Seeking value primarily in developed markets worldwide

The global value portfolio is constructed from an equity universe composed of companies with market capitalizations typically greater than $1 billion located throughout the global developed and emerging market countries. Through rigorous, bottom-up company analysis, we seek to identify undervalued stocks with upside potential. The investment process comprises three stages: quantitative screening and initial analysis, fundamental research and portfolio construction.

Benchmark
MSCI ACWI
Inception
September 30, 2001

Strategy overview

The portfolio managers discuss our Global Value strategy.

Portfolio managers

Chief Executive Officer
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager
Fundamental Portfolio Manager

Performance

QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-1.2%10.7%-6.6%7.0%4.2%9.8%10.2%
Strategy (net)-1.3%10.3%-7.0%6.5%3.7%9.1%9.5%
MSCI ACWI0.1%16.7%1.9%10.3%7.2%8.9%7.5%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-1.2%10.7%-6.6%7.0%4.2%9.8%10.2%
Strategy (net)-1.3%10.3%-7.0%6.5%3.7%9.1%9.5%
MSCI ACWI0.1%16.7%1.9%10.3%7.2%8.9%7.5%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-1.2%10.7%-6.6%7.0%4.2%9.8%10.2%
Strategy (net)-1.3%10.3%-7.0%6.5%3.7%9.1%9.5%
MSCI ACWI0.1%16.7%1.9%10.3%7.2%8.9%7.5%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-1.2%10.7%-6.6%7.0%4.2%9.8%10.2%
Strategy (net)-1.3%10.3%-7.0%6.5%3.7%9.1%9.5%
MSCI ACWI0.1%16.7%1.9%10.3%7.2%8.9%7.5%
Fund2018201720162015201420132012201120102009
Strategy (gross)-10.2%19.2%8.8%-5.3%6.5%30.6%17.8%-0.2%19.8%41.7%
Strategy (net)-10.1%19.2%8.8%-5.4%6.5%30.7%17.7%0.0%0.0%0.0%
MSCI ACWI-11.1%17.9%7.7%-6.3%5.4%29.2%16.5%-1.3%18.5%40.1%
Strategy (gross)
Strategy (net)
MSCI ACWI
2018201720162015201420132012201120102009
-10.2%19.2%8.8%-5.3%6.5%30.6%17.8%-0.2%19.8%41.7%
-10.1%19.2%8.8%-5.4%6.5%30.7%17.7%0.0%0.0%0.0%
-11.1%17.9%7.7%-6.3%5.4%29.2%16.5%-1.3%18.5%40.1%

Portfolio (as of September 30, 2019)

Benchmark: MSCI ACWI
Asset Allocation
Strategy
Stocks97.2%
Cash2.8%
Strategy Characteristics
StrategyBenchmark
No. of holdings 48 2851
Weighted avg. market cap (US $MM)$77,032$141,084
FY2 price/earnings11.114.7
Price/book value1.42.3
Dividend yield (%)3.42.5
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AGGermany3.9%
UniCredit S.p.A.Italy3.7%
BASF SEGermany3.6%
Takeda Pharmaceutical Co., Ltd.Japan3.5%
China Mobile Ltd.China3.2%
ABB Ltd.Switzerland2.9%
SYNNEX Corp.United States2.8%
Sabre Corp.United States2.8%
Samsung Electronics Co., Ltd.South Korea2.8%
Marathon Petroleum Corp.United States2.8%

A “weighted average” measures a characteristic by the market capitalization of each stock. Price/book ratio is the weighted average of the price/book ratios of all the stocks in a portfolio. The P/B ratio of a company is calculated by dividing the market price of its stock by the company’s per-share book value. The price/earnings ratio is the weighted average of the price/earnings ratios of the stocks in a portfolio. The FY2 P/E ratio is a forward P/E ratio using a next-twenty-four months EPS estimate in the denominator.

Holdings are subject to change.

SECTOR WEIGHTS
Sector Strategy Benchmark
Information Technology16.6%16.3%
Financials14.5%16.7%
Industrials13.7%10.5%
Communication Services12.3%8.8%
Health Care11.6%11.3%
Energy9.6%5.5%
Materials7.1%4.7%
Consumer Discretionary3.9%10.8%
Consumer Staples3.7%8.6%
Utilities3.4%3.5%
Real Estate0.8%3.3%
TOP 10 COUNTRIES
Country Strategy Benchmark
United States34.8%55.8%
United Kingdom18.9%4.8%
Japan11.2%7.3%
Germany8.7%2.5%
China5.0%3.7%
South Korea4.9%1.4%
Switzerland4.4%2.8%
Italy3.7%0.7%
France2.1%3.4%
Netherlands1.9%1.2%
Regional Allocation
  • Europe – other 39.7%
  • North America 36.3%
  • Pacific 11.2%
  • Emerging Asia 10.0%

Commentary (As of September 30, 2019)

Highlights

  • After contracting in July and August, developed equity markets rebounded in September, likely responding to a significant move upward in global bond yields. In September, momentum-driven “quality-growth” stocks ceded market leadership to stocks with strong value and cyclicality characteristics.
  • With low-to-no cost of financing, governments in Europe and elsewhere may decide to amplify fiscal spending. Without fiscal intervention, a vicious cycle of nil return in savings forces aging European and Japanese populations to save even more, adding to demand for fixed income, and pushing interest rates lower.
  • We believe our portfolios are well-positioned to benefit from a return to favor of value and cyclicality. If economically sensitive stocks outperform, we intend to use that opportunity to lower portfolio expected volatility with bargains from less cyclical sectors.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Holdings in the technology hardware & equipment, energy, banks, retailing, and insurance industry groups contributed to performance compared to the Index. Portfolio holdings in the pharmaceuticals & biotechnology and telecommunication services industry groups, along with an underweight position in the semiconductors & semi equipment, consumer durables & apparel, and diversified financials industry groups, detracted from relative performance. The top contributor to return was design -to-distribution business process services technology company, SYNNEX Corp. (United States). Other notable contributors included oil refiner, Marathon Petroleum Corp. (United States), electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea), banking & financial services company, Barclays Plc (United Kingdom), and banking & financial services company, UniCredit S.p.A. (Italy). The largest detractor was travel & tourism technology company, Sabre Corp. (United States). Additional notable detractors included pharmaceuticals & chemicals company, Bayer AG (Germany), pharmaceutical & consumer healthcare products producer, Novartis AG (Switzerland), global entertainment content company, Viacom, Inc. (United States), and diversified pharmaceutical company, Merck & Co., Inc. (United States).

Investment outlook

We believe that fundamentals do prevail over the long-term…it is just very difficult to know when the market will turn. September witnessed a chain reaction of cheap stocks, often in cyclical industries, attracting bargain hunting – which, in turn, attracted more buying. Stock markets have a history of discounting future events long before they occur. We suggest that most cyclical stocks priced in a recession by the end of August and are now moving upward on the hint of fiscal spending and recovery. We believe our portfolios are well-positioned to benefit from a return to favor of value and cyclicality. If economically sensitive stocks outperform, we intend to use that opportunity to lower portfolio expected volatility with bargains from less cyclical sectors. Our team has intensified efforts to get managements to commit to specific plans to improve earnings and returns on capital. While we wait, the majority of these portfolio companies return capital to shareholders, often via generous dividend payouts. This dividend income is striking in a low-income world, reducing the duration of the investment. We are holding company managements’ collective “feet to the fire,” measuring their progress and holding them accountable to their operational restructuring plans. This makes our efforts in value investing “all weather,” though a tailwind for value risk would be welcome.

The market commentary expresses the portfolio managers’ views as of the date of this report and should not be relied on as research or investment advice regarding any stock. These views and the portfolio holdings and characteristics are subject to change. There is no guarantee that any forecasts made will come to pass. The securities identified and described above do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. Past performance does not guarantee future results. For a description of our performance attribution methodology, or to obtain a list showing every holding's contribution to the overall account's performance during the quarter, please contact our product manager, Kevin Moutes, at 310-231-6116 or moutes@causewaycap.com.