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Non-U.S. Value Equity

The Non-U.S. Value Equity strategy at Barrow Hanley was a logical extension and expansion of our track record of success in investing in out-of-favor, low-expectation stocks. In our Non-U.S. Value Equity strategy, as well as our domestic value strategies, we seek to exploit inefficiencies in the valuation of securities through adherence to a value-oriented, bottom-up investment process. Our non-U.S. value equity portfolios reflect value characteristics such as: 1) price/earnings ratios below the market (MSCI EAFE), 2) price/book ratios below the market, 3) enterprise value/free cash flow ratios below the market, and 4) dividend yields above the market.

Strategy Summary
Asset Class Non-U.S. Equity
Investment Style Value
Portfolio Benchmark: MSCI EAFE Index
Portfolio Assets $2,045 MM as of 9/30/2019
Separate Account Open

Investment Process

Our approach to the equity market is based on the underlying philosophy that markets are inefficient. We believe that 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. We do not attempt to time the market or rotate in and out of broad market sectors, as we believe that 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 the belief that superior returns can be achieved while taking below-average risks. We implement this strategy by constructing portfolios of individual stocks that reflect value characteristics such as: 1) price/earnings ratios below the market (MSCI EAFE Index), 2) price/book ratios below the market, 3) enterprise value/free cash flow ratios below the market, and 4) dividend yields above the market. Barrow Hanley's history of value investing indicates that a strategy of emphasizing low price/earnings ratios, low price/book ratios, and high dividend yields provides a measure of protection in down markets, as well as participation in improving economic cycles.

The equity research process at Barrow Hanley is conducted on a bottom-up basis by our experienced analysts and portfolio managers. Our team focuses primarily on fundamental securities analysis, valuation, and prospects for a return to fair valuation.

In our portfolio construction process, we do not attempt to implement macro bets from a top-down perspective. While we adhere to internal guidelines to ensure proper diversification, industry and sector weightings are a residual of the bottom-up stock selection process and may vary meaningfully at times from the respective weightings in the MSCI EAFE Index.

We construct portfolios with non-dollar currency exposure (i.e., unhedged) in a fully-invested manner. While the Non-U.S. Value Equity strategy is primarily invested in companies domiciled in developed non-U.S. markets, we may, on an opportunistic basis, invest up to 20% of the portfolio in companies domiciled in emerging markets, as defined by MSCI.

Portfolio Characteristics as of 9/30/2019

  Portfolio Benchmark1
P/E Ratio (Forecasted 12 Months) 12.3x 13.7x
P/B Ratio 1.5x 1.6x
Weighted Average Market Cap ($M) 26,839 52,919
Median Market Cap ($M) 10,423 7,137
Dividend Yield 3.6% 3.4%
1MSCI EAFE Index
Regional Allocations as of 9/30/2019
  Portfolio
Asia/Pacific ex Japan 4.7%
Emerging Markets 10.0%
Europe ex UK 51.8%
Japan 19.6%
North America 4.3%
United Kingdom 9.7%
Top Holdings as of 9/30/2019
Airbus SE 4.2%
Cobham plc 3.3%
Ecopetrol SA Sponsored ADR 3.0%
Royal Vopak NV 3.0%
Coca-Cola European Partners Plc 2.8%
BNP Paribas SA Class A 2.7%
SJM Holdings Limited 2.7%
United Overseas Bank Ltd. (Singapore) 2.7%
Imperial Brands PLC 2.5%
Japan Tobacco Inc. 2.5%
Sector Weightings as of 9/30/2019
Financials 22.8%
Industrials 21.5%
Energy 11.5%
Consumer Staples 11.5%
Consumer Discretionary 9.2%
Materials 7.1%
Utilities 5.9%
Information Technology 5.2%
Health Care 3.6%
Communication Services 1.5%
Performance as of 9/30/2019
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. Net-of-fee returns are calculated using a model fee. The model fee is based on a $100 million portfolio using our standard fee schedule. Holdings and statistics are presented as supplemental information to the BHMS Non-U.S. Value 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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