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%-22.9%-17.3%-4.0%1.4%6.1%8.7%
Strategy (net) -1.6%-23.2%-17.7%-4.4%1.0%5.5%8.0%
MSCI ACWI -2.4%-0.7%5.4%6.1%8.7%8.5%7.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -1.6%-22.9%-17.3%-4.0%1.4%6.1%8.7%
Strategy (net) -1.6%-23.2%-17.7%-4.4%1.0%5.5%8.0%
MSCI ACWI -2.4%-0.7%5.4%6.1%8.7%8.5%7.6%
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 October 31, 2020)

Benchmark: MSCI ACWI
Asset Allocation
Strategy
Stocks 99.1%
Cash 0.9%
Strategy Characteristics
Strategy Benchmark
No. of holdings 53 2994
Weighted avg. market cap (US $MM) $63,403 $249,218
FY2 price/earnings 11.4 17.0
Price/book value 1.1 2.4
Dividend yield (%) 2.4 2.1
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 3.4%
UniCredit S.p.A. Italy 3.4%
Samsung Electronics Co., Ltd. South Korea 3.2%
Google United States 3.1%
Ashland United States 3.0%
SYNNEX Corp. United States 3.0%
Takeda Pharmaceutical Co., Ltd. Japan 2.7%
Leidos Holdings, Inc. United States 2.7%
General Electric Co. United States 2.7%
BASF SE Germany 2.6%

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 22.4% 12.7%
Information Technology 20.0% 21.2%
Industrials 19.4% 9.6%
Consumer Discretionary 9.5% 13.0%
Communication Services 7.0% 9.7%
Health Care 6.2% 12.3%
Materials 5.6% 4.8%
Real Estate 3.3% 2.7%
Consumer Staples 2.0% 7.8%
Energy 2.0% 2.7%
Utilities 1.8% 3.2%
TOP 10 COUNTRIES
Country Strategy Benchmark
United States 50.3% 58.1%
Germany 10.5% 2.4%
United Kingdom 7.4% 3.4%
Switzerland 6.1% 2.7%
Japan 5.5% 6.9%
South Korea 4.7% 1.5%
France 4.2% 2.8%
Italy 3.4% 0.6%
Netherlands 2.2% 1.2%
Spain 1.9% 0.6%
Regional Allocation
  • North America 51.6%
  • Europe – other 35.7%
  • Emerging Asia 6.3%
  • Pacific 5.5%

Commentary (As of October 31, 2020)

Highlights

  • Optimism surrounding additional fiscal stimulus packages in the US and Europe bolstered equity markets in the first half of October; however, renewed coronavirus lockdowns in several European countries and a surge in cases in the US weakened investor sentiment and developed markets finished the month in negative territory.
  • In the UK, the deadline to negotiate a Brexit deal marches closer without a resolution. Ultimately, we believe that a deal will be reached to prevent a further dampening of the UK economy in the face of the pandemic-induced recession.
  • We believe that undervaluation alone is never enough, so we seek businesses that have used this crisis to reduce their cost bases by unprecedented levels, which should reinvigorate earnings as demand improves.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, real estate, transportation, and technology hardware & equipment industry groups, as well as an underweight position in the software & services industry group, contributed to performance relative to the Index. Holdings in the pharmaceuticals & biotechnology,banks, materials, retailing, and automobiles & components industry groups offset some of the outperformance versus the Index. The top contributor to return was jet engine manufacturer, Rolls-Royce Holdings Plc (United Kingdom). Other notable contributors included power & healthcare conglomerate, General Electric Co. (United States), commercial real estate services provider, Jones Lang LaSalle, Inc. (United States), technology conglomerate, Google (United States), and life & health reinsurance company, Reinsurance Group of America, Inc. (United States). The largest detractor was Takeda Pharmaceutical Co., Ltd. (Japan). Additional notable detractors included banking & financial services company, UniCredit S.p.A. (Italy), pharmaceutical producer, Novartis AG (Switzerland), diversified chemicals manufacturer, BASF SE (Germany), and insurer, AXA SA (France).

Investment outlook

We currently expect an end to the extremely negative economic effects wrought on the global economy by the pandemic in 2021, facilitated by widely available and efficacious testing, therapies, and potential vaccines. We used October’s weakness in COVID-sensitive stocks to add to positions that we believe have some of the highest expected returns in the portfolio. With no relief from the pandemic thus far in early November, market participants have sold several stocks that we consider having significant potential upside from current prices. Some of our favorites include well-managed travel and aerospace equipment-related businesses, as well as those in travel software & services. In financials, our investment theses do not depend on rising nominal interest rates for our portfolio companies to perform well. For example, European and Japanese banks and insurance companies have contended with low-to-negative interest rates for the past several years, yet valuations are currently trading at three standard deviations below the post-2008 Global Financial Crisis mean. Several of these banks boast capital positions well in excess of regulatory requirements. As we ultimately exit the COVID-19 crisis, we expect these financials to rebound in profitability. That recovery, combined with financial strength, provides the potential for these stocks to re-rate upward. Our analysis indicates that these companies are well-positioned to return excess capital to shareholders. We believe that undervaluation alone is never enough, so we seek businesses that have used this crisis to reduce their cost bases by unprecedented levels, which should reinvigorate earnings as demand improves. Well-managed cyclical stocks trade at prices that imply permanent demand destruction, and the COVID-19 pandemic presents, in our view, a once-in-a-generation opportunity for disciplined value investors.

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].