When it Comes to Analyzing Stocks, A Bond Background Doesn’t Hurt

Posted by Dana Funds Investment Team on Feb 25, 2021 3:39:30 PM

With equity markets at all-time highs and many businesses still struggling due to a pandemic, it seems reasonable to ask: What could possibly go wrong?

At Dana, that question is a fundamental aspect of our research process, and something we spend a lot of time thinking about before any stock makes it into our portfolios. That type of risk awareness stems largely from our roots as a fixed income manager.

In a recent Q&A, our CEO, Mark Mirsberger, explained how a fixed income background has informed our approach to equities, and led to a focus on higher-quality stocks for our strategies. A brief snippet of that interview is below:

Q: Dana started as a fixed income manager. How has that background ultimately made you better equity managers?

Mark Mirsberger: Equity managers focus on growth, and bond managers typically focus just on problems. In the fixed income market, you need to focus on getting paid. You need to focus on quality.

Fixed income markets are also a little bit more quantitative. You can mathematically prove out that, for a given risk, a given duration, this bond is better than that bond. I think that discipline of process that you go through on the fixed income side, really helped us build out our process on the equity side.

Our founder (Mike Dana) would talk to Paul Volcker back in the '80s. And Paul Volcker told him, Mike, no one can predict interest rates. And so, the mantra here was always, if you can't predict interest rates, how do you know if you should be overweight financial stocks? If you can't predict inflation, if you can't predict oil prices, how do you know which sectors to overweight and underweight? It led to a focus on the characteristics and fundamentals of individual companies.

I believe that our discipline in fundamentals within fixed income, led us to higher quality equity strategies. We like stocks of high-quality companies. And, it led us to building out a robust process that we could repeat over and over. I think that's what really benefited us over the years.

To hear more about our history or other aspects of our investment process that we believe make Dana a unique boutique asset manager, we encourage you to listen to the full audiocast, available by clicking the image below. 

Audiocast with Dana CEO, Mark Mirsberger

The Dana Funds are distributed by Ultimus Fund Distributors, LLC. There is no affiliation between Ultimus Fund Distributors, LLC. and the firms referenced in this blog post.