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.

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

QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -35.5%-35.5%-28.8%-7.0%-2.7%5.0%7.9%
Strategy (net) -35.6%-35.6%-29.2%-7.5%-3.2%4.4%7.2%
MSCI ACWI -21.3%-21.3%-10.8%2.0%3.4%6.4%6.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -35.5%-35.5%-28.8%-7.0%-2.7%5.0%7.9%
Strategy (net) -35.6%-35.6%-29.2%-7.5%-3.2%4.4%7.2%
MSCI ACWI -21.3%-21.3%-10.8%2.0%3.4%6.4%6.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -35.5%-35.5%-28.8%-7.0%-2.7%5.0%7.9%
Strategy (net) -35.6%-35.6%-29.2%-7.5%-3.2%4.4%7.2%
MSCI ACWI -21.3%-21.3%-10.8%2.0%3.4%6.4%6.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -35.5%-35.5%-28.8%-7.0%-2.7%5.0%7.9%
Strategy (net) -35.6%-35.6%-29.2%-7.5%-3.2%4.4%7.2%
MSCI ACWI -21.3%-21.3%-10.8%2.0%3.4%6.4%6.5%
Fund 20192018201720162015201420132012201120102009
Strategy (gross) 23.0%-10.0%18.8%8.7%-5.4%7.1%31.8%18.3%-0.2%19.8%41.7%
Strategy (net) 22.4%-10.4%18.3%8.2%-5.8%6.7%31.2%17.4%-1.1%18.8%40.5%
MSCI ACWI 27.3%-8.9%24.6%8.5%-1.8%4.7%23.4%16.8%-6.9%13.2%35.4%
Strategy (gross)
Strategy (net)
MSCI ACWI
20192018201720162015201420132012201120102009
23.0%-10.0%18.8%8.7%-5.4%7.1%31.8%18.3%-0.2%19.8%41.7%
22.4%-10.4%18.3%8.2%-5.8%6.7%31.2%17.4%-1.1%18.8%40.5%
27.3%-8.9%24.6%8.5%-1.8%4.7%23.4%16.8%-6.9%13.2%35.4%

Portfolio (as of February 29, 2020)

Benchmark: MSCI ACWI
Asset Allocation
Strategy
Stocks 97.7%
Cash 2.3%
Strategy Characteristics
Strategy Benchmark
No. of holdings 51 3043
Weighted avg. market cap (US $MM) $82,831 $163,206
FY2 price/earnings 9.8 14.0
Price/book value 1.3 2.2
Dividend yield (%) 3.5 2.6
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 4.1%
Takeda Pharmaceutical Co., Ltd. Japan 3.6%
UniCredit S.p.A. Italy 3.3%
ABB Ltd. Switzerland 3.2%
SYNNEX Corp. United States 3.2%
BASF SE Germany 3.1%
Samsung Electronics Co., Ltd. South Korea 3.1%
British American Tobacco plc United Kingdom 2.8%
Rolls-Royce Holdings Plc United Kingdom 2.8%
China Mobile Ltd. China 2.7%

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
Industrials 19.6% 10.1%
Information Technology 17.4% 18.1%
Financials 12.9% 16.1%
Health Care 11.4% 11.9%
Communication Services 10.5% 9.1%
Materials 8.5% 4.5%
Consumer Discretionary 6.5% 10.9%
Energy 5.5% 4.5%
Consumer Staples 2.8% 8.1%
Utilities 2.6% 3.5%
Real Estate 0.0% 3.3%
TOP 10 COUNTRIES
Country Strategy Benchmark
United States 36.9% 56.2%
United Kingdom 13.0% 4.5%
Germany 12.1% 2.5%
Switzerland 7.2% 2.8%
Japan 7.0% 7.1%
China 5.4% 4.4%
South Korea 5.1% 1.4%
France 3.4% 3.2%
Italy 3.3% 0.7%
Netherlands 2.6% 1.2%
Regional Allocation
  • Europe – other 42.5%
  • North America 37.7%
  • Emerging Asia 10.5%
  • Pacific 7.0%

Commentary (As of February 29, 2020)

Highlights

  • We expect the outbreak of the coronavirus to weigh on global gross domestic product (“GDP”) growth, with the greatest drag on China and South Korea, as well as already weak economies in Europe and Japan.
  • Monetary policymakers have already begun implementing supportive measures to ease the financial pain of a prolonged slowdown. A more direct response to counter the effects of the demand slowdown from coronavirus is fiscal stimulus. We believe the virus outbreak may act as a catalyst for European economies, in particular, to enact fiscal stimulus.
  • The recent market downdraft has presented Causeway with a rare opportunity to build positions in high-quality companies in some of the industries most impacted by short-term fear, such as transportation, travel and leisure. We believe our overweight position in cyclical stocks relative to broad benchmarks positions our client portfolios for an eventual recovery in demand for the goods and services from some of the world’s, in our view, best-managed companies with strong balance sheets able to withstand the temporary slowdown.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Holdings in the software & services, energy, pharmaceuticals & biotechnology,media & entertainment, and capital goods industry groups detracted from performance compared to the Index. Portfolio holdings in the technology hardware & equipment, consumer services, and insurance industry groups, as well as an underweight position in the consumer durables & apparel and diversified financials industry groups, contributed to relative performance. The largest detractor was travel & tourism technology company, Sabre Corp. (United States). Additional notable detractors included energy exploration & production company, Halliburton Co.(United States), media company, ViacomCBS, Inc. (United States), enterprise infrastructure software company, Micro Focus International Plc (United Kingdom), and diversified chemicals manufacturer, BASF SE (Germany). The top contributor to return was life insurer, Prudential Plc (United Kingdom). Other notable contributors included Norwegian Cruise Line Holdings Ltd.(United States), paper & packaging producer, WestRock Co. (United States), defense & information technology services provider, Leidos Holdings, Inc. (United States), and mining company, Freeport-McMoRan, Inc. (United States).

Investment outlook

Panic can be one of the best times to invest fundamentally – especially with a value approach. The recent market downdraft has presented Causeway with a rare opportunity to build positions in high-quality companies in some of the industries most impacted by short-term fear, such as transportation, travel and leisure. Though we anticipate temporary earnings reductions for these hardest-hit stocks in the short-term, assets have not been impaired and we are confident in these companies’ management teams. Valuations are increasingly attractive given the precipitous stock price drops in recent weeks. Many multinational companies, as well as those operating entirely in their domestic markets, will likely continue to suffer supply chain delays and rising costs, largely from work disruption in China, Japan, South Korea, and parts of Europe. We believe, however, the earnings and cash flow setbacks will ultimately be temporary, and normalcy should return to supply chains and logistics as virus fears recede over time. Though the nature of the late February selloff broadly punished equities, we have seen the continued divergence between economically cyclical and defensive areas of the markets. In a demand slowdown, we believe stocks at the intersection of cash flow constraints and high debt levels will face larger challenges, which underscores our emphasis on portfolio companies exhibiting superior balance sheet strength. We believe our overweight position in cyclical stocks relative to broad benchmarks positions our client portfolios for an eventual recovery in demand for the goods and services from some of the world’s, in our view, best-managed companies with strong balance sheets able to withstand the temporary slowdown. As we await clarity on the virus and its economic effects, the dividend income from our portfolio holdings is even more attractive relative to sinking bond yields. If the coronavirus does not spark a prolonged period of demand destruction, we feel confident that these companies can maintain their dividends.

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 [email protected].