companies in our fully invested, concentrated portfolio
year track record
billion Small Cap Value assets under management as of 6/30/2019
upside market capture ratio since inception (8/1/08)
downside market capture ratio since inception (8/1/08)
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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
Small Cap Value
Quarter 2 2019
Equity Composite Performance
- Cooke & Bieler - Gross of Fees
- Cooke & Bieler - Net of Fees
- Russell 2000® Value Index
Quality Characteristics1
- C&B Small Cap Value†
- Russell 2000® Value Index*
| ROC 5 Year Avg | Cash Interest Coverage | Debt/EBITDA | Forecasted P/E** | P/Normalized Earnings** |
|---|---|---|---|---|
| 11.8% | 7.9x | 2.9x | 13.6x | 12.0x |
| 6.7% | 4.9x | 3.8x | 17.2x | - |
| ROC 5 Year Avg | 11.8% | 6.7% |
|---|---|---|
| Cash Interest Coverage | 7.9x | 4.9x |
| Debt/EBITDA | 2.9x | 3.8x |
| Forecasted P/E** | 13.6x | 17.2x |
| P/Normalized Earnings** | 12.0x | - |
Portfolio Attributes1
- C&B Small Cap Value
- Russell 2000® Value Index
| # Holdings | Market Cap ($B) Range | Market Cap ($B) Wtd Avg | Annual Turnover |
|---|---|---|---|
| 45 | 0.6 - 8.0 | 3.3 | 36% |
| 1,347 | 0.002 - 7.4 | 2.2 | - |
| # Holdings | 45 | 1,347 |
|---|---|---|
| Market Cap ($B) Range | 0.6 - 8.0 | 0.002 - 7.4 |
| Market Cap ($B) Wtd Avg | 3.3 | 2.2 |
| Annual Turnover | 36% | - |
Top 10 Holdings1
| Winnebago Industries | 4.7% |
| PGT Innovations | 3.6% |
| Reliance Steel & Aluminum | 3.6% |
| Helen of Troy | 3.5% |
| Air Lease | 3.4% |
| Schweitzer-Mauduit International | 3.3% |
| Steelcase | 3.1% |
| TCF Financial | 3.0% |
| Plexus | 2.9% |
| Williams-Sonoma | 2.8% |
Top 10 Holdings1
| Winnebago Industries | 4.7% |
| PGT Innovations | 3.6% |
| Reliance Steel & Aluminum | 3.6% |
| Helen of Troy | 3.5% |
| Air Lease | 3.4% |
| Schweitzer-Mauduit International | 3.3% |
| Steelcase | 3.1% |
| TCF Financial | 3.0% |
| Plexus | 2.9% |
| Williams-Sonoma | 2.8% |
Sector Weights1
- C&B Small Cap Value
- Russell 2000® Value Index
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Communication Services
C&B Small Cap Value — Russell 2000® Value Index 2.9% -
Consumer Discretionary
C&B Small Cap Value 19.7% Russell 2000® Value Index 8.5% -
Consumer Staples
C&B Small Cap Value — Russell 2000® Value Index 2.4% -
Energy
C&B Small Cap Value 1.0% Russell 2000® Value Index 5.1% -
Financials
C&B Small Cap Value 17.7% Russell 2000® Value Index 29.4% -
Health Care
C&B Small Cap Value 9.1% Russell 2000® Value Index 4.0% -
Industrials
C&B Small Cap Value 31.1% Russell 2000® Value Index 11.6% -
Information Technology
C&B Small Cap Value 6.6% Russell 2000® Value Index 11.9% -
Materials
C&B Small Cap Value 9.2% Russell 2000® Value Index 4.2% -
Real Estate
C&B Small Cap Value 1.6% Russell 2000® Value Index 12.3% -
Utilities
C&B Small Cap Value — Russell 2000® Value Index 7.6% -
Cash
C&B Small Cap Value 4.0% Russell 2000® Value Index —
Additional Cooke & Bieler Small Cap Value Disclosures
Small Cap Value Equity Composite
| Year | Total Return Gross of Fees (%) | Total Return Net of Fees (%) | Russell 2000® Value Index (%) | Russell 2000® Value Index 3-Yr Std Dev (%) | Composite 3-Yr Std Dev (%) | Composite Dispersion (%) | Market Value ($Millions) | Total Firm Assets ($Millions) | # of Portfolios |
|---|---|---|---|---|---|---|---|---|---|
| 2009 | 38.16 | 36.75 | 20.58 | - | - | N/M | 1.1 | 5,004.0 | <5 |
| 2010 | 21.14 | 19.92 | 24.50 | - | - | N/M | 1.3 | 4,841.5 | <5 |
| 2011 | (4.83) | (5.69) | (5.50) | 26.05 | 26.08 | N/M | 1.3 | 4,471.6 | <5 |
| 2012 | 41.04 | 39.67 | 18.05 | 19.89 | 22.07 | N/M | 3.0 | 4,434.6 | <5 |
| 2013 | 44.32 | 43.09 | 34.52 | 15.82 | 18.42 | N/M | 8.2 | 4,724.5 | 5 |
| 2014 | 3.41 | 2.72 | 4.22 | 12.79 | 13.69 | 0.05 | 31.7 | 4,921.9 | 8 |
| 2015 | (0.98) | (1.84) | (7.47) | 13.46 | 13.41 | 0.20 | 526.7 | 4,804.9 | 16 |
| 2016 | 28.93 | 28.02 | 31.74 | 15.50 | 14.44 | 0.29 | 684.7 | 5,303.4 | 21 |
| 2017 | 16.32 | 15.18 | 7.84 | 13.97 | 13.26 | 0.18 | 867.6 | 5,912.3 | 27 |
| 2018 | (10.56) | (11.46) | (12.86) | 15.76 | 15.61 | 0.26 | 821.3 | 5,084.6 | 37 |
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. (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 Small Cap Value Equity Composite has been examined for the period from January 1, 2011 through December 31, 2018. The examination report is available upon request.
The Cooke & Bieler Small Cap Value Equity Composite (Composite), whose inception date is August 1, 2008, currently includes all fully discretionary, fee paying, small cap value equity portfolios managed for more than one month. During 2012, the minimum market value for inclusion in the composite was $500,000. Prior to 2012, the minimum market value for inclusion was $2,500. For investment purposes, we generally define small cap equity securities as those of companies whose market capitalization is greater than $350 million and within the Russell 2000® Index at initial time of purchase. Securities are selected using the firm’s fundamental, bottom-up approach. Portfolios are more concentrated, typically holding approximately 40-60 securities. The Composite was created in April 2010.
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 is 1% per annum on the first $20 million of principal; and 0.90 of 1% per annum on the next $20 million and 0.85 of 1% per annum on the next $20 million and 0.80 of 1% per annum on the remaining balance, however fees are negotiable. Effective 7/1/2016, net of fee returns are calculated monthly by deducting one twelfth of the maximum fee rate of 1% across all accounts in the composite and are net of any performance-based fees. Prior to 7/1/2016, net of fee returns reflect the deduction of actual management fees. As an example, the "cost" of the investment advisory fee of a $20 million portfolio is 1.00% on an annualized basis. In a ten-year period, the effect of the investment advisory fee may reduce a 5% annual return by as much as 15.6% on a cumulative basis.
For comparison purposes, the Composite is measured against the Russell 2000® Value Index. The Russell 2000® Value Index measures the performance of those Russell 2000 companies with lower price/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. 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.
Strategy Commentary
Download Commentary
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 2000® Value Index (RUJ) returned 1.38%, though only five of 11 economic sectors ended the quarter higher. Investors gravitated toward Financials, Industrials, Information Technology, Real Estate, and Utilities, highlighting their uncertain outlook on the economy and interest rates. Returns were strongest for large cap stocks, but otherwise underlying market dynamics lacked discernable themes.