Select another investment strategy:

Small Cap Value Equity

Our Small Cap Value Equity strategy seeks to generate consistently superior returns by employing proprietary, first-hand research in a universe of small capitalization, low-expectation stocks. The disciplined approach identifies attractive businesses whose earnings potential and cash flows are underpriced in the marketplace. The research-intensive process identifies companies with a value gap, typically indicated by below average P/E ratios (on normalized earnings), above average free cash flow yields, and higher than market levels of internal growth and return on capital.

Strategy Summary
Asset Class U.S. Equity
Investment Style Value
Portfolio Benchmark: Russell 2000® Value Index
Portfolio Assets $2,576 MM as of 12/31/2016
Separate Account Closed

Investment Process

We have historically been able to generate consistently superior returns while assuming below average levels of risk by carefully employing high value added proprietary research in a universe of small and medium capitalization, low expectations stocks. This process is directed toward the discovery of companies in which the value of the underlying business is significantly greater than the market price. We refer to this phenomenon as the "value gap." A "value gap" is typically indicated by below average P/E ratios (on normalized earnings), above average free cash flow yields, as well as better than market levels of internal growth and return on capital. Risk is controlled at low levels by the high "special situation" content of the portfolio, the most visible effect of which is a return pattern which has been, and is expected to continue to be, significantly independent of market movements. Volatility is additionally managed by the active adjustment of the market capitalization of portfolio positions.

Our proprietary, firsthand research focuses on identifying attractive businesses whose earnings potential and cash flows are underpriced in the marketplace. Rigorous analysis of fundamental business values focuses on identifying firms with: (1) attractive valuations or a material "value gap" between market valuations and fundamental value as an ongoing business concern; (2) a high probability of undiscounted rising returns on capital; (3) strong free cash flow; (4) shareholder-oriented management. Once the "value gap" has been substantiated, the underlying fundamental and valuation assumptions are installed in two real time models, one based on prospective free cash flow yields and the other on relative earnings and various historical valuation parameters.

Portfolio Characteristics as of 12/31/2016

  Portfolio Benchmark1
P/E Ratio (Trailing 12 Months) 23.2 19.7
P/B Ratio 2.0 1.5
Weighted Average Market Cap ($B) 2.7 2.0
Median Market Cap ($B) 1.8 1.1
Dividend Yield 0.9 1.9
1Russell 2000® Value Index
Top Holdings as of 12/31/2016
Texas Capital Bancshares 4.6%
Vishay Intertechnology 4.2%
II-VI 4.2%
Terex 3.6%
UMB Financial 3.6%
Plexus 3.6%
Prosperity Bancshares 3.5%
Brooks Automation 3.5%
Barnes Group 3.2%
American Axle & Manufacturing 3.1%
Sector Weightings as of 12/31/2016
Industrials 31.1%
Information Technology 30.1%
Financials 11.7%
Materials 10.8%
Consumer Discretionary 9.2%
Energy 4.4%
Health Care 2.5%
Performance as of 12/31/2016
Annualized Portfolio Returns (%)

*3 Month returns are not annualized.

Disclosure

Barrow Hanley's returns are shown before investment management fees and custody expenses. Index returns do not reflect transaction costs, management fees, and other expenses. Performance is expressed in U.S. currency. Holdings and statistics are presented as supplemental information to the BHMS Small Cap Value Equity composite. A full disclosure presentation may be accessed from the link above. Barrow, Hanley, Mewhinney & Strauss, LLC claims compliance with the Global Investment Performance Standards (GIPS®).

All institutional product information has been provided by Barrow, Hanley, Mewhinney & Strauss, LLC. Any questions about this material or requests for additional information may be made directly to the firm from the "Contact Us" link above.

Select another investment strategy

You are leaving barrowhanley.com

You are now leaving the barrowhanley.com website. This link is provided as a convenience. Barrow Hanley is not responsible for the content provided on your destination site.

CONTINUECANCEL