Investment Strategy
- 30-45 undervalued stocks (primarily U.S. companies)
- Low P/E and earnings growth potential
- May invest in ADRs
Portfolio Managers
Strategy Attributes
The Value Equity strategy allows investors to participate in the long-term upside potential while simultaneously providing substantial downside protection of stocks. In accordance with our underlying philosophy, the Value portfolio invests in undervalued companies with above average earnings growth.
In addition to market cap and P/E criteria, portfolio securities must also meet quality standards related to their cash flow, balance sheet and return on capital. Schafer Cullen Capital Management invests in those that will benefit from specific catalysts that will drive their fundamental performance and stock price.
- The strategy invests in undervalued (low P/E) companies with above average earnings growth potential.
- Concentrated portfolio of 30-45 stocks diversified across all sectors of the market.
Investment Process
The Schafer Cullen investment team relies heavily on fundamental research as part of its investment selection process. Because the firm has a disciplined value investment philosophy, a rigorous review of company fundamentals vs. industry peer and the overall market is an important part of the investment process.
Screen for Value:
- Begin with largest 3,000 publicly traded equities
- Typical market capitalization > $3 billion
- Identify sector and industry inflection points
Fundamental Research:
- Screen for stocks in bottom quintile according to P/E and P/B basis
- Prefer dividend yield
- Seek low debt to equity and high returns on investable capital
- Search for catalysts that can drive earnings, including:
- New markets
- New products
- Strong management with clear vision and commitment to shareholder value
Portfolio Construction:
- Approximately 30-45 holdings
- Diversification across 15-20 industries
- Full position approximately 3%
- Top 10 holdings typically represent 30 – 35%
- Up to 25% international exposure (ADR) at cost
- No more than 30% in any one sector at cost
- No more than 15% in any one industry at cost
- No more than 5% in any one stock at cost
Sell Discipline:
- Price objectives reached
- Earnings growth not realized
- Deteriorating fundamentals
- Decline of 25% - investment thesis reassured
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