| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 7.7% | 3.7% | 3.7% |
Schafer Cullen's Enhanced Equity Income strategy returned 3.7% net in Q1 2026, outperforming both primary and secondary benchmarks during a volatile quarter marked by geopolitical conflict and AI disruption concerns. The strategy benefited from its defensive positioning, particularly in Energy which surged 38.3% due to the Iran war and Strait of Hormuz closure driving oil from $57 to $101 per barrel. Value significantly outperformed Growth by 11.9 percentage points, with the Russell 1000 Value achieving a technical Golden Cross signal. The portfolio's dividend focus proved rewarding as eight of 34 holdings increased dividends by an average 4.8%, contributing to a 7.2% annualized yield. Key transactions included purchasing Honeywell at attractive valuation ahead of business separations and selling PACCAR due to cyclical concerns. The manager sees compelling opportunities in low-volatility dividend growth equities given their significant discount to the S&P 500, while noting risks from AI disruption, private credit stress, and historic market concentration levels approaching prior bubble peaks.
The fund employs a defensive dividend-focused strategy with covered call options to generate income, positioned to benefit from the rotation from Growth to Value while providing downside protection through low-volatility stocks and dividend aristocrats trading at significant discounts.
The manager expects continued rotation from Growth to Value as earnings differentials narrow and concentration risks persist. They view low-volatility and dividend growth equities as compelling given current valuations and macroeconomic uncertainty. The tone is cautiously optimistic about defensive positioning while acknowledging multiple macro headwinds.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 15 2026 | 2026 Q1 | HON, PCAR | AI, dividends, energy, geopolitics, income, Options, value |
HON PCAR |
Enhanced Equity Income delivered 3.7% returns in volatile Q1 2026, benefiting from defensive positioning as Value outperformed Growth by 12 percentage points. Energy surge from Iran war drove performance while AI disruption fears hammered Growth stocks. Strategy's dividend focus and covered call income generation proved effective, with portfolio yield reaching 7.2% as rotation toward defensive value accelerated. |
| Feb 17 2026 | 2025 Q4 | AAPL, AMZN, GOOGL, JPM, KVUE, META, MSFT, NSC, NVDA, QCOM, TSLA, UNH, UNP | AI, dividends, growth, healthcare, income, rates, technology, value |
QCOM UNH UNP KVUE JPM NSC |
Enhanced Equity Income delivered 7.2% total yield in 2025 amid extreme market concentration in AI stocks. The manager sees compelling setup for value and dividend rotation as Growth-to-Value spread hits historical extremes while defensive sectors trade at multi-decade low weightings. Fed rate cuts and $8 trillion in money markets create favorable backdrop for income-focused strategies. |
| Nov 8 2025 | 2025 Q3 | AMZN, BAX, BDX, CAG, GOOGL, META, MSFT, NVDA, ORCL, RIO, SW | AI, dividends, Fed, growth, tariffs, technology, value | SPGI | Enhanced Equity Income strategy underperformed in Q3 as growth momentum continued, but maintains 7.4% total yield. Extreme market concentration and Growth trading at 110% premium to Value creates compelling mean reversion opportunity. Fed rate cuts should make dividend yields more attractive versus cash. Defensive positioning in high-dividend value stocks well-positioned for eventual rotation. |
| Aug 27 2025 | 2025 Q2 | AAPL, AMZN, COP, CVX, DOW, GOOGL, JCI, META, MSFT, NSC, NVDA, PCAR, PPG, RTX, TSLA | AI, defensives, dividends, energy, growth, Options, tariffs, value |
PCAR PPG COP NSC PCAR PPG COP NSC |
Enhanced Equity Income underperformed in Q2 as growth stocks rallied, but the strategy is positioned for a potential value rotation. With growth stocks trading at a 130% premium to value and defensive sectors at multi-decade lows, the manager sees compelling opportunities in dividend-paying stocks amid extreme market concentration and AI monetization challenges. |
| Mar 31 2025 | 2025 Q1 | AAPL, AMZN, BCE, BMY, CVX, DOC, DOW, GOOGL, KDP, META, MO, PM, PNC, RIO, TFC, TRV, TSLA, UPS, VICI, VZ | AI, dividends, growth, income, tariffs, value, volatility |
KDP PNC |
Enhanced Equity Income delivered 5.8% Q1 returns, capitalizing on the early-stage Growth-to-Value rotation. High-dividend Value stocks trade at historically attractive discounts while generating 8% annualized income through dividends and call-writing. The strategy is positioned for sustained Value outperformance driven by relative valuation gaps, improving flows, and policy tailwinds favoring domestic defensive stocks. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
OilEnergy was the best performing sector, up 38.3%, driven by the Iran war and closure of the Strait of Hormuz. WTI oil jumped 77% from $57 to $101 per barrel. The strategy benefited from spike in Energy names, with rich options premiums harvested from strong Energy positions. |
Energy Geopolitics Supply Commodities Iran |
AIInvestor concerns escalated regarding AI and disintermediation of software companies and other industries. Software stocks sharply declined as investors worried rapid AI advances could disrupt traditional business models, rendering software tools obsolete or compressing margins. Concerns spread to potential job losses for white-collar workers. |
Technology Disruption Software Automation Jobs | |
ValueValue significantly outperformed Growth, with Russell 1000 Value (+2.1%) exceeding Russell 1000 Growth (-9.8%) by 11.9 percentage points. The Russell 1000 Value transitioned to an uptrend via a Golden Cross, marking its most significant move in three years and signaling this trend change could be durable. |
Style Rotation Performance Technical Trend | |
DividendsThe strategy's annualized yield increased to 7.2%, with dividends accounting for 3.7%. Eight of 34 companies declared dividend increases averaging 4.8%. Valuation factors strongly preferred dividends, and dividend aristocrat stocks trade at significant discounts to the S&P 500, making dividend growth equities compelling. |
Income Yield Growth Aristocrats Valuation | |
Private CreditStress in private credit intensified, particularly within Financials and Technology sectors, contributing to wider credit spreads, tightening financial conditions, and rising liquidity concerns. This added another layer of uncertainty to market conditions. |
Credit Stress Spreads Liquidity Risk | |
| 2025 Q4 |
AIEdgewood views AI as creating significant opportunities across their portfolio, particularly through Draft One which generates police reports and the AI Era Plan. They see AI driving structural demand for data centers and creating new monetization opportunities for software companies. |
Artificial Intelligence Software Data Centers Infrastructure |
SemiconductorsThe firm maintains significant exposure to semiconductor companies including NVIDIA, Broadcom, and ASML, viewing them as beneficiaries of AI infrastructure buildout. They see continued growth in AI-related chip demand despite some cyclical concerns. |
Chips Hardware AI Infrastructure Memory | |
GrowthEdgewood focuses on high-quality growth companies with strong earnings growth, maintaining their conviction in companies delivering 20%+ EPS growth. They believe their portfolio's earnings strength will drive future performance despite recent underperformance. |
Earnings Growth Quality Compounding | |
Data CentersThe firm sees data centers as a key beneficiary of AI buildout, with projected incremental 100GW of capacity needed through 2030. They view this as creating opportunities for companies like Amphenol that supply critical infrastructure components. |
Infrastructure Cloud Connectivity | |
| 2025 Q3 |
AIEuphoria around AI investments has propelled markets higher, with the rebound in the Magnificent 7 pushing valuations to record highs. The trillions of dollars being invested into agentic AI will eventually need to be monetized. Capital expenditures among the top five hyperscalers have surged as these companies race to establish leadership in generative AI. |
Data Centers Cloud Semiconductors Technology Growth |
DividendsThe strategy continued to pay a 7.4% annualized total yield, which included 4.2% income from dividends. With the Fed now embarking on a rate-cutting cycle, the projected decline in short-term rates should make equity dividend yields relatively more attractive. Multiple tailwinds support Value and Dividend stocks ahead. |
Value Income Yield Interest Rates Fed | |
ValueThe valuation gap between Growth and Value stocks has reached historically extreme levels. Growth stocks currently trade at a 110% premium to Value stocks. The combination of extreme pessimism, underweight positioning and attractive valuations in these lagging sectors creates favorable starting conditions for potential mean reversion. |
Growth Valuation Mean Reversion Quality Positioning | |
Trade PolicyPresident Trump's reciprocal tariffs took effect on August 7th, establishing broad baseline tariffs of 10% and ranging as high as 50% for individual nations. Trump also assessed a 100% tariff on semiconductor and pharmaceutical imports, with exemptions for technology and pharmaceutical firms that invest in US manufacturing. |
Tariffs Manufacturing Semiconductors Pharmaceuticals Policy | |
| 2025 Q2 |
DividendsThe strategy focuses on dividend-paying stocks with a 4.2% annualized dividend yield. Dividend increases improved to 5%, declared by 15 of the 33 active holdings. Value and High Dividend stocks have underperformed over the past several years, presenting a compelling opportunity as investor interest in dividend strategies is near record lows. |
Dividend Yield Income Value Defensive Cash Flow |
ValueThe valuation gap between Growth and Value stocks has reached historically extreme levels, with Growth stocks trading at a 130% premium to Value stocks. This presents a compelling opportunity as the combined weight of Defensive sectors in the S&P 500 fell to a multi-decade low at 20.8%. A rotation into Value could be driven by factors such as a market downturn or weaker-than-expected AI monetization. |
Valuation Growth Premium Defensive Rotation Opportunity | |
AIRenewed optimism around the AI investment theme has driven markets higher, with the Magnificent 7 pushing valuations back to record highs. However, the trillions of dollars being invested into agentic AI will eventually need to be monetized. Capital expenditures among the top four hyperscalers have surged, contributing to a notable slowdown in both free cash flow and earnings growth. |
Artificial Intelligence Hyperscalers Monetization Capital Expenditures Free Cash Flow | |
Trade PolicyPresident Trump announced sweeping reciprocal tariffs on April 2nd that were more extensive than markets expected, causing the S&P 500 to drop 11% over three trading days. The administration paused reciprocal tariffs for 90 days on April 9th, and the US and China announced their own 90-day pause on May 12th, with both countries reducing tariffs significantly. |
Tariffs Trade War China Policy Uncertainty Market Volatility | |
Energy TransitionThe Congressional budget bill included the elimination of several clean energy tax credits. Energy was the worst performing sector at -8.6%, whipsawed by extreme volatility in oil prices due to geopolitical tensions and policy changes. |
Clean Energy Tax Credits Oil Prices Geopolitical Policy | |
| 2025 Q1 |
ValueThe strategy is positioned for a potential secular shift from Growth to Value stocks, with Value trading at a 94% discount to Growth versus the historical average of 57%. Value defensive sectors like Healthcare and Consumer Staples are trading at historically low valuations, presenting compelling opportunities. |
Value Growth Discount Defensive Secular |
DividendsThe Enhanced Equity Income strategy focuses on high-dividend stocks with attractive valuations. The top 10 holdings by yield average 6.4% dividend yield versus 1.4% for the S&P 500, with strong fundamentals and growing dividends supported by average dividend increases of 4.9%. |
Dividends Yield Income Growing | |
AIThe dominance of AI investment themes is coming under scrutiny following DeepSeek's emergence, which developed an AI model at a fraction of ChatGPT's cost. This has raised questions about the sustainability of massive capital expenditures by hyperscalers and potential erosion of competitive moats. |
AI DeepSeek Hyperscalers Competition | |
Trade PolicyTrump's numerous tariff proposals on Canada, Mexico, EU, China and other nations, including 25% tariffs on auto imports and pharmaceutical imports, created uncertainty for global multinational companies and contributed to market volatility in February. |
Tariffs Trade Policy Uncertainty |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Apr 15, 2026 | Fund Letters | Cullen Enhanced Equity Income Fund | HON | Honeywell International Inc. | Conglomerates | Industrial Conglomerates | Bull | NASDAQ | Aerospace, aftermarket services, Automation, Corporate Restructuring, industrial conglomerate, manufacturing, recurring revenue, spin-off, Sum-of-parts, value unlock | Login |
| Apr 15, 2026 | Fund Letters | Cullen Enhanced Equity Income Fund | PCAR | PACCAR Inc. | Farm & Heavy Construction Machinery | Machinery | Bear | NASDAQ | Aftermarket Parts, Class 8 Trucks, Commercial Trucks, Competitive pressure, Cyclical, Electric Vehicles, manufacturing, Structural Risk, Tariff Exposure | Login |
| Feb 17, 2026 | Fund Letters | James Cullen | UNH | UnitedHealth Group Incorporated | Health Care | Managed Health Care | Bull | New York Stock Exchange | dividend, managed care, Margins, Medicare, Optum | Login |
| Feb 17, 2026 | Fund Letters | James Cullen | UNP | Union Pacific Corporation | Industrials | Rail Transportation | Bull | New York Stock Exchange | dividend, Free Cash Flow, merger, Pricing, railroads, synergies | Login |
| Feb 17, 2026 | Fund Letters | James Cullen | KVUE | Kenvue Inc. | Consumer Staples | Personal Care Products | Bear | New York Stock Exchange | China Destocking, Competition, Consumer-health, marketshare, valuation | Login |
| Feb 17, 2026 | Fund Letters | James Cullen | JPM | JPMorgan Chase & Co. | Financials | Diversified Banks | Bear | New York Stock Exchange | Book Value, capital allocation, Diversified Bank, dividend, valuation | Login |
| Feb 17, 2026 | Fund Letters | James Cullen | NSC | Norfolk Southern Corporation | Industrials | Rail Transportation | Bear | New York Stock Exchange | dividend, merger, Operating Ratio, railroads, valuation | Login |
| Feb 17, 2026 | Fund Letters | James Cullen | QCOM | Qualcomm Incorporated | Information Technology | Semiconductors | Bull | NASDAQ | AI, automotive, diversification, dividend, semiconductors, Smartphones | Login |
| Nov 8, 2025 | Fund Letters | James Cullen | SPGI | S&P Global Inc. | Financials | Financial Exchanges & Data | Bull | NYSE | Data, indices, Issuance, Margins, Ratings | Login |
| Aug 27, 2025 | Fund Letters | James Cullen | COP | ConocoPhillips | Energy | Oil & Gas Exploration & Production | Bull | NYSE | buybacks, CapEx, dividends, FCF, oil | Login |
| Aug 27, 2025 | Fund Letters | James Cullen | NSC | Norfolk Southern Corporation | Industrials | Railroads | Bull | NYSE | efficiency, Intermodal, Margins, Psr, railroads | Login |
| Aug 27, 2025 | Fund Letters | James Cullen | PCAR | Paccar Inc. | Industrials | Machinery | Bull | NASDAQ | aftermarket, Margins, Powertrains, trucks, valuation | Login |
| Aug 27, 2025 | Fund Letters | James Cullen | PPG | PPG Industries, Inc. | Materials | Specialty Chemicals | Bull | NYSE | Aerospace, Coatings, Costcontrol, Pricing, recovery | Login |
| Jun 30, 2025 | Fund Letters | Cullen Enhanced Equity Income Fund | PCAR | Paccar Inc | Capital Goods | Construction & Farm Machinery & Heavy Trucks | Bull | NASDAQ | Aftermarket Parts, dividend, Industrials, infrastructure, premium brands, Technology leader, Truck Manufacturer, Value | Login |
| Jun 30, 2025 | Fund Letters | Cullen Enhanced Equity Income Fund | PPG | PPG Industries Inc | Materials | Specialty Chemicals | Bull | NYSE | Aerospace, automotive, Coatings, Diversified, Industrial, materials, Paints, Pricing power, specialty chemicals | Login |
| Jun 30, 2025 | Fund Letters | Cullen Enhanced Equity Income Fund | NSC | Norfolk Southern Corporation | Industrials | Railroads | Bull | NYSE | Eastern US, efficiency, Freight, Industrials, Operating Ratio, Precision Scheduled Railroading, railroad, recovery, Transportation | Login |
| Jun 30, 2025 | Fund Letters | Cullen Enhanced Equity Income Fund | COP | ConocoPhillips | Energy | Oil & Gas Exploration & Production | Bull | NYSE | capital allocation, dividend, energy, Exploration, Free Cash Flow, Oil & Gas, Production, shareholder returns, Value | Login |
| - | Fund Letters | Cullen Enhanced Equity Income Fund | KDP | Keurig Dr Pepper | Consumer Staples | Soft Drinks | Bull | NASDAQ | Beverages, brand portfolio, Coffee, consumer staples, cost optimization, dividend, Energy drinks, growth | Login |
| - | Fund Letters | Cullen Enhanced Equity Income Fund | PNC | PNC Financial Services Group | Financials | Regional Banks | Bull | NYSE | asset management, Commercial Banking, dividend, financials, M&A Integration, organic growth, regional bank, retail banking | Login |
| TICKER | COMMENTARY |
|---|---|
| HON | Shares of Honeywell (HON) were purchased in the strategy during the quarter. Honeywell is a global, multi-industry, manufacturing and technology company. The company's basic underlying strategy is to embed its own products into the operations of customers from which recurring revenue can be generated through higher margin aftermarket servicing. The firm is undergoing a multi-step separation into three independent, pure-play businesses with sharper strategic focus, enhanced capital efficiency, and more targeted investment priorities. Last October, Honeywell spun off its specialty chemicals business as Solstice Advanced Materials (SOLS). This coming July, the company expects to separate its Aerospace Technologies unit, which is widely considered the crown jewel of its businesses, via a tax-free spin-off to shareholders. That transaction will leave its Building and Industrial Automation businesses as the remaining Honeywell. We believe Honeywell is trading at a discount to its sum-of-the parts valuation, and the separation of these three distinct companies should unlock significant shareholder value. The three companies operate in very different end markets with different business cycles, with Aerospace tied to the commercial aviation and Defense cycles, the Automation businesses tied to industrial software, buildings, and process controls, and Advanced Materials tied to the materials and specialty chemicals markets. Each of the companies will be able to invest more aggressively in their own priorities and be free to pursue targeted acquisitions or partnerships without internal competition for capital. Shares of Honeywell were purchased at approximately 18x 2026 EPS estimates with a 2.4% dividend yield. |
| PCAR | PACCAR (PCAR) was sold from the strategy during the quarter. PACCAR manufactures and distributes light, medium, and heavy-duty commercial trucks globally and has benefited from optimism about a global manufacturing upturn and the prospect of interest rate cuts. In addition, the company's focus on reducing tariff exposure, given its high manufacturing footprint in Mexico, lifted sentiment. The risk of a cyclical downturn in the North American Class 8 truck market, leading to lower replacement demand, is a key risk, along with pricing pressure from key competitors. Additionally, the industry-wide shift to electric vehicles poses a structural risk to PACCAR's highly profitable aftermarket parts business. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
