Schafer Cullen Enhanced Equity Income


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 2,000 publicly traded equities
  • Dividend yield of 3% or greater
  • Screen for stocks in bottom quintile according to P/E and P/B basis
  • Typical market capitalization >$5 B
  • Sector and Industry Inflection Points

Fundamental Research:

  • Seek low debt to equity and high returns on investable capital
  • Search for catalyst that can drive earnings, including:
    • New markets
    • New products
    • Strong managements with clear vision and commitment to shareholder value

Portfolio Construction:

  • Approximately 30-40 holdings
  • Diversification across 15-20 industries
  • No more than 4% in any one stock at cost
  • No more than 15% in any one industry at cost
  • No more than 25% in any one sector at cost
  • Top 10 holdings typically represent 35 – 40%
  • Up to 30% non-US exposure (ADR)

Sell Discipline:

  • Price objectives reached
  • Earnings/Dividend growth not realized
  • Deteriorating fundamentals
  • Decline of 25% - investment thesis reassured
  • Cuts in dividend policy