All Cap – All Cap 40

Description

Objective

To provide attractive risk adjusted returns versus the Russell 3000 over a full market cycle.

Investment Merits

1. Opportunity derived from market emotion

Timeless investment philosophy with a disciplined process designed to eliminate behavioral biases

2. Focus on companies with proven track records trading at a discount to fair value

Cornerstone’s proprietary Fair Value Model has successfully identified attractively valued companies for over 30 years

3. Concentrated portfolio with high active share

Portfolio encompasses 40 of our most compelling ideas

Process

Conduct Investment Meetings Daily

  • Confirm relevance of historical track record
  • Eliminate fundamentally flawed companies
  • Build investment case, run sensitivity analysis, stress test assumptions
  • Identify what the market is mispricing

Determine whether past fundamentals are repeatable

Investment Team Members assess the merits of companies independently before collaborating for final review

1. Verify valuation and Dissect Financials

Assess company financials and valuation case

2. Evaluate Business Model

Identify embedded characteristics and keys to success

3. Appraise Management

Measure success of management over time

4. Assess Competitive Threats

Monitor competitors, substitutes and new entrants

5. Understand Operating Environment

Legislation, regulations, and exogenus inputs

Most compelling 40 stocks chosen

Positions typcially constrained at 5%
  • Positions built up and eliminated over time
Size of the position based on:
  • Degree of mispricing
  • Relative Attractiveness
  • Focus on stocks that offer the most attractive risk-adjusted returns

Performance

December 31, 2019

a40 performance bar graph
Cornerstone
Gross Returns
Cornerstone
Net Returns
Russell 3000
QTD 9.83% 9.58% 9.10%
1 Year 30.76% 29.60% 31.02%
Since Inception* 10.54% 9.54% 11.42%

Annual compounding rates of return ending 12/31/2019
*Composite inception date is 12/31/2017

Cornerstone
Gross Returns
Cornerstone
Net Returns
Russell 3000 Composite
3yr St Dev
Russell 3000
3yr St Dev
Composite assets $millions Accounts at period end Percent of firm assets Firm assets $millions Composite dispersion % of non fee paying clients
2019 30.76% 29.60% 31.02% N.A. N.A. 1.87 5 or fewer 0.08% 2,300.8 N.A. 7.4
2018 -6.56% -7.42% -5.24% N.A. N.A. 1.53 5 or fewer 0.07% 2,169.9 N.A. 7.4

*Composite inception date is 12/31/2017

Characteristics

December 31, 2019

The end result of the investment process is a portfolio comprised of companies with solid growth prospects trading at compelling valuation levels.

Characteristics A40 Russell 3000
5 Yr Hst. EPS Growth(Ex-Zeros) 13.8% 12.8%
LT Est. EPS Growth—Wtd Avg 9.0% 11.1%
Price/Earnings (TTM)—Wtd HAvg 14.8x 20.0x
Price/Cash Flow—Wtd Avg 10.7x 13.8x
LT Debt to Equity—Wtd Avg 0.9x 1.4x
Dividend Yield—Wtd Avg 1.9% 1.7%
Market Cap—Wtd Avg 187.1B 249.0B

Sector Weights

December 31, 2019

a40 bar graph

Sector weights can be materially different from the benchmark as a result of our bottom-up investment process

Disclaimer

All Cap 40 Institutional contains fully discretionary accounts that are comprised of around 40 securities from an approximately 3000 stock universe that may or may not pay dividends. Cash is typically less than 5% of the portfolio. The cash allocation will be determined by Cornerstone’s proprietary market valuation methodology and portfolio manager discretion. For comparison purposes the composite is measured against the Russell 3000 Index. Cornerstone Investment Partners is an independent, employee owned investment advisory firm.  Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Past performance is not indicative of future results. N.A.-Information is not statistically meaningful due to an insufficient number of portfolios in the composite for an entire year. The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income.  Net of fee performance was calculated using actual management fees. The All Cap 40 Institutional  composite incepted on December 31, 2017 and was created in March 2019. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. The 3 year ex post standard deviation is not presented because 36 months of returns are not available.  Cornerstone Investment Partners, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Cornerstone Investment Partners, LLC has been independently verified for the periods September 30, 2001 through September 30, 2019.  The verification report(s) is/are available upon request.  Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. The firm maintains a complete list and description of composites. Additional information regarding the policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Benchmark returns are not covered by the report of independent verifiers.  To receive a list of composite descriptions and/or additional information, contact Cornerstone Investment Partners at 3438 Peachtree Rd, NE; Suite 900; Atlanta, GA 30326, 404-751-3850 or marketing@cornerstone-ip.com The general fee schedule for equity accounts is as follows: 0.75% on the first $10,000,000; 0.55% on the next $10,000,000 and 0.35% on the balance. Actual investment advisory fees incurred by clients may vary.