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Guides
Philosophy
- Fundamentals drive stock prices
- Capital preservation improves returns
- Culture shapes investment decisions
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Shapes
Process
- Thorough, proprietary research by career analysts
- Focus on valuation and risk controls
- Team environment – group discussion/analyst decision
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Generates
Portfolio
- Concentrated and diversified
- Long-term/low turnover
- Fully invested/limit on cash
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Performance
- Consistent pattern of results
- Objective: Outperform the benchmark over the longer term
SMID Cap Value
Quarter 4 2017
Equity Composite Performance
- Cooke & Bieler - Gross of Fees
- Cooke & Bieler - Net of Fees
- Russell 2500™ Value Index
Quality Characteristics1
- C&B SMID Cap Value†
- Russell 2500™ Value Index*
ROC 5 Year Avg | Cash Interest Coverage | Debt/Ebitda | Forecast P/E** | P/Normalized Earnings** |
---|---|---|---|---|
6.1% | 8.1x | 3.0x | 16.8x | 13.7x |
3.4% | 5.9x | 3.3x | 18.4x | - |
ROC 5 Year Avg | 6.1% | 3.4% |
---|---|---|
Cash Interest Coverage | 8.1x | 5.9x |
Debt/Ebitda | 3.0x | 3.3x |
Forecast P/E** | 16.8x | 18.4x |
P/Normalized Earnings** | 13.7x | - |
Portfolio Attributes1
- C&B SMID Cap Value
- Russell 2500™ Value Index
# Holdings | Market Cap ($B) Range | Market Cap ($B) WTD Avg | Annual Turnover |
---|---|---|---|
44 | 0.8 - 16.3 | 5.3 | 60% |
1,752 | 0.004 - 28.4 | 4.8 | - |
# Holdings | 44 | 1,752 |
---|---|---|
Market Cap ($B) Range | 0.8 - 16.3 | 0.004 - 28.4 |
Market Cap ($B) WTD Avg | 5.3 | 4.8 |
Annual Turnover | 60% | - |
Top 10 Holdings1
Schweitzer-Mauduit Int’l Inc. | 3.8% |
FirstCash Inc. | 3.8% |
Syneos Health Inc. | 3.7% |
Gildan Activewear Inc. | 3.5% |
Quanex Building Products | 3.3% |
Steelcase Inc. | 3.3% |
AerCap Holdings NV | 3.1% |
Helen of Troy Ltd. | 3.1% |
Umpqua Holdings Corp. | 3.0% |
RenaissanceRe Holdings Ltd. | 3.0% |
Top 10 Holdings1
Schweitzer-Mauduit Int’l Inc. | 3.8% |
FirstCash Inc. | 3.8% |
Syneos Health Inc. | 3.7% |
Gildan Activewear Inc. | 3.5% |
Quanex Building Products | 3.3% |
Steelcase Inc. | 3.3% |
AerCap Holdings NV | 3.1% |
Helen of Troy Ltd. | 3.1% |
Umpqua Holdings Corp. | 3.0% |
RenaissanceRe Holdings Ltd. | 3.0% |
Sector Weights1
- C&B SMID Cap Value
- Russell 2500™ Value Index
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Consumer Discretionary
C&B SMID Cap Value 17.1% Russell 2500™ Value Index 10.7% -
Consumer Staples
C&B SMID Cap Value 1.3% Russell 2500™ Value Index 3.4% -
Energy
C&B SMID Cap Value 1.2% Russell 2500™ Value Index 7.2% -
Financials
C&B SMID Cap Value 19.9% Russell 2500™ Value Index 24.1% -
Health Care
C&B SMID Cap Value 11.8% Russell 2500™ Value Index 5.5% -
Industrials
C&B SMID Cap Value 21.4% Russell 2500™ Value Index 13.6% -
Information Technology
C&B SMID Cap Value 6.8% Russell 2500™ Value Index 8.1% -
Materials
C&B SMID Cap Value 14.0% Russell 2500™ Value Index 5.8% -
Real Estate
C&B SMID Cap Value 1.4% Russell 2500™ Value Index 14.5% -
Telecommunication Services
C&B SMID Cap Value — Russell 2500™ Value Index 0.3% -
Utilities
C&B SMID Cap Value — Russell 2500™ Value Index 6.7% -
Cash
C&B SMID Cap Value 5.2% Russell 2500™ Value Index —
Additional Cooke & Bieler SMID Cap Value Disclosures
SMID Cap Value Equity Composite
Year | Total Return Gross of Fees (%) | Total Return Net of Fees (%) | Russell 2500™ Value Index (%) | Russell 2500™ Value Index 3-Yr Std. Dev (%) | Composite 3-Yr Std Dev (%) | Composite Dispersion (%) | Market Value ($Millions) | Total Firm Assets ($Millions) | # of Portfolios |
---|---|---|---|---|---|---|---|---|---|
2008 | (32.41) | (32.81) | (31.99) | N/M | 12.6 | 3,910.4 | <5 | ||
2009 | 30.79 | 29.85 | 27.68 | N/M | 18.2 | 5,004.0 | <5 | ||
2010 | 22.32 | 21.49 | 24.82 | N/M | 22.8 | 4,841.5 | <5 | ||
2011 | (1.25) | (1.90) | (3.36) | 24.23 | 21.25 | N/M | 21.8 | 4,471.6 | <5 |
2012 | 19.95 | 19.16 | 19.21 | 18.41 | 17.06 | N/M | 24.2 | 4,434.6 | <5 |
2013 | 38.96 | 38.05 | 33.32 | 15.07 | 13.59 | N/M | 21.2 | 4,724.5 | <5 |
2014 | 6.44 | 5.73 | 7.11 | 11.25 | 10.95 | N/M | 17.0 | 4,921.9 | <5 |
2015 | (3.21) | (3.89) | (5.49) | 12.02 | 12.23 | N/M | 14.9 | 4,804.9 | <5 |
2016 | 27.32 | 26.44 | 25.20 | 13.17 | 13.67 | N/M | 19.1 | 5,303.4 | <5 |
2017 | 15.01 | 13.99 | 10.36 | 11.81 | 12.58 | N/M | 21.2 | 5,912.3 | <5 |
N/M: For those annual periods with less than five portfolios included for the entire year, dispersion is not presented as it is not considered to be meaningful.
Cooke & Bieler, L.P. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Cooke & Bieler has been independently verified for the period January 1, 1993 through December 31, 2016.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. The SMID Cap Value Equity Composite has been examined for the period from January 1, 2013 through December 31, 2016. The verification and examination reports are available upon request.
The Firm is defined as Cooke & Bieler, L.P., an independent investment management firm, and is registered as an investment adviser under the Investment Advisers Act of 1940. Registration does not imply a certain level of skill or training.
The Cooke & Bieler SMID Cap Value Equity Composite (Composite), whose inception date is January 1, 2004, currently includes all fully discretionary, fee paying, SMID cap value equity portfolios managed for more than one month. Prior to 2013, the minimum market value for inclusion was $1 million. For investment purposes, SMID cap equity investing is generally defined as investing in securities of companies whose market capitalization range is within the Russell 2500™ Index at the time of purchase. Securities are selected using the firm’s fundamental, bottom-up approach. Portfolios are more concentrated, typically holding approximately 40-50 securities. The Composite was created in March 2004.
Rates of return are expressed in U.S. dollars. Portfolios are valued monthly on a trade date basis. Portfolio returns reflect the reinvestment of dividend and interest income and are calculated using the Modified Dietz method. Composite returns are calculated monthly by weighting portfolio returns according to the size of each portfolio at the beginning of the month.
Performance returns are presented both gross and net of fees. Gross of fee returns do not reflect the deduction of our investment advisory fees. Individual client returns will be reduced by investment advisory fees and other expenses that it may incur in the management of its investment advisory account. Investment advisory fees are described in Part 2A of Form ADV. The standard fee agreement is 0.90 of 1% per annum on the first $20 million of principal, 0.80 of 1% per annum on the next $20 million, 0.75 of 1% per annum on the next $20 million, and 0.70 of 1% per annum on the remaining balance; however, fees are negotiable. As an example, the “cost” of the investment advisory fee of a $20 million portfolio is .90% on an annualized basis. In a ten-year period, the effect of the investment advisory fee will reduce a 5% annual return by as much as 14.1% on a cumulative basis. Effective 1/1/2017, net of fee returns are calculated monthly by deducting one twelfth of the maximum fee rate of 0.90% across all accounts in the composite. Prior to 1/1/2017, net of fee returns reflect the deduction of actual management fees.
The dispersion is the asset weighted standard deviation of portfolio returns represented within the Composite for the full year. For those annual periods with less than five portfolios included for the entire year, dispersion is not presented as it is not considered to be meaningful.
For comparison purposes, the composite is measured against the Russell 2500™ Value Index. The Russell 2500™ Value Index measures the performance of those Russell 2500™ companies with lower price-to-book ratios and lower forecasted growth values. The index returns are provided to represent the investment environment existing during the time periods shown and are not covered by the report of independent verifiers. Each index is fully invested and includes the reinvestment of income. The returns for each index do not include any transaction costs, management fees, or other costs. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.
The three-year annualized ex-post standard deviation measures the variability of the composite (using gross returns) and the benchmark for the preceding 36-month period. The three year annualized ex-post standard deviation is not required to be presented for periods prior to 2011 or when 36 monthly composite returns are not available. Past performance is not indicative of future results.
Strategy Commentary
Download Commentary
After posting robust, steady gains in the first three quarters of 2017, U.S. equities delivered another quarter of positive returns – the ninth consecutive one for the market as measured by the S&P 500 Index. Investors responded enthusiastically as the prospect of tax reform materialized, increasing the likelihood of continued earnings growth fueled by a lower corporate tax rate.
The major Russell U.S. equity indices ended Q4 and 2017 in positive territory as large cap stocks outperformed small cap stocks, reversing a trend that dominated in 2016. The Russell 2500™ Value Index returned 4.25% for the quarter, closing the year up 10.36%.