ESG Value Equity
- Strategy Summary
Investment Strategy
- Concentrated portfolio of 25 – 40 primarily large cap stocks focusing on integrating Environmental, Social and Governance factors
- Disciplined Value Approach
- ESG screening to exclude companies with controversial models and practices
- Portfolio companies maintain strong governance structure and competitive positioning
Portfolio Managers
Strategy Attributes
The US ESG Value Equity Strategy allows investors to participate in the long-term upside potential while simultaneously providing substantial downside protection of stocks. In accordance with our underlying philosophy, the portfolio invests in undervalued companies with above average earnings growth with an additional focus on Environmental, Social and Governance (“ESG”) integration. ESG is at the core of the strategy, as we look for companies with strong governance structure, investment in material ESG factors and competitive positioning.
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.
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 3,000 stocks, as well as sector and industry inflection points.
- Price-to-earnings ratios that are less than the multiple for the S&P 500
- Long-term earnings growth prospects that are greater than those of the S&P 500
- ESG screen to exclude companies with controversial models and practices and to filter out companies with lower ESG scores
Fundamental Research:
- Low debt-to-equity and high returns on investable capital
- Identify catalysts that can drive price appreciation and earnings growth
- In-depth security review, incorporating third party financial and ESG assessment with internal analysis
- Focus on strong management with clear vision and commitment to enhancing shareholder value
Portfolio Construction:
- Diversification across 25-40 stocks
- Typically, no more than 30% invested in any one sector at cost
- Typically, no more than 15% invested in any one industry at cost
- Typically, no more than 5% invested in any one stock at cost
- Low cash balances
Sell Discipline:
- Price-to-earnings multiple no longer justified by EPS growth rate
- Earnings growth does not meet initial expectations
- Deteriorating fundamentals or negative change in business trend
- ESG profile deterioration
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