Wealth Podcast Post

Faith Based Investing with Steve Nelson

George Grombacher June 23, 2022

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Faith Based Investing with Steve Nelson

LifeBlood: We talked about faith based investing, starting a publicly traded fund, how to screen companies for potential investment, challenges with investing in international companies, and how to get started with Steve Nelson, CFA, CoFounder and CEO of Capital Insight Partners.  

Listen to learn why when the stock market goes down, investors get excited!

You can learn more about Steve at CIPInvest.com and LinkedIn.

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Our Guests

George Grombacher


Steve Nelson

Episode Transcript

Unknown Speaker 0:00
Come on.

Unknown Speaker 0:11
Blippo This is George G. And the time is right welcome today’s guest strong a powerful Steve Nelson. Steve, are you ready to do this? I am excited to have you on Steve. Steve is a CFA he is the co founder and CEO of capital insight partners, or financial planning and global investment management firm. Steve, tell us a little about your personal life smart about your work and why you do what you do. Well, I actually started out going to Catholic schools and ended up in ministry for four years, and then entered the investment field. I’ve been Portfolio Manager for over 30 years. And more recently, just in February of 2022, we were asked to launch a global stock fund for Christians. So this trades on the New York Stock Exchange, and the ticker symbol is PR a Why pray. And again, it’s global stocks of all different sizes. And given both my investment career but also my career before entering this field. In ministry, it’s really fun to get to work on a Christian values stock fund. Yeah, well, I certainly appreciate that.

Unknown Speaker 1:20
You were gonna go into the ministry that is a that is admirable, and and obviously a massive commitment. What was it that caused you duck, for lack of a better term pivot? I fell in love with a Baptist veterinarian. So that was the end of my Catholic Church career. So Christian, I’ve been married for 32 years, she’s wonderful, I married up. But that’s what got me looking into the investment field. I had gotten an MBA during the time I was in ministry, and had always been interested in finance. So that’s what brought me to the investment world. It all makes sense. 32 years of marriage. Congratulations. Thank you.

Unknown Speaker 2:00
So this this really cool, and it sounds like

Unknown Speaker 2:06
value aligned opportunity comes along to to create global stock fund for Christians. When when that comes across your desk, did you just start thinking about new ideas? Or what what? What, what was your your sort of feeling when when the opportunity came up?

Unknown Speaker 2:27
So we have managed money in this fashion of for about four years, most of the work we do is for families with $2 million, and up. We’re based here in Scottsdale, Arizona. But about four or five years ago, we were approached by an advisor we also work with over in New Mexico. And she asked she said she had a number of Christian clients and asked if we could enter this field. So we had been in the Christian values investing world for many years. But we were approached by an investment advisor in Dallas to launch an ETF an exchange traded fund on the New York Stock Exchange. And the beautiful thing about that is it trades right now, around 20 to $23, a share, anybody can buy it, if they have you know, 25 bucks, they can buy one share and be in the fun. So it opened up for us a chance to serve more people than we traditionally can.

Unknown Speaker 3:27

Unknown Speaker 3:29
I also imagine I’m really interested in getting into the the actual ins and outs of the investment approach. How is it been of going through the process of being a publicly traded investment?

Unknown Speaker 3:44
For us, we had to learn a few new things, but we work with people who are very experienced. And frankly, it was easier than we expected it to be in the sense that for us, there’s just one fun that we have to take care of. Normally we’re in our company, we’re taking care of all kinds of different families. With multiple accounts, they might have trust accounts and IRA accounts and Roth IRA accounts and 520 names for the kids college. This is just one fun. So in that sense, it’s a little easier to manage. Got it fair enough. So with with prey, how do you get started when when when when you are starting a new fund? What is what is the first step?

Unknown Speaker 4:29
Well, for us, it’s the investment discipline, always I mean, we’re the sub advisor to the fund. So we have to focus on how are we going to manage the money and one of the unique elements of this is it’s a global stock fund, but in the name of the fund. It includes the term risk managed, which obviously given how the stock market is performing in 2022 is kind of an important topic right now. So we have the ability to raise cash even though most of the time the fund would be fully invested in stocks.

Unknown Speaker 5:00
At the moment, we’re sitting pretty close to 10% cash. At the end of today, we could be as high as 20%. But we frankly believe the economy is fairly strong right now. And despite all of the issues of inflation, the war in Ukraine, etcetera, we still find the underlying economy to be reasonably strong. So we’ve just focused on buying great companies in those different categories of large, mid cap and small cap. It ended up right now that we’re about 70% invested in US stocks, and about 30% around the rest of the world. And then as I say, we also have a big cash component at the moment, because the stock market globally has been in decline since we launched in February.

Unknown Speaker 5:48
Got it, all right. So have the opportunity to look all over the world for small companies, midsize companies, large companies, tell us a little bit more about the faith based component and how you go about screening would be companies?

Unknown Speaker 6:05
Well, we actually begin outside of the faith base component, we actually begin by looking for great businesses to invest in companies that have good cash flow, reasonable valuations, perhaps the dominant market position in their industry, all the normal investment disciplines that we would bring to bear. And we use a lot of technology to screen the universe of stocks around the world. Once we narrowed down the list of candidates that would fit our investment criteria, then we overlay a Christian screen. So to give you one example, and of course, it’s in the news a lot right now, in this fund, we will not own any drug companies that are involved with abortion, or embryonic stem cell research to the Christian community. That’s a very important issue to many in the Christian community, or they’re very focused on making sure that we have no exposure in that area. And so that would be one example of if we can own a given pharmaceutical company. But we still need to be in healthcare for diversification. And for other reasons, particularly as the population ages demand for health care continues to grow, we have to replace the stock we might have wanted to buy with another one that’s equally equally good in our mind. And so it takes more work to run a Christian values portfolio than a purely secular one. But for us, it’s a labor of love. It’s a real passion. Yeah, I appreciate that. So talk about a labor of love, talk about passion. You’ve been in the world of Investment Management for 30 plus years. And he talks about how technology benefits you through going through the screening process. But it wasn’t always that way.

Unknown Speaker 7:49
Correct. In the beginning, it was a lot more manual process. We used to use something called Lotus before Excel spreadsheets came along. There’s a lot of math involved when you’re trying to determine what the future value of a stream of cash flows will be, which is basically what we’re looking for when we buy companies. And can we buy the stock cheaply enough that will earn a sufficient rate of return for the level of risk that we’re taking on?

Unknown Speaker 8:19
Appreciate that. So with the 30 International or 30%, international companies?

Unknown Speaker 8:27
What are some of the challenges of screening international company versus domestic companies?

Unknown Speaker 8:35
In some of the markets, we simply can’t touch either because the markets aren’t liquid enough, or the accounting standards aren’t there, or the political risk from the government say of a given country, taking over the business and nationalizing it, those things preclude us, but in many, many parts of the world, the accounting standards have been coalescing to more US level standards. So it has, over the course of my career gotten easier to actually compare a US based company or Canadian company, to companies from other countries on the different continents.

Unknown Speaker 9:16
So it I don’t know if you can share this or not, are there? Do you own any companies that are that are in China?

Unknown Speaker 9:25
We don’t at the moment, we have one company in Hong Kong,

Unknown Speaker 9:30
but they’re really a company that’s been operating in Asia for many, many years. They just happen to be based in Hong Kong. They are an insurance agency and if you study the consumers of Asia, as a group, they are under insured in terms of life insurance, life insurance compared to their net worth, that region of the world tends to be under insured. And as the so many people on the Asian continent are

Unknown Speaker 10:00
Reaching middle class and even affluence. The need for insurance will be greater and greater. So that’s one example. But for the most part, we’re trying to avoid countries and areas that could be particularly problematic. You as you can imagine, we don’t own any stocks in Russia either. Right? Right. Yeah, all the things that you laid out from a problem with of liquidity to the accounting standards, just just being different. And then the, obviously, the risk of government intervention, or whatever the term might be, certainly probably does take a lot of opportunities off the table, or just makes you consider things differently. Is there a set number of companies that that that that you target to hold,

Unknown Speaker 10:48
we run what’s kind of a what’s called a high conviction portfolio, we manage high conviction portfolios. To us, that means that we’re going to own 60 to 80 different stocks in the fund at any given time. Now, many funds would have far more, a far higher number of stocks that they would own. But we like to have a big enough investment in companies we believe in that if they do perform well, they will

Unknown Speaker 11:20
dramatically help the performance of the fund. That makes sense.

Unknown Speaker 11:25
And how do you think about or compare and contrast Faith Based Investing to ESG?

Unknown Speaker 11:34
Well, the industry looks at Faith Based Investing as a subset of ESG in both cases, is a broad comment, what I would tell you is, in my experience anyway, I have found and I think others have found that, that good companies, companies who are good corporate stewards, they care about their customers or their clients, they care about their employees, the community, the country, the environment, companies that do that tend to be better run than companies that are simply in for the for the almighty buck. We tend to prefer because we’re to investors, we tend to look over a three to five to even longer year time horizon, we want companies who look beyond the immediate quarter and profit this quarter, and are looking out to see what’s sustainable, and what can be sustainably grown in the business. And that involves caring about things like your employees and your community as well as just, you know, good operational efficiency in the business. That certainly makes sense. Is there

Unknown Speaker 12:44
a age a company age that you say the company has got to be around for at least a year, two years, or now?

Unknown Speaker 12:54
Well, so far in the fund, we’ve only bought companies that have been publicly traded for a while I that’s not to say we will never consider an IPO, for example, an initial public offering a brand new company coming into the public markets. But at the moment, there’s no need to and particularly given how the stock market has fallen back this year. There are so many wonderful companies that are, frankly attractively priced at this point. Yeah.

Unknown Speaker 13:22
Appreciate that.

Unknown Speaker 13:24
Would you ever and or just more of a general question, what are your thoughts on on cryptocurrencies?

Unknown Speaker 13:32
Well, crypto is not something that would be part of the fund or even are separately managed accounts. Like I was explaining with the advisor in New Mexico and their clients. We tend not to be involved in speculation we, which is what I would call crypto investing right now.

Unknown Speaker 13:50
I think the volatility you’re seeing in crypto kind of speaks to that. But we’re more affirm that’s for people’s serious money, their foundational Money, money that they prefer not to lose, at least in the sense of a permanent impairment of capital. And I think there’s still so much flux and innovation happening in the crypto world that it’s a little hard to pick who the ultimate winners will be. So it’s just not an area that we have much expertise. Yeah, that’s certainly does make sense. And probably anybody who thought that it wasn’t a volatile

Unknown Speaker 14:27
space, just looking at what’s happened over the past couple of months. So anywho

Unknown Speaker 14:34
high conviction portfolio. Tell me more about that. So if we have a portfolio that has 2% in a stock, that’s a lot different than then a fund that would have maybe hundreds of stocks each with a half a percent weighting. Our companies have to perform because if they do, it’s great, but if they don’t, it will

Unknown Speaker 15:00
Have a truly negative impact on performance over time. So we want to understand the companies that we own very, very well. That doesn’t mean we’re perfect. We do make mistakes. But if we understand them really well, and we’re well diversified by industries, and we’re thoughtful and careful about how we buy companies on the front end, over time, that performance should be there. Got it? That’s really makes sense. I like it. Well, Steve, people are ready for that difference making tip? What do you have for them?

Unknown Speaker 15:30
Well, right now, as we speak here, in mid May of 2022, the stock markets had a rough year. And when everyone is getting very concerned, and very afraid, that’s the time you should start getting more excited, at least if you’re a long term investor, we believe that stocks will be higher a year from now than they are now.

Unknown Speaker 15:55
That may or may not prove to be true. But that’s our belief. And we are finding a number of great businesses that frankly, Wall Street has put on sale right now. So we’re actually getting more excited about the opportunities that lie before us to make money on the inevitable recovery.

Unknown Speaker 16:14
I think that that is great stuff that definitely gets a calm. Steve, thank you so much for coming on. Where can people learn more about you? How can they engage with you? Sure. Well, our contact information my contact information is at C I P invest.com. C I P IP invest.com. If people want to talk to their financial advisor or do their own research, also refer them to faith investors services.com/pray. And there they can learn more about the ETF that we were discussing.

Unknown Speaker 16:49
Excellent. If you enjoyed as much as I did, just leave your appreciation and share today’s show with a friend who also appreciates good ideas go to C I P invest.com. Check out everything that Steve is working on. Go to faith, investor services.com/prey To learn about the fun that we’ve been talking about today. Thanks again, Steve. My pleasure. Take care. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

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