The Misfits: SEI Investments Company (SEIC)

A lesson in finding the balance between returns and growth and the pitfalls of high insider ownership.

The Banker’s Table, William Hartnet, 1877, oil on canvas (Metropolitan Museum of Art)

A reader (thanks, Muzamel!) followed up on my inaugural mailbag. He asked about the limits and downsides to incentivizing management on a per-share and rates of returns, past management teams on the board and their “independence”, returns on incremental invested capital, and several other topics. I won’t be able to get to all of them, I have a great company through which we can examine these questions.

SEI Investments Company (NASDAQ: SEIC).

Since going public in 1981, SEI has delivered a 35,000% return, putting it in the upper echelon of returns over the past 40 years. The company has many of the qualities investors would want to see: a sticky relationship with its clients, a decent margin profile, a solid balance sheet, rates of return well above its cost of capital, high insider ownership from founders and early employees, and a seemingly reasonable valuation. It checks so many “quality stocks” boxes that I’m surprised this company isn’t frequently discussed at value investing conferences.

That said, the company’s results over the past 5, 10, and 20 years probably has some investors wanting more.

SEI’s story touches on many of Muzamel’s questions and presents an additional question. Can SEI get back to its market-beating ways?

Let’s dig in…

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