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%

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

September 30, 2020

Cornerstone
Gross Returns
Cornerstone
Net Returns
Russell 3000
QTD 2.97% 2.85% 9.21%
1 Year -2.84% -3.27% 15.00%
3 Year 5.38% 4.91% 11.65%
Since Inception* 8.95% 8.43% 13.37%

Annual compounding rates of return ending 9/30/2020
*Composite inception date is 09/30/2016

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 30.55% 30.02% 31.02% N.A. N.A. 50.6 5 or fewer 2.20% 2,300.8 N.A. 0.4
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, 2020

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-Year Historical Earnings Growth 13.2% 20.7%
Long-Term Estimated Earnings Growth 6.5% 12.9%
Price to Earnings (TTM) 15.5x 23.6x
Price to Cash Flow 7.8x 13.2x
Return on Equity 19.2% 22.2%
Long-Term Debt to Equity 1.0x 1.4x
Dividend Yield 2.8% 1.7%
Market Cap ($ wtd) 205.2B 384.3B

Sector Weights

September 30, 2020

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, 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 March 31, 2020.  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.