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.
- Benchmark
- MSCI EAFE
- Inception
- March 31, 2005
Portfolio managers
Sarah Ketterer
Fundamental Portfolio Manager
Ms. Ketterer is the chief executive officer at Causeway, fundamental portfolio manager, and is responsible for investment research across all sectors. Ms. Ketterer co-founded the firm in June 2001 and is a member of the operating committee.
From 1996 to 2001, Ms. Ketterer worked for the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM). At HW-MLIM, she was a managing director and co-head of the firm's HW-MLIM International and Global Value team. From 1990 to 1996, Ms. Ketterer was a portfolio manager at Hotchkis & Wiley, where she founded the International Equity product.
Ms. Ketterer earned a BA in economics and political science from Stanford University and an MBA from the Tuck School, Dartmouth College. She is currently a member of the Stanford University Board of Trustees, co-chair of the Los Angeles World Affairs Council and Town Hall, a director of the Los Angeles Philharmonic, the Music Center Foundation (as chair of the investment committee), and serves on the Advisory Board of Girls Who Invest.
Harry Hartford
Head of Fundamental Research
Fundamental Portfolio Manager
Mr. Hartford is the president at Causeway, fundamental portfolio manager, and director of research. Mr. Hartford co-founded the firm in June 2001 and is a member of the operating committee.
From 1996 to June 2001, Mr. Hartford was a managing director for the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM) and co-head of the firm's HW-MLIM international and global value team. From 1994 to 1996, Mr. Hartford was a portfolio manager for Hotchkis & Wiley. From 1984 to 1994, Mr. Hartford was with The Investment Bank of Ireland, where he gained ten years’ experience in both international and global equity management. During this time, Mr. Hartford also managed the Irish Investment Fund, a closed-end country fund quoted on the NYSE. Before entering the investment business, Mr. Hartford lectured in micro and macroeconomics at Oklahoma State University.
Mr. Hartford earned a BA, with honors, in economics from the University of Dublin, Trinity College, an MSc in economics from Oklahoma State University, and is a Phi Kappa Phi member. Mr. Hartford is a member of The Ireland Funds America Board of Directors and serves as chair of the Los Angeles Regional Board.
James Doyle
Mr. Doyle is a director and a fundamental portfolio manager at Causeway and has been with the firm since its inception in June 2001. Mr. Doyle has covered a variety of industries, including financials, industrials and consumer. His current responsibilities include technology, telecommunications and healthcare. He is also a member of the operating committee.
Previously, Mr. Doyle was an equity analyst and portfolio manager with the international team of the Hotchkis & Wiley division of Merrill Lynch Investment Managers. He also was an equity research consultant for Morgan Stanley Asset Management, and a financial analyst for LaSalle Partners.
Mr. Doyle earned a BA in economics from Northwestern University and an MBA in finance from the Wharton School, University of Pennsylvania. He is the co-chair of the Northwestern University Leadership Circle of Los Angeles.
Jonathan Eng
Mr. Eng is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global consumer discretionary and industrials sectors. He joined the firm in July 2001 and has been a portfolio manager since February 2002.
From 1997 to 2001, Mr. Eng was an equity research associate for the Hotchkis & Wiley division of Merrill Lynch Investment Managers (HW-MLIM). In 1996, Mr. Eng worked as a summer research associate for Hotchkis & Wiley, performing U.K. and European equity research. From 1993 to 1995, Mr. Eng analyzed merger and acquisition candidates at Slusser Associates. From 1990 to 1993, Mr. Eng worked as a middle market corporate lender for Bank of Boston.
Mr. Eng earned a BA in history and economics from Brandeis University and an MBA from the UCLA Anderson Graduate School of Management.
Conor Muldoon, CFA
Mr. Muldoon is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global financials and materials sectors. He joined the firm in August 2003 and has been a portfolio manager since September 2010.
From 1995 to 2003, Mr. Muldoon was an investment consultant for Fidelity Investments where he served as a liaison between institutional clients and investment managers within Fidelity. He was responsible for communicating current information on the financial markets, the economy and investment performance.
Mr. Muldoon earned a BSc and an MA from the University of Dublin, Trinity College and an MBA, with high honors, from the University of Chicago. Mr. Muldoon was inducted into the Beta Gamma Sigma honors society and is also a CFA charterholder.
Alessandro Valentini, CFA
Mr. Valentini is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global healthcare and financials sectors. He joined the firm in July 2006 and has been a portfolio manager since April 2013.
During the summer of 2005, Mr. Valentini worked as a research analyst at Thornburg Investment Management, where he conducted fundamental research for the international value fund and the value fund, focusing on the European telecommunication and Canadian oil sectors. From 2000 to 2004, Mr. Valentini worked as a financial analyst at Goldman Sachs in the European equities research-sales division in New York.
Mr. Valentini earned an MBA from Columbia Business School, with honors, an MA in economics from Georgetown University and a BS, magna cum laude, from Georgetown University. Mr. Valentini was inducted into the Beta Gamma Sigma honors society, is a Phi Beta Kappa member, and is a CFA charterholder.
Ellen Lee
Ms. Lee is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the global consumer, utilities, and energy sectors. Prior to the current role, she also covered transportation and autos. She joined the firm in August 2007 and has been a portfolio manager since January 2015.
During the summer of 2006, Ms. Lee interned at Tiger Asia, a long short equity hedge fund focused on China, Japan, and Korea. From 2001 to 2004, Ms. Lee was an associate in the mergers and acquisitions division of Credit Suisse First Boston in Seoul, where she advised Korean corporates and multinational corporations. From 1999 to 2000, she was an analyst in the mergers and acquisitions division of Credit Suisse First Boston in Hong Kong.
Ms. Lee earned a BA in business administration from Seoul National University and an MBA from the Stanford Graduate School of Business. She currently serves on the audit and investment committee at the Center for Early Education in West Hollywood.
Steven Nguyen, CFA
Mr. Nguyen is a director and fundamental portfolio manager at Causeway and is responsible for investment research in the energy, utilities, and healthcare sectors. He joined the firm in April 2012.
From 2006 to 2012, Mr. Nguyen was a senior credit analyst at Bradford & Marzec covering high yield and investment grade companies in the telecommunication services, cable, media, gaming, insurance, and REIT industries. From 2003 to 2006, Mr. Nguyen was a credit analyst/portfolio manager in the corporate bond department of Allegiance Capital.
Mr. Nguyen earned a BA in business economics from Brown University and an MBA, with honors, from the UCLA Anderson School of Management. Mr. Nguyen was the president of the Anderson Student Asset Management association. Mr. Nguyen is a CFA charterholder.
Performance
Account returns for the Causeway International Value Select Composite ("International Value Select Composite") are calculated daily. Monthly account returns are calculated by geometrically linking the daily returns. The return of the International Value Select Composite is calculated monthly by weighting monthly account returns by the beginning market values. Valuations and returns are computed and stated in US dollars. Returns include the reinvestment of interest, dividends and any capital gains. Returns are calculated gross of withholding taxes on dividends, interest income, and capital gains. Past performance is no guarantee of future performance. Gross-of-fees returns are presented before management, performance and custody fees but after trading expenses. Net-of-fees returns are presented after the deduction of actual management fees, performance-based fees, and all trading expenses, but before custody fees. Causeway’s basic management fee schedules are described in its firm brochure pursuant to Part 2 of Form ADV. A complete list and description of firm composites is available upon request. The information in the downloadable Composite Performance report supplements the performance presented. MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products. Investing involves risk including loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Diversification does not prevent all investment losses.
Portfolio (as of September 30, 2019)
Asset Allocation
| Strategy | |
|---|---|
| Stocks | 98.6% |
| Cash | 1.4% |
Strategy Characteristics
| Strategy | Benchmark | |
|---|---|---|
| No. of holdings | 55 | 923 |
| Weighted avg. market cap (US $MM) | $57,642 | $52,797 |
| FY2 price/earnings | 10.6 | 13.4 |
| Price/book value | 1.2 | 1.6 |
| Dividend yield (%) | 4.0 | 3.4 |
TOP 10 HOLDINGS
| Security | Country | Percent |
|---|---|---|
| Volkswagen AG | Germany | 4.1% |
| BASF SE | Germany | 3.8% |
| Takeda Pharmaceutical Co., Ltd. | Japan | 3.8% |
| UniCredit S.p.A. | Italy | 3.7% |
| ABB Ltd. | Switzerland | 3.2% |
| Linde Plc | Germany | 3.1% |
| China Mobile Ltd. | China | 3.1% |
| Prudential Plc | United Kingdom | 3.0% |
| Barclays Plc | United Kingdom | 2.8% |
| British American Tobacco plc | United Kingdom | 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 |
|---|---|---|
| Financials | 22.2% | 18.6% |
| Industrials | 17.1% | 14.7% |
| Communication Services | 11.5% | 5.4% |
| Health Care | 10.9% | 11.6% |
| Materials | 9.6% | 7.0% |
| Energy | 9.4% | 5.1% |
| Consumer Discretionary | 5.9% | 11.5% |
| Information Technology | 5.8% | 6.7% |
| Consumer Staples | 4.5% | 12.0% |
| Utilities | 1.7% | 3.8% |
| Real Estate | 0.0% | 3.6% |
TOP 10 COUNTRIES
| Country | Strategy | Benchmark |
|---|---|---|
| United Kingdom | 28.4% | 16.4% |
| Germany | 18.2% | 8.5% |
| Japan | 13.6% | 24.6% |
| Switzerland | 6.8% | 9.4% |
| France | 6.4% | 11.4% |
| China | 5.7% | 0.0% |
| South Korea | 5.1% | 0.0% |
| Canada | 4.8% | 0.0% |
| Italy | 3.7% | 2.3% |
| Netherlands | 3.1% | 4.0% |
Regional Allocation
- Europe – other 69.0%
- Pacific 13.6%
- Emerging Asia 10.9%
- North America 4.8%
- Emerging Europe, Middle East, Africa 0.3%
Commentary (As of September 30, 2019)
Highlights
Portfolio attribution
The Portfolio outperformed the Index during the month, due primarily to stock selection. Holdings in the banks, food beverage & tobacco, insurance, capital goods, and technology hardware & equipment industry groups contributed to performance compared to the Index. Portfolio holdings in the consumer durables & apparel and media & entertainment industry groups, along with an overweight position in the telecommunication services industry group and an underweight position in the semiconductors & semi equipment and diversified financials industry groups, detracted from relative performance. The top contributor to return was electronic equipment manufacturer, Samsung Electronics Co., Ltd. (South Korea). Other notable contributors included banking & financial services company, Barclays Plc (United Kingdom), life insurer, Prudential Plc (United Kingdom), banking & financial services company, UniCredit S.p.A. (Italy), and automobile manufacturer, Volkswagen AG (Germany). The largest detractor was pharmaceutical & consumer healthcare products producer, Novartis AG (Switzerland). Additional notable detractors included pharmaceuticals & chemicals company, Bayer AG (Germany), apparel manufacturer, Gildan Activewear (Canada), internet services provider, Baidu - ADR (China), and pharmaceutical & healthcare products manufacturer, Sinopharm Group Co., Ltd. (China).
Investment outlook
We believe that fundamentals do prevail over the long-term…it is just very difficult to know when the market will turn. September witnessed a chain reaction of cheap stocks, often in cyclical industries, attracting bargain hunting – which, in turn, attracted more buying. Stock markets have a history of discounting future events long before they occur. We suggest that most cyclical stocks priced in a recession by the end of August and are now moving upward on the hint of fiscal spending and recovery. We believe our portfolios are well-positioned to benefit from a return to favor of value and cyclicality. If economically sensitive stocks outperform, we intend to use that opportunity to lower portfolio expected volatility with bargains from less cyclical sectors. Our team has intensified efforts to get managements to commit to specific plans to improve earnings and returns on capital. While we wait, the majority of these portfolio companies return capital to shareholders, often via generous dividend payouts. This dividend income is striking in a low-income world, reducing the duration of the investment. We are holding company managements’ collective “feet to the fire,” measuring their progress and holding them accountable to their operational restructuring plans. This makes our efforts in value investing “all weather,” though a tailwind for value risk would be welcome.
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.