An Interview with Needham Funds Portfolio Manager John Barr
Today, we have the privilege of gaining valuable buy-side insights through an exclusive interview with John Barr, Managing Director, Executive Vice President, and Portfolio Manager at Needham Funds. Since January 2010, Barr has served as Co-Portfolio Manager of the Needham Growth Fund and Portfolio Manager of the Needham Aggressive Growth Fund, bringing extensive expertise and strategic perspective to our discussion.
The Podium: Thanks for joining us today, John.
John Barr: My pleasure; looking forward to the discussion.
The Podium: What is the one thing investor relations (IR) professionals could do to make meetings with the buy-side more productive?
John Barr: Before answering that, I think it’s useful to explain how we invest. Our mission is to create wealth for long-term investors. We do that by investing in what I call Hidden Compounders and holding for a long-time. Our most recent trailing 12-month turnover was 7%, which translates to a 14-year holding period.
My investment philosophy is that the market inefficiently values some companies beyond a 12 to 18-month time horizon. Wall Street rarely looks beyond the typical financial model.
There are three phases to my investment process:
The first is the “Hidden Compounder” phase – when we first invest in a company that has an established business but is investing in something new, whether it’s a service or product. The time frame for the payoff on the new investment may be beyond 12-18 months. We primarily focus on small caps.
The second is the “Transition” phase – when the company’s business starts showing visible results.
And finally, the “Quality Compounder” phase – when the company’s success becomes apparent to the broader market.
The challenge is to hold on while companies move through the three phases and not to be enticed to sell just because a stock price has moved a certain percentage.
I also look for companies with long-tenured management, often run by founders or families, because they tend to think long-term. Because our turnover is low, we’re not trading in and out of companies frequently. We’re looking to be financial partners to the companies we invest in.
With that context, the best thing IR professionals can do is understand who we are. Know my investment process and whether your company aligns with it. If it does, we welcome the chance to meet management.
The Podium: What are the key mistakes that companies and IR professionals make in their ongoing communication with you?
John Barr: The biggest mistake is not responding. If we reach out, it means we’re interested in the company. Even if it’s a quiet period, at least acknowledge our request and let us know when we can talk.
If we request a meeting, try to find a way to say yes. If you’re holding an investor day or an event, consider how to make it available to all of us that may match with your desired investors, even if we are from smaller funds. Consider that some small funds can be great, long-term investors. In-person events are much better than virtual.
The Podium: Let’s talk about investor conferences. We’ve seen a dramatic increase in the number of “fireside chats” versus traditional company presentations in recent years — which do you prefer?
John Barr: If I’m completely new to a company, I prefer a full presentation. Otherwise, I lean toward a fireside chat. Fireside chats tend to be very insightful.
I don’t care for panel discussions. When you have four or five executives on a panel for 40 minutes, each person gets about five minutes to speak after you’ve considered the moderator’s speaking time. I’d rather hear a single executive’s perspective than a general industry discussion. Every executive has a valuable point of view on a topic. I’d rather not dilute that valuable point of view by introducing other speakers to the discussion.
The Podium: When it comes to meeting with a company at a conference, do you prefer one-on-ones or small group settings?
John Barr: One-on-ones, two-on-ones, three-on-ones, and even four-on-ones are fine. Once you get to five people, it may be too many. Mixed knowledge levels may also be an issue—if someone starts by saying, “I haven’t had time to look at the company, can you tell me the story?” it’s not a good start. Having a well-prepared audience who understands the basics can lead to a more productive discussion.
The Podium: What are your thoughts on companies providing earnings guidance?
John Barr: I don’t want it. Some of my best companies don’t provide guidance. Companies should let investors figure out what they think a company may earn. I focus on long-term business performance, not whether a company hits or misses a quarterly estimate by a penny.
The Podium: What do you look for in an IR website? Any innovative features you find useful?
John Barr: I look for the basics. A good corporate presentation is the most important thing. I’m referring to a strategy presentation, not just a quarterly update. Although a quarterly update presentation is better than no presentation at all. Transcripts of earnings calls are useful but can be made available through FactSet or Bloomberg. A recorded version of the calls is helpful, although most of the time I read the transcript.
One idea I’d love to see is links to CEO or CFO podcasts. Many executives appear on podcasts, but they’re hard to find. Linking to them on the IR website would be valuable. Additionally, offering a well-organized historical archive of presentations, earnings reports, and key company milestones could add transparency and credibility.
The Podium: How has technology impacted your investment process? Are you using sentiment analyses or other AI tools?
John Barr: No, we’re not using sentiment analysis. AI could eventually help with analyzing transcripts and filings, but we haven’t implemented anything like that yet. We rely on traditional research methods.
The Podium: What is one thing public companies could do better in investor relations?
John Barr: Understand your investors and allocate resources toward long-term, low-turnover shareholders rather than short-term traders looking to trade around sentiment shifts and quarterly events. Proactively engaging with long-term investors and ensuring transparent communication can build strong relationships and trust.
The Podium: Any examples of companies that excel at IR?
John Barr: Clean Harbors stands out, and their IRO, Jim Buckley, is excellent. He understands the company as well as management does, knows what can and cannot be shared, and is highly responsive. Others include Dave Spille from Parsons Corp. and Tom Barth from Blackbaud and formerly of Akamai (the new team at Akamai is great too!) Traci Tsuchiguchi of Teradyne, David Lowenstein of CarMax, and Ivonne Salem of Thermon Group all do great jobs as well. These companies have IROs who deeply understand their businesses, are responsive and maintain strong relationships with investors.
The Podium: Thanks for joining us today, John; looking forward to seeing you on the road!
John Barr: It’s been a pleasure.
