companies in our fully invested, concentrated portfolio
year track record
billion Mid Cap Value assets under management as of 3/31/2020
upside market capture ratio since 2000
downside market capture ratio since 2000
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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
Mid Cap Value
Quarter 1 2020
Equity Composite Performance
- Cooke & Bieler - Gross of Fees
- Cooke & Bieler - Net of Fees
- Russell Midcap® Value Index
Quality Characteristics1
- C&B Mid Cap Value†
- Russell Midcap® Value Index*
| ROC 5 Year Avg | Cash Interest Coverage | Debt/EBITDA | Forecasted P/E** | P/Normalized Earnings** |
|---|---|---|---|---|
| 13.2% | 9.0x | 2.3x | 10.1x | 8.4x |
| 9.2% | 6.7x | 3.1x | 13.6x | - |
| ROC 5 Year Avg | 13.2% | 9.2% |
|---|---|---|
| Cash Interest Coverage | 9.0x | 6.7x |
| Debt/EBITDA | 2.3x | 3.1x |
| Forecasted P/E** | 10.1x | 13.6x |
| P/Normalized Earnings** | 8.4x | - |
Portfolio Attributes1
- C&B Mid Cap Value
- Russell Midcap® Value Index
| # Holdings | Market Cap ($B) Range | Market Cap ($B) Wtd Avg | Annual Turnover |
|---|---|---|---|
| 48 | 0.9 - 45.7 | 8.8 | 40% |
| 632 | 0.1 - 39.3 | 12.3 | - |
| # Holdings | 48 | 632 |
|---|---|---|
| Market Cap ($B) Range | 0.9 - 45.7 | 0.1 - 39.3 |
| Market Cap ($B) Wtd Avg | 8.8 | 12.3 |
| Annual Turnover | 40% | - |
Top 10 Holdings1
| Helen of Troy | 3.4% |
| Hill-Rom | 3.2% |
| Arrow Electronics | 3.1% |
| Colfax | 3.1% |
| Perrigo | 2.9% |
| FirstCash | 2.8% |
| Progressive | 2.8% |
| TCF Financial | 2.7% |
| Integra LifeSciences | 2.7% |
| TE Connectivity | 2.6% |
Top 10 Holdings1
| Helen of Troy | 3.4% |
| Hill-Rom | 3.2% |
| Arrow Electronics | 3.1% |
| Colfax | 3.1% |
| Perrigo | 2.9% |
| FirstCash | 2.8% |
| Progressive | 2.8% |
| TCF Financial | 2.7% |
| Integra LifeSciences | 2.7% |
| TE Connectivity | 2.6% |
Sector Weights1
- C&B Mid Cap Value
- Russell Midcap® Value Index
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Communication Services
C&B Mid Cap Value 3.6% Russell Midcap® Value Index 4.0% -
Consumer Discretionary
C&B Mid Cap Value 12.2% Russell Midcap® Value Index 7.5% -
Consumer Staples
C&B Mid Cap Value — Russell Midcap® Value Index 5.6% -
Energy
C&B Mid Cap Value — Russell Midcap® Value Index 3.1% -
Financials
C&B Mid Cap Value 23.5% Russell Midcap® Value Index 16.7% -
Health Care
C&B Mid Cap Value 13.1% Russell Midcap® Value Index 8.3% -
Industrials
C&B Mid Cap Value 26.2% Russell Midcap® Value Index 11.9% -
Information Technology
C&B Mid Cap Value 11.3% Russell Midcap® Value Index 8.0% -
Materials
C&B Mid Cap Value 4.9% Russell Midcap® Value Index 7.1% -
Real Estate
C&B Mid Cap Value 1.7% Russell Midcap® Value Index 14.1% -
Utilities
C&B Mid Cap Value — Russell Midcap® Value Index 13.6% -
Cash
C&B Mid Cap Value 3.4% Russell Midcap® Value Index —
Additional Cooke & Bieler Mid Cap Value Disclosures
Mid Cap Value Equity Composite
| Year | Total Return Gross of Fees (%) | Total Return Net of Fees (%) | Russell Midcap® Value Index (%) | Russell Midcap® Value Index 3-Yr Std Dev (%) | Composite 3-Yr Std Dev (%) | Composite Dispersion (%) | Market Value ($Millions) | Total Firm Assets ($Millions) | # of Portfolios |
|---|---|---|---|---|---|---|---|---|---|
| 2010 | 22.64 | 21.93 | 24.75 | - | - | 0.31 | 582.0 | 4,841.5 | 12 |
| 2011 | (0.88) | (1.46) | (1.38) | 22.78 | 21.42 | 0.18 | 414.3 | 4,471.6 | 10 |
| 2012 | 20.53 | 19.82 | 18.51 | 16.76 | 17.27 | 0.25 | 452.6 | 4,434.6 | 10 |
| 2013 | 38.66 | 37.89 | 33.46 | 13.69 | 13.80 | 0.18 | 634.0 | 4,724.5 | 12 |
| 2014 | 5.65 | 5.08 | 14.75 | 9.81 | 10.98 | 0.12 | 547.7 | 4,921.9 | 11 |
| 2015 | (1.83) | (2.33) | (4.78) | 10.71 | 11.93 | 0.15 | 398.2 | 4,804.9 | 11 |
| 2016 | 24.90 | 24.25 | 20.00 | 11.30 | 13.03 | 0.29 | 441.3 | 5,303.4 | 8 |
| 2017 | 16.30 | 15.33 | 13.34 | 10.32 | 11.72 | 0.13 | 496.9 | 5,912.3 | 7 |
| 2018 | (13.58) | (14.32) | (12.29) | 11.96 | 13.89 | 0.07 | 483.6 | 5,084.6 | 9 |
| 2019 | 38.32 | 37.31 | 27.06 | 12.79 | 15.56 | 0.22 | 865.1 | 9,757.1 | 10 |
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. Cooke & Bieler 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. The Mid Cap Value Equity Composite has been examined for the period from March 1, 1998 through December 31, 2018. The verification and performance examination reports are available upon request.
The Cooke & Bieler Mid Cap Value Equity Composite (Composite), whose inception date is March 1, 1998, currently includes all fully discretionary, fee paying, mid cap value equity portfolios managed for more than one month. During 2012, the market value for inclusion was $1 million. Prior to 2012, the minimum market value for inclusion was $2,500. For investment purposes, we generally define mid cap equity securities as those of companies whose market capitalization is within the Russell Midcap® Index at initial time of purchase. Securities are selected using the firm’s fundamental, bottom-up approach. Portfolios are more concentrated, typically holding approximately 40-50 securities. The Composite was created in March 1998.
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 0.75 of 1% on the first $25 million, 0.65 of 1% on the next $25 million and 0.58 of 1% per annum on the remaining balance, however fees are negotiable. As an example, the "cost" of the investment advisory fee of a $25 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. Effective 1/1/2017, net of fee returns are calculated monthly by deducting one twelfth of the maximum fee rate for the respective period across all accounts in the composite. Prior to 1/1/2017, net of fee returns reflect the deduction of actual management fees. As of 12/31/19, less than 1% of composite assets are custodied with a broker that does not charge trading expenses. Accounts custodied with other brokers may incur trading expenses, which may reduce returns.
For comparison purposes, the Composite is measured against the Russell Midcap® Value Index. The Russell Midcap® Value Index measures the performance of those companies with lower price-to-book ratios and lower forecasted growth rates. The stocks are also members of the Russell 1000® Value index. 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 scale and speed of this quarter’s equity market rout were unprecedented, marked by the fastest bear market descent in U.S. history. The wholesale selloff was staggering and unforeseen, but with no historical analog for the unfolding coronavirus pandemic and economic landscape, it was in many respects understandable.
Against this backdrop, the Russell MidCap® Value Index (RMV) declined by 31.71%, the worst quarterly result since its inception. Performance was broadly negative across Index constituents, ranging from bad in the Utilities and Consumer Staples sectors to atrocious in Energy, where freefalling demand converged with free-flowing supply.