How did Graeme Forster, a mathematician from Wales, end up managing a stock portfolio in Hamilton, Bermuda? His resume is quite unique, much like the incentive fees his employer, Orbis Investment Management, receives for overseeing the $7.5 billion in his portfolio. Particularly distinctive is his eclectic mix of 65 stocks.
Forster is making strategic bets on antibody-based drugs with a novel approach, advocating for shareholder empowerment in Korea, navigating high inflation, and even investing in movie theaters, which seems contrary to current trends. This certainly doesn’t resemble a traditional index fund; had it done so, Orbis would struggle, as they’re incentivized by outperforming indices.
He earned his Ph.D. from Cambridge in 2007 by exploring the decision-making processes of farmers regarding pest control investments. Shortly after completing his thesis, Forster joined Orbis, a global asset manager that prioritizes intelligence over Wall Street experience in its hiring. By age 31, he was leading the international equity strategy.
Founded by the late billionaire Allan Gray, Orbis directs much of its profits to a charitable foundation. Following in the footsteps of famed fund manager John Templeton, Gray selected a remote Atlantic island as the ideal environment for unconventional thinking. At 45, Forster enjoys the solitude, juggling his three kids and occasional golf outings.
There’s a notable link between the embedded options in investments and stock payoffs. Forster aims for companies generating sufficient profits to validate their stock prices, with a hidden potential for substantial payouts if market dynamics shift favorably. He seeks stocks with a future price distribution leaning towards positive extremes—most potential outcomes center around moderate returns, but there’s a favorable tail on the right.
Forster has invested $240 million in Genmab, a Danish company pioneering a method for combining two antibodies: one that targets cancer cells and another that can either deliver toxins or mobilize the immune response. Genmab is currently undervalued compared to existing therapeutic options, with implicit call options on future innovations arising from its antibody technology.
The Orbis portfolio additionally comprises shares in SK Hynix, a notable producer of memory chips crucial for artificial intelligence. Forster capitalized on its low valuation, accessing stocks through SK Square, a holding company trading significantly below its true worth. He speculates that Korean insiders will eventually untangle their holding structures, potentially rewarding shareholders greatly.
