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Mid Cap Value Equity

Our Mid Cap Value Equity strategy emphasizes low price/book ratios as well as high dividend yields which provide a measure of protection in down markets, thus helping to preserve assets. In periods of economic recovery and rising equity markets, profitability and earnings growth are rewarded by the expansion of price/earnings ratios and the generation of excess returns. Through the research-intensive process, our seasoned investment team focuses on securities that are not widely followed by industry analysts, giving us a greater opportunity to seek out undervalued companies.

Strategy Summary
Asset Class U.S. Equity
Investment Style Value
Portfolio Benchmark: Russell Midcap® Value Index
Portfolio Assets $7,611 MM as of 3/31/2017
Commingled Fund Open
Separate Account Open

Investment Process

Our approach to the mid-capitalization equity market is very similar to the approach used in our large cap value equity strategy. The process is based on the underlying philosophy that markets are inefficient. These inefficiencies can best be exploited through adherence to a value-oriented investment process dedicated to the selection of securities on a bottom-up basis. Our mid cap value equity strategy focuses on securities that are not widely followed by industry analysts, giving us a greater opportunity to seek out undervalued companies utilizing the firsthand research we perform internally. We do not attempt to time the market or rotate in and out of broad market sectors, as we believe it is difficult, if not impossible, to add incremental value on a consistent basis by market timing.

We stay fully invested with a defensive, conservative orientation based on our belief that superior returns can be achieved while taking below average risks. We implement this strategy by constructing portfolios of individual stocks that reflect all three value characteristics: price/earnings and price/book ratios below the market and dividend yields above the market (Russell Mid Cap Index). While we are exacting in our definition of value, we are equally demanding in our pursuit of quality companies. We seek companies with profitability and earnings growth greater than the market.

Our strategy of emphasizing low price/book ratios as well as high dividend yields provides a measure of protection in down markets, helping to preserve assets. In periods of economic recovery and rising equity markets, profitability and earnings growth are rewarded by the expansion of price/earnings ratios and the generation of excess returns.

Our greatest source of value added comes through individual stock selection. The vast experience of Barrow Hanley's value investment team, both in absolute terms and in years working together, is where the value is added in the qualitative part of the decision-making process. The Barrow Hanley team not only has the experience necessary to identify the reasons for a temporary undervaluation of a company's shares in the market, but also has the conviction and patience to invest in shares of stock of the business on a contrarian basis.

Portfolio Characteristics as of 3/31/2017

  Portfolio Benchmark1
P/E Ratio (Trailing 12 Months) 18.4 19.7
P/B Ratio 2.3 1.9
Weighted Average Market Cap ($B) 16.7 13.8
Median Market Cap ($B) 11.5 6.5
Dividend Yield 2.1 2.1
1Russell Midcap® Value Index
Top Holdings as of 3/31/2017
Royal Caribbean Cruises 3.5%
Norwegian Cruise Line 3.5%
Discover Financial Services 3.2%
Owens Corning 3.2%
Cigna 3.0%
Cardinal Health 3.0%
Stanley Black & Decker 2.9%
Whirlpool 2.9%
Microchip Technology 2.8%
Reynolds American 2.7%
Sector Weightings as of 3/31/2017
Financials 24.1%
Consumer Discretionary 17.0%
Industrials 16.8%
Energy 10.2%
Health Care 7.6%
Materials 7.2%
Information Technology 5.6%
Utilities 5.2%
Consumer Staples 4.7%
Real Estate 1.6%
Performance as of 3/31/2017
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 Mid 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.

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