Q&A with Dana Portfolio Manager: Michael Honkamp, CFA

Posted by Dana Funds Investment Team on Nov 30, 2018 11:56:40 AM

 

Dana_Michael Honkamp

Michael Honkamp, CFA joined Dana Investment Advisors in 1999 and has been managing equity portfolios since 2003. Recently, a member of our team sat down with Michael and asked him a few questions about his career and experience.  


Q: How did you wind up at Dana Investment Advisors?

A: Mike Dana, founder of Dana Investment Advisors, was a Cub Scout leader with my mother. He offered advice when I was in school, and brought me in for lunch one day during college to explain his view of the business. Years later in 1998, after a bout of entrepreneurialism, we reconnected and he offered some bond projects to occupy me as an intern. Eventually they started paying me and taking me to meetings!

 

Q: What was the transition like from fixed income to equity investing?

A: As a backdrop, I had always been interested in the equity markets. I started reading about them in high school and took relevant classes in college and graduate school. Initially, Dana had an opportunity for me on the fixed income side, which I accepted as a challenge and to ensure I could get established in the field. After the late 2002 market turbulence I started working on a portfolio of lower volatility and higher income large cap stocks for a client. That started my pull into equities and in 2006 I began helping with other strategies.

 

Q: What is the culture like at Dana?

A: The culture was very entrepreneurial in the beginning, which suited my skills and experience. Over time the firm has grown from $1b to $7b, and there are more specific demands requiring specialized attention. Importantly, however, industrious and curious thinkers are still rewarded. The investment team has a lot of freedom, even though we operate all equity and bond strategies with a disciplined process, but we are involved in some detail on most aspects of the verticals we work in – like sales, service, and communication – so as individuals we have to maintain an entrepreneurial posture. There are a lot of dimensions to what we are expected to be able to do.

 

Q: As more and more money flows into passive small-cap products, low- or non-earning companies are being lifted with strong-earning companies alike.  Does this present any opportunities for active managers like yourself?

A: Opportunities is a funny word there. The passive wave often seems more like a puzzle, and we spend time trying to understand it. One challenge it presents is the potential for positive correlation between high and low-quality companies in a given period, what some call reduced-correlation differentials. There are other aspects to the passive impact that many strategists are still studying. Fortunately, there are a lot of storylines in the small cap space, so we do not have to focus on the non-earning element any more than we have to focus on the other puzzles we find in our space. In the end, clients expect us to choose good stocks.

 

Q: What are some broad market trends you’re monitoring now? Is anything keeping you up at night?

A: There are some tensions in the market – like between valuation and momentum. Recently we have been in an environment where market factors such as sales growth are very important, and stable-growth companies with great profitability may be getting less attention if their top line can’t move higher fast enough. While not keeping me up at night, I am concerned liquidity and electronic trading may amplify volatility within short term market adjustments. I’m unsure how prepared retail investors or advisors are for real volatility.

 

 

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