This is part four of a five-part interview with John (Jack) E. Leslie III, CFA Portfolio Manager for the Miller/Howard Income-Equity Fund. The interview is part of ValueWalk’s Value Fund Interview Series.

Throughout this series, we are publishing weekly interviews with value-oriented hedge fund, and asset managers. All the past interviews in the series can be found here.

Miller/Howard Investments Inc. is an independent, SEC registered investment firm with over two decades’ experience managing equity portfolios for institutions and individuals in disciplined, dividend-focused investment strategies.

Jack Leslie has over 30 years of experience in the money management industry and before joining Miller/Howard in 2004 Jack was a portfolio manager at Value Line Asset Management, M&T Capital Advisors Group (Division of M&T Bank), and Dewey Square Investors (Division of UAM). Jack has been interviewed by The Wall Street Journal, Barron‘s and Forbes Online. Jack has appeared as a guest on thestreet.com and After the Bell on Fox Business.

Millerhoward dividend investing
Dividend Investing With Miller/Howard Investments [Pt.4]
The interview has been divided into five parts and will be downloadable as a PDF at the end of the series. So stay tuned.


Dividend investing with Miller/Howard Investments [Pt.4]

Continued from part three……

What’s your average turnover for your dividend funds?  

Our portfolio turnover is typically between 30-40% which is consistent with our 3-5 year hold period.

Another mutual fund you run is the Miller/Howard Drill Bit to Burner Tip® Fund. Could you tell our readers a bit about this?

Of course. Miller/Howard Drill Bit to Burner Tip® Fund (Ticker DBBEX) is an integrated approach to investing in energy. Much of the money currently invested in energy in concentrated in the upstream production companies, in particular in the larger multi-nationals. We take a more diversified, multi-industry approach. We allocate to four different buckets – upstream, midstream, downstream, and enabler/beneficiaries. Our goal in doing this is to hopefully provide a smoother ride for the investor by portfolio diversification. Also important, is our ability to manage the weights between these four buckets. Some industries, such as the upstream producers, benefit from high commodity prices. Others, such as utilities and petrochemical companies, benefit from low commodity prices. We have the ability to shift our allocations between these buckets in response to what we are seeing in the energy space.

I would point out two things about this fund. Though it is well positioned to benefit from the re-emergence of the United States as an energy powerhouse as we move toward energy independence, we think it should be seen as a long-term core portfolio allocation as it provides exposure to energy production, energy transportation/energy infrastructure, and the largest customers that benefit from abundant supplies of affordable natural gas in this country. The portfolio is decidedly tilted toward natural gas. Natural gas is the cleanest burning fossil fuel and is the chosen bridge fuel between the present fueled by coal and oil to a future that is carbon free. That future is likely 20 years or so away.

The second point is that even though we recently launched this mutual fund, we have been managing this strategy for high-net worth individuals for over 5 years so this is not a new approach for us. Beyond that, roughly 70% of the portfolio consists of stocks we hold in one of our other strategies so a good way to look at the Drill Bit to Burner Tip mutual fund is that it is a best ideas portfolio from our existing utilities, energy infrastructure, and dividend strategies. As I stated, we see it as a core energy allocation. It should be utilized with a long-term time horizon as we are dynamically adjusting the allocations within the fund similar to a multi-asset or multi-sector fund.

We believe it to be the most comprehensive way to capture the broad benefits of the North American energy revolution. This is first and foremost a technological revolution and from an investment standpoint the biggest beneficiaries of these breakthroughs are very likely to be companies that are not traditional energy players, but those benefitting from a newfound abundance of inexpensive domestic supply.

Finally, last 24 months have reminded us that energy is cyclical. The breadth of this portfolio’s investment universe allows us to leverage 3 decades of experience investing through energy cycles as we seek to achieve maximum returns with reduced volatility.