All Cap – Yield

Description

Objective

The primary objective of the Yield Strategy is to outperform the Russell 1000 Value Index over a full market cycle. A second, but equally important, objective is to invest in dividend paying stocks that provide income for current investors. By consistently maintaining a yield premium to the market, the strategy has been able to provide holders with a rising dividend payout over time.

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. Designed to provide US equity exposure as well as an above-market yield for income seeking investors

Process

Conduct fundamental review

  • 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

30 Stocks chosen

Positions typically 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
  • Contribution to overall portfolio yield
Sector weights range from 0-30%
Overall portfolio targeted to provide 30% yield premium to S&P 500

Performance

September 30, 2020

Cornerstone
Gross Returns
Cornerstone
Net Returns
Russell 1000
Value
QTD 6.80% 6.49% 5.59%
1 Year -4.31% -4.71% -5.03%
3 Year 4.20% 3.78% 2.63%
5 Year 8.23% 7.79% 7.66%
7 Year 6.90% 6.46% 7.35%
10 Year 8.96% 8.51% 9.95%
Since Inception* 7.17% 6.73% 6.64%

Annual compounding rates of return ending 9/30/2020
*Composite inception date is 3/31/2008

Cornerstone
Gross Returns
Cornerstone
Net Returns
Russell 1000
Value
Composite
3yr St Dev
R1Value
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 27.85% 27.35% 26.54% 14% 12% 39.4 5 or fewer 1.7% 2,300.8 N.A. 0.7
2018 -5.80% -6.18% -8.27% 13% 11% 32.2 5 or fewer 1.5% 2,169.9 N.A. 0.6
2017 18.18% 17.70% 13.66% 14% 10% 35.7 5 or fewer 1.5% 2,458.6 N.A. 0.6
2016 16.30% 15.83% 17.34% 14% 11% 31.5 5 or fewer 1.2% 2,609.7 N.A. 0.6
2015 -13.67% -14.03% -3.83% 13% 11% 28.3 5 or fewer 0.8% 3,480.2 N.A. 0.6
2014 14.11% 13.65% 13.45% 10% 9% 34.1 5 or fewer 0.4% 9,154.3 N.A. 0.6
2013 39.18% 38.60% 32.53% 13% 13% 31.0 5 or fewer 0.4% 8,210.6 N.A. 0.5
2012 7.28% 6.82% 17.51% 15% 16% 23.1 5 or fewer 0.4% 5,725.4 N.A. 0.5
2011 3.84% 3.37% 0.39% 19% 21% 22.7 5 or fewer 0.7% 3,466.7 N.A. 0.5
2010 16.99% 16.48% 15.51% N.A. N.A. 22.7 5 or fewer 0.9% 2,394.8 N.A. 0.0
2009 22.64% 22.09% 19.69% N.A. N.A. 20.2 5 or fewer 1.4% 1,437.6 N.A. 0.0
2008* -24.09% -24.28% -30.82% N.A. N.A. 18.6 5 or fewer 3.0% 613.0 N.A. 0.4

*Composite inception date is 03/31/2008

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 Yield Russell 1000 Value
5-Year Historical Earnings Growth 15.4% 10.5%
Long-Term Estimated Earnings Growth 6.8% 6.9%
Price to Earnings (TTM) 15.1x 18.0x
Price to Cash Flow 6.2x 9.1x
Return on Equity 19.0% 17.0%
Long-Term Debt to Equity 1.9x 1.3x
Dividend Yield 4.1% 2.6%
Market Cap ($ wtd) 109.3B 122.2B

Sector Weights

September 30, 2020

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

Disclaimer

Yield contains fully discretionary institutional accounts that are typically around 30-35 securities that pay dividends and are suitable for clients that are seeking both income and long term capital appreciation. For comparison purposes the composite is measured against the S&P 500 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 Yield composite incepted and created on March 31, 2008. 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 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 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.