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

Performance

QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 1.6%-21.7%-13.0%-3.1%3.0%6.7%8.8%
Strategy (net) 1.5%-21.9%-13.4%-3.6%2.6%6.1%8.1%
MSCI ACWI 8.3%1.8%11.0%7.7%10.9%9.1%7.7%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 1.6%-21.7%-13.0%-3.1%3.0%6.7%8.8%
Strategy (net) 1.5%-21.9%-13.4%-3.6%2.6%6.1%8.1%
MSCI ACWI 8.3%1.8%11.0%7.7%10.9%9.1%7.7%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 1.6%-21.7%-13.0%-3.1%3.0%6.7%8.8%
Strategy (net) 1.5%-21.9%-13.4%-3.6%2.6%6.1%8.1%
MSCI ACWI 8.3%1.8%11.0%7.7%10.9%9.1%7.7%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 1.6%-21.7%-13.0%-3.1%3.0%6.7%8.8%
Strategy (net) 1.5%-21.9%-13.4%-3.6%2.6%6.1%8.1%
MSCI ACWI 8.3%1.8%11.0%7.7%10.9%9.1%7.7%
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 September 30, 2020)

Benchmark: MSCI ACWI
Asset Allocation
Strategy
Stocks 99.0%
Cash 1.0%
Strategy Characteristics
Strategy Benchmark
No. of holdings 52 2993
Weighted avg. market cap (US $MM) $64,116 $260,753
FY2 price/earnings 12.2 17.7
Price/book value 1.2 2.5
Dividend yield (%) 2.5 2.0
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 3.9%
Samsung Electronics Co., Ltd. South Korea 3.5%
UniCredit S.p.A. Italy 3.4%
Ashland United States 3.1%
SYNNEX Corp. United States 3.1%
Takeda Pharmaceutical Co., Ltd. Japan 3.1%
Novartis AG Switzerland 2.8%
BASF SE Germany 2.8%
Leidos Holdings, Inc. United States 2.8%
Google United States 2.8%

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
Financials 21.6% 12.5%
Information Technology 20.3% 21.7%
Industrials 19.0% 9.6%
Consumer Discretionary 9.9% 12.9%
Health Care 6.9% 12.6%
Communication Services 6.7% 9.3%
Materials 5.9% 4.8%
Real Estate 2.8% 2.8%
Consumer Staples 2.3% 8.0%
Energy 2.0% 2.8%
Utilities 1.5% 3.1%
TOP 10 COUNTRIES
Country Strategy Benchmark
United States 48.6% 58.3%
Germany 11.6% 2.6%
United Kingdom 7.4% 3.5%
Switzerland 6.5% 2.8%
Japan 6.1% 6.9%
South Korea 4.7% 1.5%
France 3.8% 2.8%
Italy 3.4% 0.6%
Netherlands 2.2% 1.2%
Spain 1.8% 0.6%
Regional Allocation
  • North America 49.7%
  • Europe – other 36.7%
  • Emerging Asia 6.4%
  • Pacific 6.1%

Commentary (As of September 30, 2020)

Highlights

  • Equities declined in September—the first month of negative returns since the market shock in March at the onset of the coronavirus pandemic. Value stocks underperformed growth stocks.
  • Until a vaccine, therapies, and widespread testing are available and economies fully reopen, we believe further stimulus packages will be needed to bolster the recovery in most regions.
  • In our view, the most compelling companies in the value universe are those engaged in operational restructuring, using the disruption of the pandemic to lean out their cost bases and shed non-core assets. This ensuing boost in operating leverage may position these forward-thinkers well for an upturn in revenues as recovery develops.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, banks, transportation, real estate, and consumer services industry groups detracted from performance relative to the Index. Holdings in the technology hardware & equipment, semiconductors & semi equipment, food beverage & tobacco, insurance, and automobiles & components industry groups offset some of the underperformance versus the Index. The largest detractor was jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom). Additional notable detractors included banking & financial services company, UniCredit S.p.A. (Italy), global financial services giant, Citigroup, Inc. (United States), multinational airline holding company, International Consolidated Airlines Group SA (United Kingdom), and airliner manufacturer, Airbus SE (France). The top contributor to return was parcel transportation & delivery company, FedEx Corp. (United States). Other notable contributors included design-to-distribution business process services technology company, SYNNEX Corp. (United States), electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea), robotics manufacturer, FANUC Corp. (Japan), and British American Tobacco plc (United Kingdom).

Investment outlook

This year’s dominance of growth and momentum stocks over value stocks has surpassed the peak reached during the technology, media, and telecommunications (“TMT”) bubble in the early 2000s. The biggest winners in this bifurcated market are companies exhibiting top-line growth, regardless of whether this translates to near-term profitability.The trends of passive investing and algorithmic trading have exacerbated a concentration of performance—the bulk of equity returns in a number of region-based indices during the year-to-date period derive from just five companies, with the effect most pronounced in the US and emerging markets. Growth stock valuations are so stretched relative to history that we believe any abatement of pandemic-related uncertainty—namely efficacious vaccines or therapies that facilitate economic reopening—could spark a shift in investor sentiment towards economically cyclical companies. We believe that the cyclical component of value should also benefit from further fiscal spending by Western governments in infrastructure. In our view, the most compelling companies in the value universe are those engaged in operational restructuring, using the disruption of the pandemic to lean out their cost bases and shed non-core assets. This ensuing boost in operating leverage may position these forward-thinkers well for an upturn in revenues as recovery develops. We continue to engage with portfolio company management teams to hold them accountable to meet their earnings and cash flow goals. For example, in a lower-for-longer interest rate environment, we expect certain bank stock managements to grow fee-based and trading-based franchises that are not reliant on a rise in rates. While much of our fundamental research is dominated by cyclical stocks, we also seek opportunities in defensive sectors that have also been impacted by the coronavirus lockdowns. The considerable undervaluation in stocks across a range of industries has led us to experience far more investment opportunities than we have capital to deploy. We believe that, by mid-2021, the earnings, cash flow, and dividend prognosis for many of these undervalued stocks should improve demonstrably. Markets anticipate events well in advance. In our view, this should translate into better performance, perhaps amplified by valuation multiple upgrades as confidence in these companies rises post-pandemic.

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].