Large Cap – Domestic Ultra Concentrated

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
2. More predictable outcomes from selecting companies trading at a modest discount to fair value but with improving earnings

Cornerstone’s proprietary Fair Value Model has successfully identified attractive companies for over 30 years and this strategy focuses on the highest risk adjusted return area of the model

3. Concentrated “best ideas” portfolio with high active share

Portfolio encompasses the 5-15 most compelling ideas with a maximum position size of 30%

Video Introduction

Domestic Ultra Concentrated Strategy

Process

Determine Reasonableness of Inputs

  • Verify valuation inpurts
  • Prefer flexible cost structure, low financial leverage and attractive P/TBV ratio
  • Identify compelling investment case to drive stock price towards Fair Value

Good Companies Have Strong Fundamentals

Industry leader
History of success
Geographic and Product Diversification
Manageable Financial Leverage
Sensible Capital Allocation
Operational Consistency
Positive and Achievable Growth
Conservative Inputs
Competitive Edge

Choose 5-15 Stocks

Positions Sizes Range from 1% to 30%
Weights Reflect:
  • Upside Opportunity
  • Fundamental Attractiveness
  • Risk/Return Profile
Sector Weights Unconstrained

Performance

Cornerstone
Gross Returns
Cornerstone
Net Returns
Russell 3000
QTD 3.45% 3.33% -0.10%
1 Year 45.77% 45.16% 31.88%
3 Year 14.30% 13.81% 16.00%
Since Inception* 15.48% 14.97% 16.85%

Annual compounding rates of return ending 9/30/2021
*Composite inception date is 09/30/2016

Cornerstone
Gross Returns
Cornerstone
Net Returns
Russell 3000 Gross

Composite
3yr St Dev

Russell 3000
3yr St Dev
Composite assets $millions Accounts at period end Percent of firm assets Firm assets $millions Gross

Composite dispersion

% of non fee paying clients
2020 6.50% 6.03% 20.89% 21% 19% 67.6 5 or fewer 3.69% 1831.3 N.A. 0.4
2019 30.55% 30.02% 31.02% 13% 12% 50.6 5 or fewer 2.20% 2,300.8 N.A. 0.3
2018 -7.03% -7.45% -5.24% N.A. N.A. 23.5 5 or fewer 1.08% 2,169.9 N.A. 0.4
2017 23.93% 23.38% 21.13% N.A. N.A. 23.8 5 or fewer 0.97% 2,458.6 N.A. 0.2
2016* 5.27% 5.16% 4.21% N.A. N.A. 20.0 5 or fewer 0.77% 2,609.7 N.A. 0.3

*Composite inception date is 09/30/2016

Characteristics

September 30, 2021

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

Characteristics DUC Russell 3000
5 Yr Hst. EPS Growth(Ex-Zeros) 18.3% 19.6%
LT Est. EPS Growth—Wtd Avg 14.8% 16.2%
Price/Earnings (TTM)—Wtd HAvg 14.7x 22.3x
Price/Cash Flow—Wtd Avg 11.5x 17.8x
LT Debt to Equity—Wtd Avg 3.3x 1.3x
Dividend Yield—Wtd Avg 1.9% 1.3%
Market Cap—Wtd Avg 298.4B 469.6B

Sector Weights

September 30, 2021

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

Disclaimer

Domestic Ultra Concentrated Portfolios in this composite are typically comprised of 5-15 securities from an 800 stock universe that may or may not pay dividends. Positions are typically bought and increased opportunistically to a maximum of 30%. 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 Domestic Ultra Concentrated composite incepted on September 30, 2016 and was created in June 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 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 September 30, 2001 thru December 31, 2020. The verification and performance examination reports are available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report. The firm maintains a complete list and description of composites. Policies for valuing investments, calculating performance, and preparing GIPS Reports 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. GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.