via an annual 4% rise in consumer spending coupled with market share gains of 4% from cash and cheques. Raising prices combines with these two metrics to produce the double-digit annual earnings growth we look for across all our portfolio companies.
We have observed over the years that the average holding period of US equities has declined markedly in concert with the increase in trading activity, much of it mechanical and formulaic. This provides us with a time arbitrage advantage as we look to separate the fundamentals of a business from its share price.
Consistent – both in the way I invest and in how I treat people. I stick to a time-tested philosophy and process and I hope that people know that they can count on me.
I have always been interested in fitness and running, however over the covid lockdown I got really into weightlifting as a group activity. Additionally, as my children get older, I need to invest more time to be able to see them as they become more geographically dispersed.