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) -0.2%-23.1%-14.5%-2.9%0.4%7.3%8.8%
Strategy (net) -0.3%-23.3%-14.9%-3.4%0.0%6.7%8.1%
MSCI ACWI 5.3%-1.0%7.8%7.6%8.0%9.4%7.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -0.2%-23.1%-14.5%-2.9%0.4%7.3%8.8%
Strategy (net) -0.3%-23.3%-14.9%-3.4%0.0%6.7%8.1%
MSCI ACWI 5.3%-1.0%7.8%7.6%8.0%9.4%7.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 19.7%-22.9%-15.4%-2.2%0.7%8.4%8.8%
Strategy (net) 19.6%-23.1%-15.8%-2.6%0.2%7.8%8.2%
MSCI ACWI 19.4%-6.0%2.6%6.7%7.0%9.7%7.4%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 19.7%-22.9%-15.4%-2.2%0.7%8.4%8.8%
Strategy (net) 19.6%-23.1%-15.8%-2.6%0.2%7.8%8.2%
MSCI ACWI 19.4%-6.0%2.6%6.7%7.0%9.7%7.4%
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 June 30, 2020)

Benchmark: MSCI ACWI
Asset Allocation
Strategy
Stocks 96.9%
Cash 3.1%
Strategy Characteristics
Strategy Benchmark
No. of holdings 49 2987
Weighted avg. market cap (US $MM) $89,028 $218,474
FY2 price/earnings 11.8 16.9
Price/book value 1.2 2.3
Dividend yield (%) 2.6 2.2
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 4.0%
UniCredit S.p.A. Italy 3.6%
BASF SE Germany 3.2%
SYNNEX Corp. United States 3.2%
Novartis AG Switzerland 3.1%
Samsung Electronics Co., Ltd. South Korea 3.1%
Baidu - ADR China 3.1%
ABB Ltd. Switzerland 3.0%
Citigroup, Inc. United States 2.9%
Takeda Pharmaceutical Co., Ltd. Japan 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
Information Technology 22.7% 20.7%
Industrials 18.5% 9.4%
Financials 16.4% 13.4%
Health Care 10.4% 12.9%
Materials 9.9% 4.6%
Communication Services 7.6% 9.4%
Consumer Discretionary 6.0% 11.8%
Consumer Staples 2.9% 8.1%
Real Estate 1.4% 2.9%
Utilities 1.0% 3.2%
Energy 0.0% 3.6%
TOP 10 COUNTRIES
Country Strategy Benchmark
United States 42.2% 57.6%
Germany 14.2% 2.5%
United Kingdom 10.5% 3.9%
Switzerland 8.1% 2.8%
Japan 6.3% 7.0%
Italy 3.6% 0.6%
Netherlands 3.3% 1.2%
South Korea 3.1% 1.4%
China 3.1% 5.0%
France 1.4% 3.0%
Regional Allocation
  • Europe – other 42.3%
  • North America 42.2%
  • Pacific 6.3%
  • Emerging Asia 6.2%

Commentary (As of June 30, 2020)

Highlights

  • Bolstered by enormous monetary and fiscal stimulus policies globally, equity markets continued to ascend from their late-March lows. Although the valuation gap between growth stocks and value stocks grew even wider, global central bank liquidity injections fueled a resurgence of cyclical stocks over defensive stocks during the second quarter.
  • Worldwide, central banks indicated they are prepared to continue supportive policies to maintain abundant monetary liquidity and keep their respective government and corporate borrowing costs low. We anticipate that monetary and fiscal policy responses from major economies will continue until economic data indicate a sustainable recovery has taken hold.
  • Cyclical stocks have traditionally performed best as markets begin to discount a recovery from the lows of recession. We are taking advantage of investor pessimism (and investors’ possible short time horizons) by adding to positions in several competitively well-positioned companies, at valuations we believe imply permanent demand destruction.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the consumer services, capital goods, materials, and banks industry groups, as well as an underweight position in the health care equipment & services industry group, contributed to relative performance. Holdings in the insurance, software & services, pharmaceuticals & biotechnology,and automobiles & components industry groups, along with an underweight position in the retailing industry group, detracted from performance compared to the Index. The top contributor to return was cruise ship operator, Norwegian Cruise Line Holdings Ltd. (United States). Other notable contributors included design-to-distribution business process services technology company, SYNNEX Corp. (United States), power & automation technology company, ABB Ltd. (Switzerland), aerostructure supplier, Spirit AeroSystems Holdings, Inc. (United States), and internet services provider, Baidu - ADR (China). The largest detractor was defense & information technology services provider, Leidos Holdings, Inc.(United States). Additional notable detractors included Takeda Pharmaceutical Co., Ltd. (Japan), life & health reinsurance company, Reinsurance Group of America, Inc. (United States), investment bank, Moelis & Co. (United States), and media & entertainment conglomerate, The Walt Disney Co. (United States).

Investment outlook

With vaccines potentially available by year-end 2020 or early 2021, we believe equity markets have more upside potential. In the latter half of 2020, we expect markets to benefit further from a recovery in both consumption and investment spending. The second quarter of 2020 was the strongest quarter for global equities since 2009, in part thanks to the unprecedented levels of central bank purchases of financial securities and record setting low bond yields. The persistent decline in long term bond yields partly explains the widening gap in performance between growth and value investment styles. However, we believe this valuation disparity will reverse as economies move through the worst of their lockdown-induced recessions. Although the rally in equity markets from late-March lows was primarily driven by liquidity, a nascent economic recovery helped economically sensitive stocks outperform traditionally defensive stocks during the quarter. This suggests, in our view, that cyclical stocks, hardest hit in the first quarter selloff, have further recovery potential. Operating leverage should propel earnings growth for cyclical companies as revenues recover towards pre-pandemic levels and slimmer cost bases boost profit margins. Cyclical stocks have traditionally performed best as markets begin to discount a recovery from the lows of recession. This may be especially true of the recession caused by the coronavirus, given extraordinary fiscal spending and efforts to stimulate the economic recovery. We are taking advantage of investor pessimism (and investors’ possible short time horizons) by adding to positions in several competitively well-positioned companies, at valuations we believe imply permanent demand destruction. We currently expect temporary, not structural, changes to aerospace, aviation, travel & leisure, and a host of cyclical industries such as banking, insurance, and industrials. Strong balance sheets, abundant cash flow, and talented management teams should provide these companies the flexibility to position themselves to prosper when economic growth eventually rebounds.

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].