All Cap Value Q2 2019
The second quarter was a bumpy ride for the U.S. stock market. The rally that began late last year continued through April, was upended in May by renewed concerns about the economy and a more protracted trade war, then was revived in June by the Fed’s clear pivot toward monetary easing.
The Russell 3000® Value Index (RAV) returned 3.68%, with every sector except Energy posting gains, led by Financials and Industrials. Returns were strongest for large cap stocks, but otherwise underlying market dynamics lacked discernable themes.
companies in our fully invested, concentrated portfolio
year track record
million All Cap Value assets under management as of 6/30/2019
upside market capture ratio since inception (5/1/01)
downside market capture ratio since inception (5/1/01)
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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
All Cap Value
Quarter 2 2019
Equity Composite Performance
- Cooke & Bieler - Gross of Fees
- Cooke & Bieler - Net of Fees
- Russell 3000® Value Index
Quality Characteristics1
- C&B All Cap Value†
- Russell 3000® Value Index*
| ROC 5 Year Avg | Cash Interest Coverage | Debt/EBITDA | Forecasted P/E** | P/Normalized Earnings** |
|---|---|---|---|---|
| 13.0% | 9.4x | 2.5x | 13.1x | 12.7x |
| 7.6% | 5.6x | 3.5x | 15.2x | - |
| ROC 5 Year Avg | 13.0% | 7.6% |
|---|---|---|
| Cash Interest Coverage | 9.4x | 5.6x |
| Debt/EBITDA | 2.5x | 3.5x |
| Forecasted P/E** | 13.1x | 15.2x |
| P/Normalized Earnings** | 12.7x | - |
Portfolio Attributes1
- C&B All Cap Value
- Russell 3000® Value Index
| # Holdings | Market Cap ($B) Range | Market Cap ($B) Wtd Avg | Annual Turnover |
|---|---|---|---|
| 47 | 1.0 - 522.9 | 71.1 | 40% |
| 2,069 | 0.002 - 1,026.9 | 121.0 | - |
| # Holdings | 47 | 2,069 |
|---|---|---|
| Market Cap ($B) Range | 1.0 - 522.9 | 0.002 - 1,026.9 |
| Market Cap ($B) Wtd Avg | 71.1 | 121.0 |
| Annual Turnover | 40% | - |
Top 10 Holdings1
| Winnebago Industries | 3.4% |
| Fidelity National Financial | 3.1% |
| Arrow Electronics | 3.1% |
| AerCap | 2.7% |
| Brookfield Asset Management | 2.6% |
| Helen of Troy | 2.6% |
| Intercontinental Exchange | 2.5% |
| Schweitzer-Mauduit International | 2.5% |
| Allergan | 2.4% |
| Syneos Health | 2.4% |
Top 10 Holdings1
| Winnebago Industries | 3.4% |
| Fidelity National Financial | 3.1% |
| Arrow Electronics | 3.1% |
| AerCap | 2.7% |
| Brookfield Asset Management | 2.6% |
| Helen of Troy | 2.6% |
| Intercontinental Exchange | 2.5% |
| Schweitzer-Mauduit International | 2.5% |
| Allergan | 2.4% |
| Syneos Health | 2.4% |
Sector Weights1
- C&B All Cap Value
- Russell 3000® Value Index
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Communication Services
C&B All Cap Value 4.2% Russell 3000® Value Index 6.8% -
Consumer Discretionary
C&B All Cap Value 12.9% Russell 3000® Value Index 5.5% -
Consumer Staples
C&B All Cap Value 1.7% Russell 3000® Value Index 7.4% -
Energy
C&B All Cap Value 3.3% Russell 3000® Value Index 8.7% -
Financials
C&B All Cap Value 24.2% Russell 3000® Value Index 23.0% -
Health Care
C&B All Cap Value 11.8% Russell 3000® Value Index 14.4% -
Industrials
C&B All Cap Value 21.0% Russell 3000® Value Index 8.2% -
Information Technology
C&B All Cap Value 9.2% Russell 3000® Value Index 9.9% -
Materials
C&B All Cap Value 7.6% Russell 3000® Value Index 4.0% -
Real Estate
C&B All Cap Value — Russell 3000® Value Index 5.5% -
Utilities
C&B All Cap Value — Russell 3000® Value Index 6.5% -
Cash
C&B All Cap Value 4.0% Russell 3000® Value Index —
Additional Cooke & Bieler All Cap Value Disclosures
All Cap Value Equity Composite
| Year | Total Return Gross of Fees (%) | Total Return Net of Fees (%) | Russell 3000® Value Index (%) | Russell 3000® Value Index 3-Yr Std Dev (%) | Composite 3-Yr Std Dev (%) | Composite Dispersion (%) | Market Value ($Millions) | Total Firm Assets ($Millions) | # of Portofilios |
|---|---|---|---|---|---|---|---|---|---|
| 2009 | 25.28 | 24.39 | 19.76 | - | - | 0.78 | 152.7 | 5,004.0 | 24 |
| 2010 | 16.16 | 15.32 | 16.23 | - | - | 0.16 | 154.5 | 4,841.5 | 20 |
| 2011 | (0.39) | (1.14) | (0.10) | 21.04 | 20.79 | 0.50 | 166.2 | 4,471.6 | 21 |
| 2012 | 15.82 | 14.99 | 17.55 | 15.81 | 15.80 | 0.28 | 180.6 | 4,434.6 | 20 |
| 2013 | 35.34 | 34.40 | 32.69 | 12.90 | 12.31 | 0.64 | 224.9 | 4,724.5 | 25 |
| 2014 | 9.12 | 8.32 | 12.70 | 9.36 | 9.65 | 0.48 | 245.2 | 4,921.9 | 31 |
| 2015 | (1.44) | (2.18) | (4.13) | 10.74 | 10.69 | 0.32 | 227.4 | 4,804.9 | 32 |
| 2016 | 20.84 | 19.98 | 18.40 | 10.97 | 11.34 | 0.44 | 281.5 | 5,303.4 | 37 |
| 2017 | 18.43 | 17.58 | 13.19 | 10.33 | 10.56 | 0.32 | 324.8 | 5,912.3 | 39 |
| 2018 | (11.31) | (11.99) | (8.58) | 11.05 | 12.71 | 0.71 | 255.4 | 5,084.6 | 37 |
Cooke & Bieler, L.P. (the Firm) is 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.
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. The Firm has been independently verified for the period January 1, 1993 through December 31, 2018. 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 All Cap Value Equity Composite has been examined for the periods from May 1, 2001 through December 31, 2018. The examination reports are available upon request.
The Cooke & Bieler All Cap Value Equity Composite (Composite) currently includes all fully discretionary, fee paying and non-fee paying all cap value equity portfolios managed for more than one month. During 2012, the minimum market value for inclusion in the composite was $1 million. Prior to 2012, the minimum market value for inclusion was $2,500. For investment purposes, we generally define all cap equity securities as those of companies whose market capitalization is greater than $1.5 billion and within the range of the Russell 3000® Index at initial time of purchase. The Composite was created in May 2001. All Cap portfolio holdings are chosen from securities held in the firm’s large, mid and small cap portfolios. The investment team regularly reviews these portfolios to determine which securities are to be held in the All Cap portfolio. Typically, those stocks that have higher portfolio weights in the large, mid and small cap portfolios represent a substantial portion of the All Cap portfolio. As part of the inclusion process, the investment team also considers the impact a security has on the portfolio’s sector and market cap diversification profile. Portfolios are more concentrated, typically holding approximately 40-50 securities.
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. The standard fee agreement currently in effect is 0.75 of 1% per annum on the first $20 million of principal, 0.65 of 1% per annum on the next $20 million of principal, 0.60 of 1% per annum on the next $20 million of principal and 0.55 of 1% per annum on the remaining balance, however fees are negotiable. Net returns are net of model investment advisory fees in effect for the respective time period and are derived using the maximum fixed fee rate. As an example, the "cost" of the investment advisory fee of a $10 million portfolio is .75% 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 11.8% on a cumulative basis.
For comparison purposes, the Composite is measured against the Russell 3000® Value Index. The Russell 3000®Value Index measures the performance of those Russell 3000® companies with lower price-to-book ratios and lower forecasted growth values. The Russell 3000® Value 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. 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 dispersion is measured using an asset weighted standard deviation of portfolio returns represented within the Composite for the full year. A list of composite descriptions is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are also available upon request.
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.