Excerpted from our 2022 Annual Shareholder Letter

At Eventide, it is our strong conviction that high-quality companies that excel at creating value for others and trade at a discount to intrinsic value offer superior long-term risk-adjusted returns. We call this our investment philosophy because it is the thesis that drives our actions. We developed this philosophy through thorough historical research and a deep understanding of how financial markets function over long periods of time.

The purpose of our written philosophy is to both form our process and hold our actions accountable. Our actions have to remain consistent with our philosophy. If we are ever inclined to act in a way that is inconsistent with our philosophy, we have to ask, do we no longer believe the thesis?

We have experienced a number of testing points over the last twelve months. Rising inflation, rising interest rates, the ongoing war in Ukraine and continued supply chain disruptions have each contributed to fearful responses from investors, leading much of the market to sell out of companies with long-term resilient qualities and gravitate to stocks that quantifiably appear to be safer in the short-term. On the other side of the same coin, fear of missing out has led a subset of investors to buy into short-lived manias in hopes of realizing a quick gain and selling out before the euphoria is brought back to reality.

A common adage in investing is to “be fearful when others are greedy and greedy when others are fearful.” I would contend that this adage is helpful because it gives you the confidence to deviate from the madness of crowds. But there is a better way to respond to fear than with greed. As Aristotle explains, there are two opposite vices for each virtue. Cowardice and rashness or fear and greed do not become virtues when confronted with the opposite vice. So, in a market environment dominated by fear, what posture should investors take if not one of greed?

As in any area of life, it is easy to remain committed to your beliefs when your actions are reinforced by immediate gratification. It’s not until you go through a season of testing, though, that you discover whether you have the overarching virtue that drives you to act consistently with your beliefs despite the lack of immediate reinforcement.

This overarching virtue is courage.

C.S. Lewis once wrote that “courage is not simply one of the virtues, but the form of every virtue at the testing point, which means at the point of highest reality.”1

Looking at the historical performance of our funds for numerous multi-year periods shows us that our thesis has been reinforced through times of fear and greed. Past results, however, do not guarantee future performance. If future performance was guaranteed, investors wouldn’t need courage.

During times of extreme volatility and future uncertainty, we ask ourselves if we still believe our investment philosophy, namely that high-quality companies that excel at creating value for others and trade at a discount to intrinsic value offer superior long-term risk-adjusted returns.

The answer is an emphatic yes. Our portfolio team is actively considering the shifts taking place in the macro environment and projecting the potential headwinds and tailwinds to each of the companies within our portfolios and prospective companies in the investable universe. We then ask, Does this company still meet our rigorous financial and qualitative standards of being “high-quality”? Do we believe this company will still excel at creating value for others? If the answers to those first two questions remain positive, a fear-driven market often reveals great opportunities to invest in companies that meet the third requirement—the stock trading at a discount to intrinsic value.

In this report, you’ll find our assessments of how each of our funds performed over the past twelve months, including detail on our understanding of the impetus for outperformance in some instances and underperformance in others. Some of the companies’ fundamentals have indeed been hampered by the daunting macroeconomic factors, but many companies have suffered stock sell-offs as a result of fearful investing behavior rather than any underlying change in fundamentals. As an active investment manager, we are actively discerning between the factors that will impact the performance of the companies in our portfolios over the next 3, 5, and 10 years and adding to positions or reallocating based on our own convictions, even if those convictions are currently out of favor.

We seek to remain courageously committed to our philosophy-driven process when others are fearful or greedy.

Thank you for taking the time to read Eventide’s Annual Shareholder Letter. We understand the importance of your capital, and we seek to allocate it to what we believe to be its best use— investing in companies that create value for (1) you, the beneficial owners of the company; (2) the company’s stakeholders who are impacted by the business and have a reciprocal impact on the business; and (3) for the global common good, meeting the needs of our neighbors near and far.

Thank you for your trust.

Finny Kuruvilla, MD, PhD
Dolores Bamford, CFA
Anant Goel
Andrew Singer, CFA
Authors

Finny Kuruvilla, MD, PhD

Co-Chief Investment Officer, Senior Portfolio Manager, Managing Director, Founding Member

Finny Kuruvilla, MD, PhD, serves as a Co-Chief Investment Officer, Senior Portfolio Manager for Eventide’s strategic growth strategies and healthcare & life sciences strategies, a Managing Director for Eventide Ventures, as well as Founding Member of Eventide. 

Dr. Kuruvilla has a background in healthcare, statistics, and investing. Concurrent with his early years at Eventide, he was a Principal at Clarus Ventures, a healthcare and life sciences venture capital firm subsequently acquired by Blackstone. Earlier in his career, Dr. Kuruvilla was a postdoctoral research fellow at the Broad Institute of Harvard and MIT, where he led the development of a new microarray between the Broad Institute and a publicly-traded company Affymetrix. Prior to his investing career, Dr. Kuruvilla was resident, chief resident, and fellow at the Brigham and Women’s Hospital and Boston Children’s Hospital. 

Dr. Kuruvilla holds an MD from Harvard Medical School, a PhD in Chemistry and Chemical Biology from Harvard University, a SM in Electrical Engineering and Computer Science from MIT, and a BS in Chemistry from Caltech. 

Dolores Bamford, CFA

Co-Chief Investment Officer, Senior Portfolio Manager

Dolores Bamford, CFA, serves as Co-Chief Investment Officer for Eventide and Senior Portfolio Manager for Eventide’s Dividend Growth, Dividend Value, and Balanced Income Strategies.

Ms. Bamford has over 30 years of investment experience. Prior to joining Eventide in 2019, she was with Goldman Sachs Asset Management for 13 years (2002-2015), most recently as Managing Director and Portfolio Manager on U.S. Value Equity. She also led Goldman Sachs’s U.S. Responsible Equity strategy and co-led the Global Sustain Equity strategy. Previously, she was with Putnam Investments for 10 years (1992-2002), where she served as Senior Vice President and Portfolio Manager and Analyst on multiple value investments. Before that, she was with Fidelity Investments (1988-1990), where she served in investment research.

Ms. Bamford holds an S.M. in Management from the MIT Sloan School of Management, a dual-M.A. in Theology and Church History from Gordon-Conwell Theological Seminary, and a B.A. in Economics from Wellesley College. She is a CFA Charterholder and member of the Boston Society of Security Analysts.

Anant Goel

Portfolio Manager, Senior Research Analyst

Anant Goel serves as a Portfolio Manager for Eventide’s Strategic Growth, Technology, and Large Cap strategies, as well as Senior Research Analyst on other Eventide investments.

Mr. Goel has a diverse background having grown up and lived in India, Hong Kong, UK, USA and China, which combined with his academic and professional interests, allow him to incorporate a diverse set of perspectives in his investment decision process. He has been passionate about responsible investing from early in his career. He has served as a Research Analyst at Eventide since 2016, leading its technology focused research. In 2015, during his M.B.A. program, he worked at Adage Capital Management, a long/short hedge fund. From 2011-2014, he served as an Analyst for NewQuest Capital Partners, a Private Equity firm in Hong Kong, where he was responsible for evaluating new investment opportunities for funds across Asia. From 2008-2011, he lived and worked in Beijing, China where he studied Mandarin and worked on start-up companies and other investment projects.

Mr. Goel holds an M.B.A. from the MIT Sloan School of Management where he was selected as a Teaching Assistant (TA) for finance courses for both Executive M.B.A. and M.B.A. students. He also holds a Bachelors of Science (HONS) from the University of Warwick, UK in Economics.

Andrew Singer, CFA

Portfolio Manager, Senior Research Analyst

Andrew Singer, CFA, serves as a Portfolio Manager for Eventide’s Dividend Growth and Large Cap strategies, as well as Senior Research Analyst on other Eventide investments.

Prior to joining Eventide, Mr. Singer held investment analyst positions at Credit Suisse, BlackRock, and John Hancock, where he focused on small- and mid-cap equities across a variety of sectors. He has a bachelor’s degree in Quantitative Economics from Tufts University and an MBA from Babson College. He holds the Chartered Financial Analyst designation and is a member of the CFA Society Boston and CFA Institute.

References
1. C.S. Lewis, The Screwtape Letters (New York: HarperCollins, 2009), 161, Kindle.