Schafer Cullen ESG Value Equity


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
Russell 1000® Value
Inception Date
Dec 31, 2020

Strategy Attributes

The US ESG Value Equity Strategy utilizes a similar investment approach to the other Schafer Cullen value strategies, 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 facts and competitive positioning. This strategy has a large-cap bias; however, a percentage of the portfolio will be invested in mid- and small-cap stocks.

Fundamental to our philosophy is the belief that buying stocks at a low price relative to their earnings produces higher returns over time. The stocks selected for our clients' portfolios generally have P/E ratios that are less than the P/E multiple for the S&P 500 Index. The long-terms earnings growth prospects for these companies will generally be greater than the earnings growth prospects of the S&P 500. In addition, portfolio securities must collectively meet quality standards related to their cash flow, debt-to-capitalization, price-to-book and return on equity. 

Several ESG screens are applied with the goal of minimizing exposure to industries and companies with controversial business models and practices. Then, through fundamental analysis, the strategy's ESG conviction in a company is reflected in the portfolio's composition.

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.

Jim Cullen, Portfolio Manager

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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