Schafer Cullen Small Cap Value Equity


Strategy Overview

Portfolio Managers: Jim Cullen, Brooks H. Cullen, and Brian Drubetsky Firm Strategy AUM: $5.6 million as of 06/30/2020 Benchmark: Russell 2500 Value Total Return Benchmark: Russell 2000 Benchmark

Historical studies show that a disciplined value strategy of selecting stocks at low prices relative to their earnings holds the promise of better than average market performance over time. For instance, a strategy of buying stocks with low price/earnings multiples has substantially outperformed the S&P 500 index.

The Schafer Cullen Small Cap Value Equity strategy focuses this low P/E discipline on stocks that generally have a market capitalization of more than $500 million and less than $5 billion. Small cap stocks have also demonstrated above average price performance over time, according to historical studies. In addition to market cap and P/E criteria, portfolio securities must also meet quality standards related to their cash flow, balance sheet and return on capital. Schafer Cullen Capital Management invests in those that will benefit from specific catalysts that will drive their fundamental performance and stock price.

An extensive research effort is crucial in analyzing small-cap companies, because they are relatively underfollowed. They also often have less resources and sophistication with regard to controls and procedures. Diligent research and careful stock selection helps address these risks and creates the potential for improving returns. We focus on high return on capital companies with leading market positions and strong balance sheets. Focusing on small cap gives us access to those businesses whose competitive strength resides in niche products market or specific geographies. We find that meetings with company management are more productive with smaller companies. We also emphasize making calls away from Wall Street to outside industry experts, suppliers and customers to gain perspective.