Seeking value primarily in the non-US developed markets

The international value portfolio is constructed from an equity universe composed of companies with market capitalizations typically greater than $1 billion located throughout the non-US 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 International 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) 8.8%-25.1%-19.2%-4.4%-2.6%3.7%5.9%
Strategy (net) 8.8%-25.2%-19.5%-4.8%-3.0%3.3%5.5%
MSCI EAFE 6.5%-17.7%-10.9%-0.1%0.3%4.0%4.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 8.8%-25.1%-19.2%-4.4%-2.6%3.7%5.9%
Strategy (net) 8.8%-25.2%-19.5%-4.8%-3.0%3.3%5.5%
MSCI EAFE 6.5%-17.7%-10.9%-0.1%0.3%4.0%4.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -31.2%-31.2%-23.9%-6.3%-3.3%2.8%5.5%
Strategy (net) -31.3%-31.3%-24.2%-6.7%-3.7%2.3%5.0%
MSCI EAFE -22.7%-22.7%-13.9%-1.3%-0.1%3.2%4.1%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -31.2%-31.2%-23.9%-6.3%-3.3%2.8%5.5%
Strategy (net) -31.3%-31.3%-24.2%-6.7%-3.7%2.3%5.0%
MSCI EAFE -22.7%-22.7%-13.9%-1.3%-0.1%3.2%4.1%
Fund 201920182017201620152014201320122011201020092008200720062005200420032002
Strategy (gross) 22.5%-18.0%28.6%1.1%-1.9%-4.6%27.6%24.6%-10.2%13.9%37.7%-43.0%9.8%27.5%9.0%29.5%48.4%-8.9%
Strategy (net) 22.0%-18.4%28.0%0.7%-2.3%-5.0%27.1%24.1%-10.5%13.4%37.1%-43.2%9.4%27.0%8.5%29.0%47.8%-9.2%
MSCI EAFE 22.7%-13.4%25.6%1.5%-0.4%-4.5%23.3%17.9%-11.7%8.2%32.5%-43.1%11.6%26.9%14.0%20.7%39.2%-15.7%
Strategy (gross)
Strategy (net)
MSCI EAFE
201920182017201620152014201320122011201020092008200720062005200420032002
22.5%-18.0%28.6%1.1%-1.9%-4.6%27.6%24.6%-10.2%13.9%37.7%-43.0%9.8%27.5%9.0%29.5%48.4%-8.9%
22.0%-18.4%28.0%0.7%-2.3%-5.0%27.1%24.1%-10.5%13.4%37.1%-43.2%9.4%27.0%8.5%29.0%47.8%-9.2%
22.7%-13.4%25.6%1.5%-0.4%-4.5%23.3%17.9%-11.7%8.2%32.5%-43.1%11.6%26.9%14.0%20.7%39.2%-15.7%

Portfolio (as of April 30, 2020)

Benchmark: MSCI EAFE
Asset Allocation
Strategy
Stocks 99.1%
Cash 0.9%
Strategy Characteristics
Strategy Benchmark
No. of holdings 66 915
Weighted avg. market cap (US $MM) $51,047 $50,710
FY2 price/earnings 10.8 13.7
Price/book value 1.0 1.4
Dividend yield (%) 3.1 3.0
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 4.5%
FANUC Corp. Japan 3.8%
BASF SE Germany 3.7%
Takeda Pharmaceutical Co., Ltd. Japan 3.7%
UniCredit S.p.A. Italy 3.5%
ABB Ltd. Switzerland 3.2%
British American Tobacco plc United Kingdom 3.0%
Barclays Plc United Kingdom 3.0%
Siemens AG Germany 3.0%
Samsung Electronics Co., Ltd. South Korea 2.9%

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 22.6% 14.3%
Financials 20.1% 16.2%
Health Care 12.4% 14.7%
Information Technology 9.7% 7.8%
Materials 9.3% 6.8%
Consumer Discretionary 7.6% 11.3%
Communication Services 7.6% 5.5%
Consumer Staples 6.3% 12.4%
Energy 2.1% 3.7%
Utilities 1.3% 4.0%
Real Estate 0.0% 3.3%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom 24.8% 15.6%
Germany 20.6% 8.6%
Japan 12.6% 24.7%
Switzerland 9.3% 9.7%
France 7.6% 11.3%
China 6.7% 0.0%
South Korea 5.1% 0.0%
Italy 3.3% 2.4%
Netherlands 2.9% 4.1%
Canada 2.7% 0.0%
Regional Allocation
  • Europe – other 75.4%
  • Pacific 12.3%
  • Emerging Asia 9.7%
  • North America 1.2%
  • Emerging Latin America 0.5%

Commentary (As of April 30, 2020)

Highlights

  • After the severe shock of the COVID-19 pandemic in March and the subsequent emergency relief measures provided by monetary and fiscal authorities worldwide, global equities rebounded in April.
  • Market participants have typically anticipated the benefits (and liquidity surge) of monetary and fiscal stimulus. Equity markets’ sharp rebound in April suggests the short-term bottom of the current crisis was around March 23, when governments and central banks around the world enacted massive stimulus programs.
  • We have used the market weakness—especially the punishing of economically sensitive stocks—to buy in our view some of the world’s best placed and best managed companies in sectors that historically recovered the fastest from bear markets.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the capital goods, pharmaceuticals & biotechnology, automobiles & components, telecommunication services, and food beverage & tobacco industry groups contributed to relative performance. Holdings in the media & entertainment, food & staples retailing, and insurance industry groups, along with an underweight position in the diversified financials and retailing industry groups, detracted from performance compared to the Index. The top contributor to return was automobile manufacturer, Volkswagen AG (Germany). Other notable contributors included robotics manufacturer, FANUC Corp. (Japan), Takeda Pharmaceutical Co., Ltd. (Japan), semiconductor company, Infineon Technologies AG (Germany), and banking & financial services company, Barclays Plc (United Kingdom). The largest detractor was integrated oil & gas company, Total (France). Additional notable detractors included insurance company, Aviva Plc (United Kingdom), consumer retailer, Carrefour SA (France), passenger & cargo airline company, Air France-KLM SA (France), and crude oil & natural gas company, BP Plc (United Kingdom).

Investment outlook

In past crises (such as the 1997 Asian financial crisis, the 2008-2009 Global Financial Crisis, and the 2011 European debt crisis), markets reached the bottom, and subsequently began their recovery many months before the recovery became evident in the economic data. Market participants have typically anticipated the benefits (and liquidity surge) of monetary and fiscal stimulus. Equity markets’ sharp rebound in April suggests the short-term bottom of the current crisis was around March 23, when governments and central banks around the world enacted massive stimulus programs. This crisis differs from prior periods of economic contraction in its origin: a global pandemic and government-mandated closures. For consumers and businesses alike, a sustained recovery in confidence will require effective therapies to mitigate the severity of COVID-19. Our healthcare research indicates that the development of such therapies this year is possible, with the potential for mass produced vaccines by mid- to late-2021.


We have used the market weakness—especially the punishing of economically sensitive stocks—to buy, in our view, some of the world’s best placed and best managed companies in sectors that historically recovered the fastest from bear markets. We have funded this buying by reducing the portfolio’s exposure to stocks in the telecommunications, healthcare, and consumer staples sectors, and reinvesting in companies in the industrials, financials, and information technology sectors. Investors appear to have no patience to wait for recoveries in some of these companies most negatively affected by the shutdowns, such as those in the aerospace and aviation industries, and those exposed to the travel & leisure industry. We believe that buying these stocks at such low prices relative to their normalized earnings potential will benefit the portfolio in the years ahead.

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].