If you want to know something about the history of the Baltimore investment community, you might want to call James Hardesty.
The 67-year-old history buff and chairman of Hardesty Capital Management has spent his career in Baltimore, starting with a job in the mail room of Alex. Brown & Sons and later as an executive at the old Mercantile Safe Deposit & Trust Co. Both Baltimore companies eventually were acquired.
He founded his own investment firm in Baltimore in 1995. Today, it manages $800 million in assets, with a goal of reaching $1 billion within two years. To help achieve that, the firm recently hired a new president.
Hardesty recently discussed the stock market, challenges for his firm and an old classmate who is a former U.S. president.
Your first job out of high school influenced your decision to make a career of investing. So what did you discover delivering inter-office mail at Alex. Brown & Sons that enticed you to become a money manager?
My job as a mail boy in the summer of 1964 was collecting, sorting and redelivering the inter-office mail every hour. This required me to visit every major department and operation throughout the firm many times a day. In no time, I observed the fast-paced action of some of the departments, watched traders diving for banks of phones ringing constantly, and roaming through the quiet, almost library-like atmosphere of the investment banking and research departments. In my blue blazer and tie, I moved silently through the grand 30-foot-high main banking rooms and passed the partners seated at antique roll-top desks. Before and after my daily mail room duties, I found myself reading investment research reports and annual reports in the firm's research library. That summer, I knew that I was in the middle of Baltimore's most powerful financial center. I loved everything about it — I was hooked on a career!
While attending Georgetown University, you became friends with a fellow student from Arkansas — Bill Clinton — whom you later visited in the Oval Office. So what was Clinton like in college, and did you foresee back then he would be living in the White House someday?
I and many other freshmen met the president-to-be on my first day at Georgetown. He was very outgoing, and though I did not realize it, he may have already been running for class president, a position he would win a month later and keep for all four years. He was a natural politician, even then. At school he was a regular (although extremely bright) guy, and I remember his impressive energy even with just four hours of sleep each night. Did I ever think he would be president? Of course not; heck, there have only been 44 in the history of the republic. But I did think he would have a political career in Washington, most likely as a long-serving senator from Arkansas, like his then-hero Sen. William Fulbright, chairman of the Foreign Relations Committee.
You hired a new president, Chad Meyer, to continue building Hardesty Capital Management, which has a goal of reaching $1 billion in assets within two years. What challenges do you see ahead for the firm?
I worked with Chad when he was an intern 20 years ago at Mercantile Bank, when I was executive vice president of the trust department. I realized Chad had a rare passion for the investment business, much like I had as a young man. I had always hoped to work with him, but after earning his MBA degree from [New York University's] Stern School he moved to Wall Street and a prestigious job at Brown Brothers Harriman.
Fortunately, his marriage to his lovely wife, Kate, and three children domesticated him and returned him to Baltimore to raise a family. I was waiting to pounce! Chad will serve as our firm's president, and he is a shareholder in the company. His primary role is to oversee our marketing efforts, a position that perfectly suits his skills and our firm's needs. Chad will also work closely with our analysts and portfolio managers as a member of our investment committee.
Our value investment philosophy had earned Hardesty Capital a good reputation, and marketing is an area where we've needed more bench strength. As an added benefit, Chad frees our new vice chairman and former president, Steven Shea, to pursue his area of strength in investment banking. I feel our team is now properly structured to take the firm from its current asset base of $800 million to the next level.
In an interview with The Baltimore Sun in March when the Dow Jones industrial average was around 14,400, you said stocks remained undervalued, but you would get nervous when the Dow hit 16,000. The Dow reached that point in November. Does that still make you nervous and what changes, if any, had you made to the portfolio you manage?
The easy answer to your question am I nervous now that Dow has reached my March forecast of 16000 is "yes." But we are close to a new year and we foresee higher earnings next year that could justify further gains in the Dow, though these gains are unlikely to be as strong as we have experienced in 2013. But our firm's intrinsic value approach is to seek individual companies selling at a significant discount to our analysts' appraisals of value relative to the current share price in the market. Though the overall market may be at an all-time high, many individual companies offer a margin of safety that can produce satisfactory investment returns in the coming year.
One of your outside interests is traveling — with a historian as a guide. What were some of your favorite trips and why?
My wife, Lindsay, is in charge of our family's travel department. In the last several years, we have visited Scotland and Ireland. In a new twist, Lindsay has hired a driver and a guide/historian to accompany us, and this has made the trips much more interesting. Walking the Scottish battlefields of Culloden and searching for the Loch Ness monster with a running commentary, often spiced with humor, provided by the historian has enriched our travel experiences. Next stop: Southeast Asia/China.
James D. Hardesty
Title: Chairman, Hardesty Capital Management
Previous job: Investment Counselors of Maryland, Mercantile Bank
Education: Georgetown University, B.S., 1968; Columbia University, MBA, 1970
Family: Wife, Lindsay; daughter, Ellen, 26
Residence: Baltimore County
Hobbies/interests: Reading, bridge, history, travel, golf