Schafer Cullen Small Cap Value Equity


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:

  • Bottom-up approach to security selection which begins with a universe of 2,500 stocks (2,000 U.S. and 500 overseas) with a market capitalization below $5 billion.

Fundamental Research:

  • High and/or improving long-term return on capital profile
  • Strong liquidity and balance sheet, including amount and maturity schedule of debt
  • Dominant or leading position in industries with stable market shares
  • Management commitment to enhancing shareholder value with strong Board governance
  • Turnaround situations where potentially disposable or improvable segments can highlight value
  • On-site meetings and discussions with management, industry experts, suppliers, customers and competitors

Portfolio Construction:

  • Diversification across approximately 25-35 stocks with equal weighting at cost
  • No more than 5% invested in any one stock at cost
  • Diversification across 15-20 industries
  • No more than 15% invested in any one industry at cost
  • Up to 30% invested in foreign securities (ADRs)
  • Generally fully invested

Sell Discipline:

  • Make room for other investment(s) with higher risk-adjusted return potential
  • Valuation objective reached
  • Earnings growth does not meet initial expectations
  • Deteriorating fundamentals or negative change in business trend