Large Cap – Concentrated 30

Description

Objective

To provide attractive risk adjusted returns versus the S&P 500 over a full market cycle.

Investment Merits

1. Long-term capital appreciation and total return

Performance has exceeded peers and benchmark since inception

2. Opportunity derived from market emotion

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

3. 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

4. Concentrated portfolio with high active share

Portfolio encompasses 30 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 30 stocks chosen

Positions typcially start at 2% with a maximum of 6%
  • Positions built up and eliminated over time
Size of the position based on:
  • Discount to our Fair Value
  • Relative Attractiveness
Sector weights range from 0-30%

Performance

June 30, 2020

Cornerstone
Gross Returns
Cornerstone
Net Returns
S&P 500
QTD 16.79% 16.65% 20.54%
1 Year -2.78% -3.13% 7.51%
3 Year 6.76% 6.38% 10.73%
5 Year 7.83% 7.45% 10.73%
7 Year 8.24% 7.87% 12.13%
10 Year 11.15% 10.77% 13.99%
Since Inception* 8.91% 8.47% 8.15%

Annual compounding rates of return ending 6/30/2020
*Composite inception date is 9/30/2001

Cornerstone
Gross Returns
Cornerstone
Net Returns
S&P 500 Composite
3yr St Dev
S&P 500
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 30.73% 30.30% 31.49% 12% 12% 1,519.0 28 66.0% 2,300.8 0.2 0.00
2018 -6.08% -6.41% -4.38% 12% 11% 1,631.3 32 75.2% 2,169.9 0.3 0.00
2017 26.80% 26.36% 21.83% 12% 10% 1,910.0 40 77.7% 2,458.6 0.1 0.00
2016 16.82% 16.44% 11.96% 13% 11% 2,154.2 42 82.5% 2,609.7 0.4 0.02
2015 -13.54% -13.87% 1.38% 12% 10% 2,741.3 60 78.8% 3,480.2 0.3 0.01
2014 8.41% 8.08% 13.69% 10% 9% 7,857.3 101 85.8% 9,154.3 0.2 0.01
2013 35.18% 34.76% 32.39% 12% 12% 6,664.9 91 81.2% 8,210.6 0.5 0.01
2012 15.32% 14.97% 16.00% 15% 15% 3,996.3 78 69.8% 5,725.4 0.2 0.05
2011 3.89% 3.50% 2.11% 19% 19% 1,969.3 65 56.8% 3,466.7 0.2 0.08
2010 13.08% 12.61% 15.06% 21% 22% 989.1 62 41.3% 2,394.8 0.4 0.20
2009 24.90% 24.37% 26.46% 20% 20% 485.1 52 33.7% 1,437.6 0.8 0.47
2008 -28.08% -28.45% -36.99% 14% 15% 105.0 25 17.1% 613.0 0.4 1.90
2007 12.52% 11.99% 5.49% 8% 8% 71.7 14 12.6% 569.1 0.2 0.00
2006 17.71% 17.24% 15.79% 7% 7% 206.8 39 54.1% 382.5 1.0 0.00
2005 8.65% 8.24% 4.91% 10% 9% 111.8 22 45.3% 246.9 0.5 0.00
2004 12.99% 12.30% 10.88% 18% 15% 45.6 15 36.9% 123.6 0.5 0.00
2003 31.62% 30.98% 28.68% N.A. N.A. 5.8 5 or fewer 11.4% 50.7 N.A. 0.00
2002 -16.80% -17.32% -22.06% N.A. N.A. 2.4 5 or fewer 10.6% 22.1 N.A. 0.00
2001* 14.96% 14.96% 10.66% N.A. N.A. 2.0 5 or fewer 13.0% 15.4 N.A. 0.0

*Composite inception date is 9/30/2001

Characteristics

March 31, 2020

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

Characteristics C30 S&P 500
5-Year Historical Earnings Growth 16.4% 20.4%
Long-Term Estimated Earnings Growth 10.3% 10.2%
Price to Earnings (TTM) 15.1x 21.6x
Price to Cash Flow 8.3x 12.6x
Return on Equity 23.4% 25.5%
Long-Term Debt to Equity 1.0x 1.6x
Dividend Yield 2.4% 1.9%
Market Cap ($ wtd) 261.0B 387.8B

Sector Weights

June 30, 2020

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

Disclaimer

Concentrated 30 Institutional Composite contains fully discretionary institutional accounts that are typically comprised of 27-35 securities that may or may not pay dividends and are suitable for those clients with an emphasis on long-term capital appreciation and have an above-average risk tolerance. For comparison purposes the composite is measured against the S&P 500 Index. Cornerstone Investment Partners’ has constructed a universe of 800 large, liquid securities, including non-US companies, traded on US exchanges. At some point in the past the composite was referenced as Concentrated Equity Institutional. Cornerstone Investment Partners, LLC is an independent, employee owned investment advisory firm. The firm maintains a complete list and description of composites, which is available upon request. 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 the 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. Gross returns were reduced by transaction costs. Net of fee performance was calculated using actual management fees. Beginning October 1, 2008, composite policy requires the temporary removal of any portfolio incurring a client initiated significant cash inflow or outflow of 30% of portfolio assets. The Concentrated 30 Composite was created on April 1, 2010. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. Cornerstone Investment Partners 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 has been independently verified for the periods beginning September 30, 2001 thru March 31, 2020. 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. The Concentrated 30 Institutional Composite has been examined for the periods September 30, 2001 thru December 31, 2019. The verification and performance examination reports are available upon request. Benchmark returns are not covered by the report of independent verifiers. As of January 1, 2007, the composite was split into a tax sensitive composite and a non-tax sensitive composite to better reflect our performance for each account type. Additional information regarding the policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Submit requests to Cornerstone Investment Partners: 3438 Peachtree Rd, Suite 900. Atlanta, GA 30326; Phone: 404-751-3850; Email: 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.