Large Cap – Value 50

Description

Objective

To provide attractive risk adjusted returns versus the Russell 1000 Value 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

Focuses on stocks in our proprietary Fair Value Model that have produced the strongest risk adjusted returns over time

4. Concentrated portfolio with high active share

Portfolio encompasses 50 of our most compelling ideas

Process

Determine Reasonableness of Inputs

  • Verify valuation inputs
  • Preference towards companies with low operating, financial leverage and low P/TBV
  • Eliminate companies with declining earnings

Fundamental review process is designed to eliminate flawed candidates

Valuation is a launch point for fundamental review

Characteristics of an ideal candidate:
Industry Leader
History of Success
Manageable Financial Leverage
Sensible Capital Allocation
Operational Consistency
Reasonable Growth Rate
Conservative Inputs
Competitive Edge

Most compelling 50 stocks chosen

Positions typically start at 2% with a maximum of 5%
Portfolio is equal weighted:
  • Positions rebalanced when they exceed tolerance bands
Sector weights unconstrained

Performance

December 31, 2019

value 50 bar graph
Cornerstone Pure
Gross Returns**
Cornerstone
Net Returns
Russell 1000 Value
QTD 11.51% 11.51% 7.41%
1 Year 32.98% 32.79% 26.54%
3 Year 13.15% 12.61% 9.68%
5 Year 10.83% 10.18% 8.29%
7 Year 15.15% 14.43% 12.20%
Since Inception* 14.77% 14.01% 12.85%

Annual compounding rates of return ending 12/31/2019
*Composite inception date is 12/31/2011

Cornerstone
Pure Gross Returns**
Cornerstone
Net Returns
Russell 1000 Value Composite
3yr St Dev
R1000 Value
3yr St Dev
Composite assets $millions Accounts at period end Percent of firm assets Firm assets $millions Net Composite % of non fee paying clients % of bundled fees
2019 32.98% 32.79% 26.54% 13% N.A. 0.23 5 or fewer 0.01% 2,300.8 N.A. 100.0 0.0
2018 -10.02% -10.61% -8.27% 13% 11% 1.30 5 or fewer 0.06% 2,169.9 N.A. 6.5 0.0
2017 21.07% 20.31% 13.66% 12% 10% 1.60 5 or fewer 0.06% 2,458.6 N.A. 7.5 7.5
2016 16.97% 16.06% 17.34% 13% 11% 1.55 5 or fewer 0.06% 2,609.7 N.A. 17.4 6.5
2015 -1.30% -2.04% -3.83% 12% 11% 1.63 5 or fewer 0.05% 3,480.2 N.A. 23.9 23.9
2014 9.27% 8.47% 13.45% 13% 9% 1.74 5 or fewer 0.02% 9,154.3 N.A. 23.0 23
2013 46.86% 45.83% 32.53% N.A. N.A. 1.65 5 or fewer 0.02% 8,210.6 N.A. 22.4 22.4
2012 12.13% 11.15% 17.51% N.A. N.A. 1.15 5 or fewer 0.02% 5,725.4 N.A. 22.2 22.2
2011 19.25% 19.07% 17.81% N.A. N.A. 0.20 5 or fewer 0.01% 2,496.6 N.A. 100.0 0
2010 -10.02% -10.61% -8.27% 13% 11% 1.30 5 or fewer 0.06% 2,169.9 N.A. 6.5 0

*Composite inception date is 12/31/2011
**Pure gross returns are presented as supplemental information as they do not reflect the deduction of any expenses, including trading costs.

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 V50 Russell 1000 Value
5-Year Historical Earnings Growth 12.8% 7.9%
Long-Term Estimated Earnings Growth 9.2% 7.4%
Price to Earnings (TTM) 15.2x 16.2x
Price to Cash Flow 11.6x 10.2x
Return on Equity 21.3% 14.0%
Long-Term Debt to Equity 0.9x 1.0x
Dividend Yield 1.9% 2.4%
Market Cap ($ wtd) 98.5B 130.6B

Sector Weights

December 31, 2019

value 50 bar graph

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

Disclaimer

Value 50 Composite contains fully discretionary accounts that are comprised of around 45-55 securities derived from our valuation work highlighting attractive companies based on their risk reward profile and have reasonable assumptions around growth and balance sheet strength. For comparison purposes the composite is measured against the Russell 1000 Value Index. **Pure gross returns are presented as supplemental information as they do not reflect the deduction of any expenses, including trading costs.  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.  The composite includes both bundled fee and non-bundled fee accounts. Gross returns for non-bundled fee accounts were reduced by transaction costs and gross returns for bundled fee accounts are shown as supplemental information and have not been reduced by transaction costs.  Net of fee performance for these accounts have been reduced by the entire bundled fee. Other than brokerage commissions the bundled fee includes administrative and custodial services, and in some cases the investment management fee.  Some of the bundled fee accounts included may pay the investment management fee separately from the bundled fee.  For these accounts, net of fee performance has been reduced by both the bundled fee and the investment management fee.  Net of fee performance for non-bundled fee accounts was calculated using actual management fees. The Value 50 composite was created and incepted on December 31, 2011. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. 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 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.