Letter #325: Emme Kozloff and Mike Gitlin (2025)
Capital Group Portfolio Manager and Capital Group President & CEO | Running a tight, high-conviction portfolio in a noisy market
Intro
More on this newsletter here.
Short Bios
Emme Kozloff is a Portfolio Manager at Capital Group.
Mike Gitlin is the President and CEO of Capital Group, as well as the Chair of the Capital Group Management Committee.
Full Bio, Summary, and Related Resources below paywall
Transcript
Mike Gitlin: Now Emme, not a lot of our guests can say on the way into the podcast they had a flat tire and are still on time. So you get an A+ this morning before you even say a word for being on time with a flat tire. Go Emme! But thank you for being here. Tell us a little bit about your start before you got here.
Emme Kozloff: So, I went to business school and I landed a job at the Walt Disney Company right here in Southern California. I worked for a financial planning group that reported directly to the CFO. What was really interesting about that is one of our jobs was to roll up the corporate quarterly earnings model. What that meant was every quarter our phones would be ringing off the hook with these buy-side analysts, sell-side analysts, and portfolio managers, all asking a thousand questions. “Why didn’t you grow fast enough? What’s wrong with that French theme park? What’s the next movie on slate?” On and on. I thought, wow, these guys are pretty bold. Then I got moved to consumer products. Disney has tons of retail relationships for the obvious reason: the content, the characters, etc. It was a little while later, I got a random call from a headhunter who said, “Hey, would you be interested in interviewing for a sell-side job?” And I said, “Why not?”
Mike Gitlin: To be a research analyst on Wall Street covering stocks.
Emme Kozloff: Exactly. Which I really knew nothing about other than the quarterly earnings at Disney. About six months later, my husband, our 14-month-old baby, and I were packed up, and we moved 3,000 miles to New York City, and I started my job as a retail analyst. But I realized I wanted to go to the buy-side.
Mike Gitlin: Become an investor.
Emme Kozloff: Become an investor, exactly. You’re living in the sell-side world of short-termism. Five and a half years later, I got a phone call from one of our clients, The Capital Group. When you’re a sell-sider that wants to go to the buy-side...
Mike Gitlin: That’s a good call to get.
Emme Kozloff: That is the dream call! And I had to act cool, calm, and collected, of course.
Mike Gitlin: Maybe I’ll think about it.
Emme Kozloff: Exactly. And inside I was like, “Oh my god.” It was about 700 interviews later, the usual, that I was fortunate enough to get an offer to be a retail analyst at Capital in one of the equity groups.
Mike Gitlin: So when you got to Capital Group, you knew retail well; you were covering retail. But you also started to cover diversified financials, which are super different. They could not be more different, sort of like my oldest son and my daughter – they could not be more different, both wonderful, but different. So, how did that set you off as an investor? How did that inform your style?
Emme Kozloff: Retail, I think of it as guerrilla warfare. It is incredibly volatile in terms of the stocks. There’s tons of competition. You’ve got all sorts of business models: hypergrowth, deep value. What I really learned from retail was separating the signal from the noise because, Lord knows, there was a ton of noise. Compare that to diversified financials, and in my case, that was covering equity exchanges, derivative exchanges, rating agencies, data analytics firms – super opaque, nobody that interested. But within it were some incredible business models, deep moats, and pricing power. When I put the two together in terms of my overall investment style, I think I learned a ton about offense and being nimble in retail, and a lot about discipline and defensiveness with the diversified financials. So I actually got really lucky to have that combo.
Mike Gitlin: And then that led you to be an investor, obviously, at Capital Group. Analysts are investors. Did your style come out of that? How would you describe your style today?
Emme Kozloff: I would say mental flexibility is really my edge, and that’s because this is an incredibly humbling business. When the facts change, you’ve got to be prepared to change. I have a quality bias by nature, and I think the diversified financials really let me appreciate that. So my filter is first: are these durable business models, what is the pricing power, what is the competitive edge of that company and that management team? I love to use that as my preliminary filter, and then I get to partner with the analysts, and it’s that combination that really helps me build my portfolio.
Mike Gitlin: So, not so rigid that a company in your portfolio has to have these 17 checklist things. It’s that mental flexibility that helps you find the best opportunities and not have to check off all of a certain list of things. Is that right?
Emme Kozloff: Exactly.
Mike Gitlin: And you tend to be very concentrated in your portfolio. We have investors on this podcast, and some have 182 holdings and some have 30. You’re in the 30 camp. So, tell us why you — and we’ll get into some of your ideas today — tell us a little bit about why you run such a concentrated portfolio, stylistically.
Emme Kozloff: First of all, I just don’t have the mental bandwidth to manage over a hundred stocks. I can’t keep all that in my head. God bless the people that can.
Mike Gitlin: Can’t be an expert on 182 names.
Emme Kozloff: Not at all. Not at all. That goes back to signal and noise for me. I need focus. I need that tighter portfolio. I also think, for me at least, covering the asset management industry and seeing the rise of passive, etc., I feel like I have a duty as an active manager to be active. So, I’m willing to take larger positions, again, when I’m partnering with an analyst that has very strong conviction. Essentially, I build my portfolio one stock at a time. But to your point, not necessarily with one giant theme, it’s just where I see the opportunity. And I’m incredibly selective.
Mike Gitlin: And your biggest holding of your portfolio could be 10% of your total portfolio. It’s not necessarily 5% or 3%. It could be a double-digit sized position that’s your largest holding.
Emme Kozloff: Yeah, above 10%. It doesn’t start that way. I don’t come charging in and say, “I’m going to have a 10% position.” I usually start with a mid-size position, but the key is holding it and letting it grow. Again, it goes back to my conviction matched with the partnership with the analyst that usually gets it to that point.
Mike Gitlin: And then you wrap that in the Capital system. So, talk about how you think of broader risk in a portfolio when you’re one of the several disclosed portfolio managers. Talk a little bit about that nature of the Capital system.
Emme Kozloff: Well, that’s actually the beauty: we have all of these different managers. So I am allowed to be me. That is an incredible gift. Other people have different styles. Other people have different risk management approaches. I do me, they do them. The beauty of that is that they all bubble up into something where the principal investment officer of a fund is able to check it and make sure that the risk profile overall is doing fine, but generally, they don’t tinker too much with us.
Mike Gitlin: Yeah, that autonomy is important. I like to say you’re not left with one individual’s 300th or 400th best idea because you have high conviction in multiple portfolio managers executing. So, ideas — and the only rule is no open orders on the trading desk — whether thematically or individual stocks, what’s on your mind right now?
Emme Kozloff: Well, I’m probably the 50th person you’ve talked to that’s going to say this, but AI to me is a revolution. This is not an evolution. This is going to —
Mike Gitlin: Fundamental change.
Emme Kozloff: Fundamental, and across so many different sectors. That being said, I think it’s going to be very tricky to figure out where these mass applications will end up. So in my view and the way I’m investing, I’m investing in that early-stage infrastructure buildout. To me, I think there are several more years of runway for that to happen, whether it’s in the semiconductor supply chain or in the rebuilding of the electrical grid. I’m really pumped about that.
Mike Gitlin: So, the infrastructure, what supports the whole ecosystem.
Emme Kozloff: Exactly, exactly. We call that the picks and shovels versus picking maybe a software company or a killer app. I’m not there yet. I think that’s an area that we will obviously get to, but right now, I feel a lot more comfortable staying in that buildout component. The other area that I’m intrigued by is healthcare, and that’s really the other end of the spectrum. That sector has been left behind in this bull market that we’ve had for the last couple of years. It’s just hard for me not to believe that AI is not going to transform drug discovery, personalized medicine, and efficiency in the healthcare insurance area. So, I’m very picky, but I’m sniffing around there. I think I’m probably going to be spending the next 12 to 18 months. These may be long-term investments, but that’s an area I also think is important to be focused on.
Mike Gitlin: And that’s a bit more of your value bias, seeing from a multiples perspective, it’s historically cheap versus the broader market.
Emme Kozloff: Exactly. But with some potential long-term organic growth.
Mike Gitlin: Got it. Okay. I want to talk also about lessons learned. This is a humbling profession we’re in, and whenever I mention it to folks, they say, “Where do you want me to start?” So there’s...
Emme Kozloff: You have all day?
Mike Gitlin: So, in the context of a 30-minute podcast, what are some lessons learned along the way that you can share with people? I view this podcast as a master class in investing. I’m privileged to be able to talk to you and other investment professionals who are so good at what they do, and they all do it differently, like you said, and they all have different lessons learned. But talk to us about one or two of those.
Emme Kozloff: I mentioned retail being like guerrilla warfare, and one of the very valuable lessons I learned covering that sector was to be very, very careful about turnarounds. There was a time when I think I had three retail investments, if I remember: Coach, Urban Outfitters, and Lululemon, all in varying phases of a ‘turnaround.’ I think the reality is turnarounds take longer, they’re more expensive, and they’re a heck of a lot more difficult than anybody thinks. In a given 12-month period, I think all three underperformed the market by 50%. It was brutal.
Mike Gitlin: Degree of difficulty in turnarounds in retail is just super high.
Emme Kozloff: Oh, super high. If you look at my portfolios today, I have very, very few. I guess it’s a permanent scar on me, but it was an incredibly important lesson. It was also a lesson about execution because, a lot of times, these turnarounds go nowhere unless the execution is excellent.
Mike Gitlin: So, you talk about lessons, and you and I have talked about mentoring in the past. I’d like your mentors to be outside of Capital Group. When I ask our investment professionals for mentors, which is great, they always come from inside the four walls. Give us one or two mentors from outside of Capital Group that help steer you in the direction you’re on.
Emme Kozloff: Sure. There are two amazing women outside of Capital that have had a huge impact on my career. The first one was Sallie Krawcheck. She was the research director at Sanford Bernstein, became the CFO at Citi, and ultimately ended up opening her own all-female asset management firm. She took a shot; she gave me a chance. I was coming from industry, I knew nothing about Wall Street. She brought me in, and frankly, there’s no way I’d be here today talking about this if it wasn’t for her. She always had a great line. She would say to me, “Emme, never forget: play to your strengths.” And I think as a female in the investment world, she was trying to say, “Don’t try to be everything to everybody.”
Mike Gitlin: Be you.
Emme Kozloff: Be you. Own it. Share it. You can be successful just as you are. To me, that’s incredible leadership. It was just a great way of really inspiring me at a time when I wasn’t really sure.
Mike Gitlin: That’s a great piece of advice.
Emme Kozloff: And the other one is Lisa Shalett. She took over from Sallie when she left Sanford Bernstein, and she’s now the CIO of Morgan Stanley’s Wealth Management Group. She’s brilliant, she is hilarious, and she taught me a tremendous amount about managing failure. One example I will never forget: I was on the sell-side, pitching a retail stock in front of the salesforce, and as I was pitching the stock as a buy, the company negatively pre-announced earnings, and the stock dropped 15% in the pre-market.
Mike Gitlin: Like right then.
Emme Kozloff: Right then and there. I walked out of that room. I walked down the hall straight into the ladies’ room. I locked myself in a stall and just sat there trying to figure out ways I could become invisible. It was awful. About 15 minutes later, Lisa Shalett, who’s only yay high, came in and she said, “Emme Kozloff, I know you’re in here. You can’t erase your mistakes, but you can outgrow them. So, get out of the bathroom and get back to work.” And once again, the lesson is so powerful and applicable as much today as it was then. It was just a great way of a leader recognizing we had a crisis here, but I had to keep that person moving forward.
Mike Gitlin: I spoke with her recently. She’s a force of nature. She’s an impressive woman.
Emme Kozloff: She really is. I consider her a mentor now.
Mike Gitlin: In your words, what makes Capital Group different or special? What makes us different or special?
Emme Kozloff: Well, having covered the asset management industry as an analyst, that’s a really easy question for me. First, we’re private. Watching these public asset managers have to deal with the external forces of shareholders demanding all of these things short-term, Capital has the ability to invest long-term in our strategies and long-term in our people. I think every one of us at Capital should be an asset management analyst because boy, you will appreciate the fact that we’re private. The second part is really the lack of a star system. Again, covering these companies, there are single portfolio managers in charge of giant funds, and we don’t have that. The important part about that is that it allows you to build a culture of collaboration. It’s not viewed as a zero-sum game. So when you have collaboration, you build trust. When you build trust, you allow people to take risk. And this job is all about taking risk.
Mike Gitlin: Yeah, that’s really well said. You also avoid key person risk, which in asset management, one person driving off a cliff can happen a lot, and it has historically. We’ve seen that time and time again. So I think that’s super well said.
Emme Kozloff: The last thing I would say is what you mentioned earlier: analysts manage money. From the day you launch your coverage, you’re managing money, you are managing risk. What that does is it breeds the next generation of portfolio managers from the beginning. Just like you mentioned about key risk, we, I think, have created a great system where we get that natural transition to the next generation, but we do that in a very calculated manner. There are not many asset managers that let analysts actively manage money.
Mike Gitlin: We talked earlier about the difference in covering retail and diversified financials. I think the difference between being an analyst who just puts a buy or sell on something and rates it, or, invests real money and having skin in the game, it’s a totally different job.
Emme Kozloff: Game changer.
Mike Gitlin: Game changer. Different job. Could not agree more. The office treasure hunt. I did go into your office, and I couldn’t physically take something off your wall, so I’m going to describe it for folks.
Emme Kozloff: You need to work out more, Mike.
Mike Gitlin: I know. I’m trying. Now I’m walking. Now I’ve got to start lifting. There’s a lot on my to-do list. So, I look at the picture on your wall, and it’s of a woman in a lawn chair with a six-pack of beer next to her, reading a financial publication or a newspaper. I obviously have to ask about that because, first of all, it’s super cool, and second of all, it must mean something to you. Tell me about that.
Emme Kozloff: It definitely has a lot of meaning to me. It’s a photograph by an artist named Alex Prager, and primarily it does a great job of reminding me every day that there’s no one type of investor. There are so many stereotypes about investing. It’s the guy in the suit on Wall Street, or the woman, or the 20-year-old buying crypto on Robinhood. No, it’s all of us, and it should be all of us. That speaks to something that I’m really passionate about: women’s investment literacy. We have this huge gap. Our company has done a study, and we find that women invest later than men, they invest in less risky assets, which means they invest in a lower percentage of equities, and we live longer, which means we end up with less money. It’s really important that we, as asset managers and as investors, really try to close that gap. So yeah, I smile at her every day, and she reminds me of what I’m doing.
Mike Gitlin: Now, you told me your daughter opened an investment account. Has she seen the picture, first and foremost?
Emme Kozloff: Yes.
Mike Gitlin: Okay. So, how did the investment account go? Is it still going for your daughter? Does she want to be an investor like mom? What’s the story there?
Emme Kozloff: Of course she doesn’t want to be an investor like her mother. Nobody wants to be like their parent. I spent years talking to her about it and trying to get her excited. I think I was like the Charlie Brown teacher; all she could hear was ‘wah wah, wah wah.’ But for some reason, at the end of 2022, the light bulb, I guess, went off, and she announced that she had opened an investment account. I was like, “Wow.” She took her TA money, her birthday money, she was a hostess. She put all that money into the market, a broad fund. Well, you know what the market’s done since the end of 2022.
Mike Gitlin: Yeah.
Emme Kozloff: So now she thinks she’s an investment genius.
Mike Gitlin: Oh, she’s done super well. She’s annualizing probably 15% returns.
Emme Kozloff: More. And she looks at me and goes, “I don’t get it. Why do you say this job is so hard?” So…
Mike Gitlin: Wait. Wait for it.
Emme Kozloff: Exactly. I’m just happy she’s engaged. She had darn good timing, though.
Mike Gitlin: Good timing. Timing is important in that regard. What advice — you talked about women in investing, and you’re a mentor to many people. You were kind about mentioning mentors externally, but you also mentor folks. What advice do you give for women entering our business?
Emme Kozloff: Well, first, I want to say, “Bring your friends. We need more of you.” The second thing is, as long as you’re willing to take the time and learn the tools, and not get hung up on short-term setbacks, this can be an incredible career. It helps to have mentors, absolutely. But I think we’ve just made this job very opaque, and we’ve got to break down those barriers. So my view is: come in, take the risk. It can mean a lot.
Mike Gitlin: Get involved. Gratitude. I’m going to share with you our mug, our excessively, obsessively, wonderfully grateful mug.
Emme Kozloff: Thank you.
Mike Gitlin: You get to keep this one. Usually, when one of our investment professionals is in London or Hong Kong, we have to send it to them. Here, you can just walk downstairs.
Emme Kozloff: Thank you very much.
Mike Gitlin: What are you grateful for?
Emme Kozloff: To be honest, it’s sitting right here right now talking to you. That’s because about 10 years ago, I was diagnosed with advanced-stage breast cancer. Through the miracle of modern medicine and immunotherapy, I’m here today. So, I am incredibly grateful. I feel incredibly lucky. I have an amazing husband and a family that really supported me through that. Thank you, and here’s to luck.
Mike Gitlin: Yeah. Well, we’re grateful you’re here. Your family’s grateful that you’re here as well. Our clients, tens of millions in the U.S. and around the world, are also grateful for you investing for them every single day. Thank you for joining me here. Thanks for having a good time this morning. Sorry about the flat tire this morning, but thank you. It was a great conversation.
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