Seeking value primarily in the non-US developed markets

The International Value Select portfolio is constructed from an equity universe composed of companies with market capitalizations typically greater than $5 billion located in non-US developed and emerging market countries. The strategy uses our international value equity strategy with two distinctions: the select portfolio has greater liquidity (by way of investing in larger capitalization companies) and fewer holdings. We believe that concentrating the holdings can compensate for the loss of small/mid cap exposure. 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 Select strategy.

Portfolio managers

Fundamental Portfolio Manager
Fundamental Portfolio Manager
President
Head of Fundamental Research
Fundamental Portfolio Manager
Chief Executive Officer
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) -2.2%-2.2%9.7%0.3%8.4%6.0%6.3%
Strategy (net) -2.2%-2.2%9.3%0.0%8.0%5.6%5.8%
MSCI EAFE -1.1%-1.1%9.4%2.7%9.4%5.6%5.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) -2.2%-2.2%9.7%0.3%8.4%6.0%6.3%
Strategy (net) -2.2%-2.2%9.3%0.0%8.0%5.6%5.8%
MSCI EAFE -1.1%-1.1%9.4%2.7%9.4%5.6%5.5%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 26.7%6.9%6.9%2.4%7.1%6.7%6.5%
Strategy (net) 26.6%6.5%6.5%2.0%6.7%6.3%6.0%
MSCI EAFE 16.1%8.3%8.3%4.8%8.0%6.0%5.6%
QTD YTD 1 year3 years5 years10 years Since inception
Strategy (gross) 26.7%6.9%6.9%2.4%7.1%6.7%6.5%
Strategy (net) 26.6%6.5%6.5%2.0%6.7%6.3%6.0%
MSCI EAFE 16.1%8.3%8.3%4.8%8.0%6.0%5.6%
Fund 202020192018201720162015201420132012201120102009
Strategy (gross) 6.9%21.2%-17.2%29.5%1.5%-1.3%-4.3%27.2%24.7%-9.6%13.2%35.4%
Strategy (net) 6.5%20.8%-17.5%29.1%1.1%-1.7%-4.7%26.8%24.3%-9.9%12.7%34.8%
MSCI EAFE 8.3%22.7%-13.4%25.6%1.5%-0.4%-4.5%23.3%17.9%-11.7%8.2%32.5%
Strategy (gross)
Strategy (net)
MSCI EAFE
202020192018201720162015201420132012201120102009
6.9%21.2%-17.2%29.5%1.5%-1.3%-4.3%27.2%24.7%-9.6%13.2%35.4%
6.5%20.8%-17.5%29.1%1.1%-1.7%-4.7%26.8%24.3%-9.9%12.7%34.8%
8.3%22.7%-13.4%25.6%1.5%-0.4%-4.5%23.3%17.9%-11.7%8.2%32.5%

Portfolio (as of January 31, 2021)

Benchmark: MSCI EAFE
Asset Allocation
Strategy
Stocks 99.0%
Cash 1.0%
Strategy Characteristics
Strategy Benchmark
No. of holdings 56 874
Weighted avg. market cap (US $MM) $69,229 $58,607
FY2 price/earnings 12.7 16.4
Price/book value 1.3 1.8
Dividend yield (%) 2.6 2.4
TOP 10 HOLDINGS
Security Country Percent
Volkswagen AG Germany 4.7%
Samsung Electronics Co., Ltd. South Korea 3.5%
Rolls-Royce Holdings Plc United Kingdom 3.3%
BASF SE Germany 3.1%
Takeda Pharmaceutical Co., Ltd. Japan 3.1%
UniCredit S.p.A. Italy 3.1%
Siemens AG Germany 3.0%
Novartis AG Switzerland 3.0%
Sanofi France 2.9%
ABB Ltd. Switzerland 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 22.1% 16.3%
Industrials 20.4% 15.3%
Information Technology 13.6% 9.2%
Health Care 12.6% 12.9%
Consumer Discretionary 9.8% 12.3%
Consumer Staples 6.6% 10.7%
Materials 5.6% 8.0%
Utilities 3.6% 3.9%
Energy 3.6% 3.2%
Communication Services 1.0% 5.2%
Real Estate 0.0% 3.1%
TOP 10 COUNTRIES
Country Strategy Benchmark
Germany 17.4% 9.3%
France 16.9% 10.8%
United Kingdom 12.9% 14.2%
Switzerland 12.8% 9.6%
Japan 9.9% 25.4%
Spain 7.3% 2.4%
South Korea 5.5% 0.0%
Netherlands 5.1% 4.0%
Italy 5.0% 2.4%
China 1.6% 0.0%
Regional Allocation
  • Europe – other 80.4%
  • Pacific 10.9%
  • Emerging Asia 7.0%
  • Emerging Latin America 0.6%

Commentary (As of January 31, 2021)

Highlights

  • After a strong start, developed equity markets gave up gains in the latter half of January as investor sentiment was dampened by a slower-than-expected global rollout of vaccines, concerns over new variants of the virus, and renewed lockdowns.
  • We currently expect additional vaccines to receive broad-based emergency use authorization in the first quarter of 2021, such as those from AstraZeneca/Oxford, Novavax and Johnson & Johnson—all of which reported high levels of efficacy. A rebound in global gross domestic product (“GDP”) growth should accelerate as the pace of vaccinations ramp up.
  • The recovery from the global healthcare crisis has proceeded with fits and starts, with short-term news flow drowning out other investment considerations such as talented managements, favorable competitive positioning, strong balance sheets, and prospects for a sharp upturn in profitability. While we believe vaccine campaigns should succeed in allowing a full reopening of global economies, we have taken advantage of investor pessimism for economically sensitive stocks.

Portfolio attribution

The Portfolio underperformed the Index during the month, due primarily to stock selection. Portfolio holdings in the banks, transportation, capital goods, insurance, and materials industry groups detracted from performance relative to the Index. Holdings in the consumer durables & apparel, automobiles & components, media & entertainment, and food beverage & tobacco industry groups, as well as an overweight position in the technology hardware & equipment industry group, 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 travel & tourism information technology provider, Amadeus IT Group SA (Spain), low-budget airline, Ryanair Holdings Plc - ADR (Ireland), life insurer, Prudential Plc (United Kingdom), and airport operator, Aena S.M.E. SA (Spain). The top contributor to return was industrial conglomerate, Siemens AG (Germany). Other notable contributors included consumer retailer, Carrefour SA (France), electronic components manufacturer, Murata Manufacturing Co. Ltd. (Japan), power & automation technology company, ABB Ltd. (Switzerland), and robotics manufacturer, FANUC Corp.(Japan).

Investment outlook

January’s slump in share prices for some of the stocks hardest hit by the pandemic does not dent our conviction. We believe some of the largest future returns should come from stocks most affected by coronavirus lockdowns like travel, travel software, leisure, and aerospace. The recovery from the global healthcare crisis has proceeded with fits and starts, with short-term news flow drowning out other investment considerations such as talented managements, favorable competitive positioning, strong balance sheets, and prospects for a sharp upturn in profitability. We believe vaccine campaigns should succeed in allowing a full reopening of global economies and have taken advantage of investor pessimism for economically sensitive stocks. Some of these company management teams have engaged in meaningful cost-cutting and efficiency improvements over the last year, positioning their firms to generate higher cash flows and earnings as revenues recover. We also focus our research efforts on areas of the market that were largely left out of the late-2020 rally boasting attractive defensive characteristics and growth. These risk reducers include high-quality pharmaceutical and consumer companies. We remain confident that many of our portfolio companies should return capital to shareholders in the form of dividends and share buybacks as vaccination efforts speed up and economies return to normality.

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].