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.

Benchmark
MSCI EAFE
Inception
June 11, 2001

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

QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)7.2%17.5%9.9%8.4%3.5%6.9%7.5%
Strategy (net)7.1%17.1%9.5%7.9%3.1%6.5%7.0%
MSCI EAFE4.8%18.8%13.0%10.2%4.8%5.8%5.5%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)7.2%17.5%9.9%8.4%3.5%6.9%7.5%
Strategy (net)7.1%17.1%9.5%7.9%3.1%6.5%7.0%
MSCI EAFE4.8%18.8%13.0%10.2%4.8%5.8%5.5%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-1.9%9.6%-6.5%5.3%1.9%6.2%7.1%
Strategy (net)-2.0%9.3%-6.9%4.9%1.5%5.7%6.7%
MSCI EAFE-1.0%13.3%-0.8%7.0%3.8%5.4%5.3%
QTDYTD1 year3 years5 years10 yearsSince inception
Strategy (gross)-1.9%9.6%-6.5%5.3%1.9%6.2%7.1%
Strategy (net)-2.0%9.3%-6.9%4.9%1.5%5.7%6.7%
MSCI EAFE-1.0%13.3%-0.8%7.0%3.8%5.4%5.3%
Fund20182017201620152014201320122011201020092008200720062005200420032002
Strategy (gross)-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)-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-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
20182017201620152014201320122011201020092008200720062005200420032002
-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%
-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%
-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 November 30, 2019)

Benchmark: MSCI EAFE
Asset Allocation
Strategy
Stocks98.1%
Cash1.9%
Strategy Characteristics
StrategyBenchmark
No. of holdings 60 920
Weighted avg. market cap (US $MM)$61,054$53,209
FY2 price/earnings11.614.2
Price/book value1.21.7
Dividend yield (%)3.83.3
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AGGermany4.4%
Takeda Pharmaceutical Co., Ltd.Japan4.2%
BASF SEGermany3.8%
UniCredit S.p.A.Italy3.5%
FANUC Corp.Japan3.0%
Siemens AGGermany2.9%
Barclays PlcUnited Kingdom2.8%
ABB Ltd.Switzerland2.8%
British American Tobacco plcUnited Kingdom2.6%
China Mobile Ltd.China2.6%

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
Financials20.2%18.4%
Industrials19.0%15.1%
Health Care11.6%12.1%
Communication Services10.8%5.3%
Materials8.8%7.0%
Energy8.4%4.8%
Information Technology6.9%7.0%
Consumer Staples5.4%11.4%
Consumer Discretionary5.3%11.6%
Utilities1.6%3.7%
Real Estate0.0%3.5%
TOP 10 COUNTRIES
Country Strategy Benchmark
United Kingdom26.6%16.2%
Germany19.7%8.8%
Japan14.4%24.8%
France7.6%11.4%
Switzerland6.9%9.2%
China5.4%0.0%
South Korea4.9%0.0%
Canada3.7%0.0%
Italy3.5%2.4%
Netherlands2.8%3.9%
Regional Allocation
  • Europe – other 69.6%
  • Pacific 14.4%
  • Emerging Asia 10.3%
  • North America 3.7%

Commentary (As of November 30, 2019)

Highlights

  • Equities largely continued to rally in November as suggestions of a potential trade deal between the US and China may have buoyed investor sentiment.
  • New European Central Bank President Christine Lagarde has addressed geopolitical risks in recent speeches and indicated steps governments can take to boost the effectiveness of monetary policy. We believe fiscal stimulus is the logical next step for European economies, with low-to-no borrowing costs and aging populations struggling to save sufficiently for retirement.
  • Without the specter of major economic slowing to weigh on revenue growth, cyclical stocks have fared well from late summer. We focus our research efforts on companies improving free cash flows and returning capital to shareholders via dividends and share buybacks, paying shareholders to wait for enhanced earnings from operational restructuring.

Portfolio attribution

The Portfolio outperformed the Index during the month, due primarily to stock selection. Holdings in the banks, food beverage & tobacco, media & entertainment, pharmaceuticals & biotechnology, and transportation industry groups contributed to performance compared to the Index. Portfolio holdings in the telecommunication services, technology hardware & equipment, energy, and materials industry groups, along with an underweight position in the health care equipment & services industry group, detracted from relative performance. The top contributor to return was Takeda Pharmaceutical Co., Ltd. (Japan). Other notable contributors included banking & financial services company, UniCredit S.p.A. (Italy), British American Tobacco plc (United Kingdom), industrial conglomerate, Siemens AG (Germany), and internet services provider, Baidu - ADR (China). The largest detractor was mobile telecommunications operator, China Mobile Ltd. (China). Additional notable detractors included robotics manufacturer, FANUC Corp. (Japan), specialty chemicals producer, Johnson Matthey Plc (United Kingdom), diversified chemicals manufacturer, BASF SE (Germany), and electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea).

Investment outlook

Since the end of August 2019, the portfolio has generally enjoyed a re-rating upward in valuation coincident with the upswing in global sovereign bond yields from their 2019 lows. This change in sentiment by bond markets indicates a waning demand for risk-free bonds. With central governments globally using monetary and fiscal tools to forestall recession (and economic cycles), bond prices have fallen and yields have risen. Without the specter of major economic slowing to weigh on revenue growth, cyclical stocks have fared well from late summer. We focus our research efforts on companies improving free cash flows and returning capital to shareholders via dividends and share buybacks, paying shareholders to wait for enhanced earnings from operational restructuring. As investors continue to crowd into defensive trades, we strive to identify companies that can execute on restructuring plans and position themselves for an improvement in performance.

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 moutes@causewaycap.com.