Scuttlebutt and its dramatic effect on long-term investing | John Wilson | EP10

July 4, 2018 Print

John Wilson, analyst on Mawer’s global small cap equity strategy, defines scuttlebutt and its competitive advantage for long-term investors.

Highlights include:

  • Scuttlebutt’s (and mosaic theory’s) valued place in Mawer’s investment process
  • From Bogota to Oslo: the dramatic new places scuttlebutt can take us
  • A 180 degree turn: the dramatic effects scuttlebutt can have on an investment thesis


Your host

Website2017 160x240 RGB2 Cameron Webster, CFA
Institutional Portfolio Manager

Cam likes to think and act long-term. He has broad experience in the capital markets over his 20+ years as an analyst, portfolio manager, and client service professional. When not thinking about markets and investing, Cam trains and participates in other “boring” and disciplined activities such as ultra-endurance races—marathon, triathlon, one-day 300+km bike rides.


Start – 0:58

1:44 – What is scuttlebutt?

  • Mosaic theory: the cobbling together of information to corroborate what management teams are saying in order to make a more informed decision.

2:45 – How scuttlebutt helps investors differentiate between different shades of grey.

  • Example: The discrepancy found doing scuttlebutt between the importance an Australian accounting software provider’s management team put on having their end-user accountants on the same software. The accountants had a slightly different story.

5:11 – How to get people to open up to you

  • Don’t pretend to be someone that you’re not
  • Always maintain a high degree of integrity

6:55 – Scuttlebutt is not commonly used in the investing world because it demands the investment of time. For long-term investors, the data gathered is worth this investment.

8:34 – Always on my mind: John can’t stop doing scuttlebutt, even in his personal life!

Key scuttlebutt learnings:

  • Price is not always a customer’s main priority—there can be search costs, switching costs, or trust factors that trump price.

11:10 – A sharing culture: using M42 database to share scuttlebutt learnings with the entire research team

11:58 – Scuttlebutt can cause a dramatic shift in direction: From Bogota to Oslo

  • Example: In doing scuttlebutt on a Columbian stock exchange, the team reached out to the Oslo stock exchange and found they were much more impressed with the latter. Oslo Børs is still a holding in the global small cap strategy years later.

13:12 – How the Mawer team weighs the information they learn from scuttlebutt

  • Bayes Theorem: Not all information gained in terms of updating your hypothesis is the same. The rarer the information is, the better.
  • Example: If you ask CEOs who they respect in their industries, they are not biased to sing the accolades of their competitors: the answers gleaned is rare and therefore, we weigh it more heavily than other information.

15:30 – When scuttlebutt can change our thesis completely and we walk away from an investment

17:24 – Rapid Fire Round: Get to know John Wilson better

  • What’s the hardest part about learning to ski?
  • Relating learning to ski to investing
  • What John is reading (outside investing): The Effective Engineer
  • What John likes best about Toronto

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This blog and its contents are for informational purposes only. Information relating to investment approaches or individual investments should not be construed as advice or endorsement. Any views expressed in this blog were prepared based upon the information available at the time and are subject to change. All information is subject to possible correction. In no event shall Mawer Investment Management Ltd. be liable for any damages arising out of, or in any way connected with, the use or inability to use this blog appropriately.