Polaris: Hidden Gems

In the first part of this series we learn how Bernie Horn, CEO and founder Polaris Capital Management, LLC discovered value in both the Energy Crisis in the 1970s and the GFC.

As a teenager working the cleaning night-shift at Boston Logan Airport, the young Bernie Horn picked up Barron’s magazine and was delighted to learn that his interest in value investing was reflected in the contrarian publication’s pages. Working as a cleaner also taught Horn that he wanted an education, so that he wouldn’t be working the night shift for the rest of his professional life.

With an eye always open for a good deal, Horn finds opportunity where many others may see only disaster. For example, when the American real estate market took a dive during the Global Financial Crisis, Horn capitalised by researching distressed properties in the downtown Boston area. He ended up purchasing the building where his business, Polaris Capital LLC, is now based. This approach is indicative of Horn’s general investing philosophy: view things differently, and you may just discover some hidden gems.  

Further in Horn’s past, he also found opportunity in the energy crisis that gripped the United States during the 1970s. “I think one of the first investments I made was Consolidated Edison,” he says. Following a blackout that affected large swathes of New England, the company’s stock was trashed the following day. Confident that the shares were temporarily devalued, Horn invested while the share price was low. It was a trade that delivered impressive returns for the rookie investor. 

The global investment marketplace was a vastly different environment when Horn first moved into the arena in the 1980s. Most of his competitors in the field – and there weren’t many of them – were based in London. Early marketing attempts received feedback from some would-be investors that it was un-American to invest outside of the country. Without the benefit of the internet, information gathering was slow and riddled with obstacles. Telephone lines frequently offered up terrible connections, annual reports could take a couple of months to arrive in Boston, and when they finally arrived, were often in other languages with unfamiliar accounting practices. 

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Those lonely early years have paid off, however, as the world’s attention has been drawn to offshore opportunities. Expanding steadily over the past 21 years, Horn has prioritised the recruitment of team members with diverse backgrounds and expertise in emerging markets. This is how he’s come to hire an Indian national, a South African-born finance major and a Chinese computer science expert who started his US career as a software engineer. Polaris celebrates this broad skill set as it gives the company a distinct advantage when investigating investment potential a long way from Boston. The company’s growth and success is a reflection of Horn’s belief in value investing and of his talented team, in equal measure. 

To find out more about the Polaris Global Equity Fund available via the Macquarie Professional Series, visit our webpage. 

Important notice: Macquarie Investment Management Australia Limited (ABN 55 092 552 611 AFSL 238321) is the issuer and responsible entity of the Polaris Global Equity Fund. Polaris Capital Management, LLC is the investment manager of the Fund. Other than Macquarie Bank Limited (MBL), none of the entities noted in this document are authorised deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. This is general information only and does not take account of investment objectives, financial situation or needs of any person. It should not be relied upon in determining whether to invest in the Fund. You should read the relevant product disclosure statement, available at macquarie.com.au/pds or by contacting us on 1800 814 523, before deciding to invest in the Fund.