Finding hungry management teams in the age of AI may be key to picking a winning stock portfolio

THE rise of artificial intelligence (AI) raises fears over the future of jobs. AI could even replace writers, among other professions. What jobs can our children do that will not be taken over by AI? 

Elite sportsmen such as footballers likely have little to worry about. People will still want to witness the drama of top-class football teams competing with one another. And people may continue to derive excitement from supporting a football club.

I used to follow sports more avidly. I do so less these days because of family commitments. Also, some of the unpredictability of club football has been removed due to the rise of extremely well-funded teams that can secure the services of top players and afford to keep deep benches.

Still, there was much drama in the recently concluded season of club football in England. Luton Town’s promotion to the Premier League – English club football’s top tier – was remarkable, having been in the fifth tier of English club football a decade back.

Brighton qualified for next season’s Europa League for the first time by finishing sixth in the Premier League, ahead of more fancied rivals such as Tottenham and Chelsea. Meanwhile, there was a nerve-wracking fight to avoid relegation on the Premier League’s final match day among Everton, Leicester City and Leeds United.

Value of hunger

Through years of following sports, I believe hunger and desire can drive outperformance. 

Sure, deep data can generally be used to accurately predict the outcome of sporting competitions. But occasionally, there are teams that do much better than expected. Such fairy tales are in turn likely to be built on a raw hunger for success and willingness to dream big.

Maybe a stockpicker looking to find gems in the equities market – the equivalent of Luton Town and Brighton – needs to try to find management teams with hunger. 

Today, many people play the equities market by buying exchange-traded funds (ETFs), which offer cost-effective exposure to particular countries or sectors.

Going forward, one can probably rely more on AI to construct bespoke stock portfolios based on one’s risk appetite, investment style, time horizon and sector preferences.

Nevertheless, human ingenuity may still give one an edge in stockpicking.

Data analytics can dissect sector drivers and generate useful forecasts of industry outlook. Still, one can use human judgment to find management teams who are hungry and therefore likely to drive better performance.

Day 1 mentality

Jeff Bezos of Amazon is well-known for stressing the importance of corporate management teams having a “Day 1’‘ mentality. What this means is a management team that is constantly curious, nimble, and experimental. It also means being brave enough to fail so that by applying lessons learnt, management can better surprise and delight customers in the future.

In short, as a business grows and ages, if management continues to have a Day 1 mentality, the organisation can hopefully avoid the pitfalls of growing complexity, slowness in decision-making and complacency. 

In Singapore, it is not just the population that is ageing. Many leading groups on the Singapore Exchange are also rapidly ageing.

OCBC was formed in 1932 from the merger of three local banks, the oldest of which was founded in 1912. UOB traces its roots to the founding of United Chinese Bank in 1935. Meanwhile, the youngest of the local banking trio, DBS , turned 50 several years ago.

Another household name on the local bourse, Keppel Corporation , which is repositioning as a leading global asset manager and operator, also turned 50 years a few years back.

Property giant City Developments turns 60 this year. Telco Singtel traces its heritage to the late 19th century. 

Among younger groups that are members of the benchmark Straits Times Index are large-cap real estate investment trusts (Reits), CapitaLand Integrated Commercial Trust and CapitaLand Ascendas Reit , which have marked 20 years on the local bourse.

Do the management teams of leading Singapore groups have a Day 1 mentality? Or are they focused on internal politics, overly comfortable in their corporate offices, and complacent about the many forces that may disrupt their business?

As corporate Singapore ages, let us hope various businesses can ensure their sustainability by having management teams with a Day 1 mentality. This is particularly so as businesses face challenges such as the rise of AI, digitalisation, climate change, protectionism and superpower rivalry.

The return of physical annual general meetings as well as in-person investor days and industry events can give retail investors more opportunities to get a sense of the drive and dynamism of various management teams.

Nonetheless, it can be challenging for investors to gauge the energy level within various businesses. 

But as AI gets more powerful, the value created from having hungry management teams could rise.

Take Reits, for example. Maybe AI can one day largely handle leasing and even acquisition negotiations, taking on tasks ranging from financial analysis to drawing up terms and conditions that best protect the interests of a party.

Still, being able to build human rapport with a counter-party can be the differentiating factor in securing a lease or acquisition deal.

While the rise of AI could make people lazier, those who are hungry could end up with a competitive edge that translates into clear outperformance.

We do not know how exactly AI will disrupt jobs and businesses. If our children are hungry, perhaps that trait – more than technical competencies – will help them thrive.

As for management teams, they need to embrace uncertainty. Management teams should also internalise what the late Andy Grove, long-time head honcho of Intel Corporation, said – that “only the paranoid survive”.

Find the hungry teams in the ageing corporate landscape here, and they could become gems in your portfolio.