| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | 6.8% | 15.9% |
| 2025 |
|---|
| 6.8% |
Schafer Cullen's Value Equity strategy returned 6.8% net in Q3 2025, outperforming the Russell 1000 Value's 5.3% return. The manager sees compelling opportunities in Value stocks as the Growth-Value valuation gap has reached historically extreme levels, with Growth trading at a 110% premium versus the 57% long-term average. Market concentration has reached new extremes with the top 10 S&P 500 stocks comprising 39% of the index, driven by AI euphoria and speculative trading at multi-year highs. The portfolio added quality names like UnitedHealth Group, Becton Dickinson, and Mercedes-Benz at attractive valuations while trimming overvalued positions. Key risks include unsustainable AI investment levels, private credit stress approaching $2 trillion, and elevated market valuations near 25x earnings. However, Fed rate cuts and policy certainty around tariffs provide tailwinds for Value stocks. The strategy trades at 14.5x forward earnings versus 24.7x for the S&P 500, positioning for outperformance as factors normalize and defensive dividend strategies recover from record-low investor interest.
Value stocks are positioned for outperformance as extreme Growth-Value valuation gaps and record-low investor interest in dividend strategies create compelling opportunities amid normalized economic conditions and Fed rate cuts.
The manager expects Value and Dividend stocks to be well positioned for improved relative performance versus the broader market and Growth stocks as factors normalize over time. Multiple tailwinds support Value ahead, including broadening profit growth from lower interest rates and greater policy certainty around tariffs.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Nov 8 2025 | 2025 Q3 | AMAT, BAC, BDX, BMY, BWA, C, CI, CMCSA, DIS, JPM, KVUE, LOW, MBGYY, MDLZ, MS, MU, NEE, ORCL, SRE, UNH | AI, dividends, financials, growth, healthcare, technology, value |
BDX SW UNH |
Value strategy outperformed in Q3 as extreme Growth-Value gaps create compelling opportunities. Added quality names like UnitedHealth and Mercedes-Benz at attractive valuations while market concentration and AI euphoria reach dangerous levels. Fed rate cuts and tariff certainty provide tailwinds for Value rotation from record Growth premiums and speculative excess. |
| Aug 27 2025 | 2025 Q2 | AAPL, AMAT, AMZN, AXP, AXTA, C, CI, COP, CVX, GOOGL, JPM, KVUE, MDT, META, MS, MSFT, NVDA, ORCL, TSLA | AI, financials, growth, tariffs, technology, value |
ORCL AMAT KVUE |
Schafer Cullen's Value strategy outperformed in Q2 2025 despite tariff volatility, driven by strong Technology and Financials performance. With Value stocks trading at historically extreme discounts to Growth equities and AI-driven market concentration at record levels, the manager sees compelling opportunities for Value rotation as Growth earnings slow and valuations remain elevated. |
| Mar 31 2025 | 2025 Q1 | AXP, AXTA, BAC, CI, GD, JNJ, KVUE, MDLZ, MDT, MS, PKG, RTX, SIE.DE, SRE, TFC | AI, defense, dividends, healthcare, industrials, tariffs, value | - | Value significantly outperformed Growth in Q1 as Trump's tariff agenda drove defensive rotation. Strong stock selection in Industrials, Consumer Staples, and Healthcare drove performance while Financials detracted. Manager sees Value in early stages of longer-term resurgence with Growth trading at 94% premium versus 57% historical average, positioning for continued market broadening. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q3 |
AIAI investments have propelled markets higher with euphoria around AI driving the Magnificent 7 to record valuations. Trillions of dollars are being invested into agentic AI that will eventually need to be monetized. Capital expenditures among top hyperscalers have surged as they race to establish leadership in generative AI, creating a self-perpetuating cycle of investment. |
Data Centers Cloud Semiconductors Capital Markets Growth |
ValueThe valuation gap between Growth and Value stocks has reached historically extreme levels, with Growth trading at a 110% premium to Value versus the long-term average of 57%. Current positioning remains heavily skewed towards Growth, creating favorable conditions for Value rotation as factors normalize over time. |
Dividends Quality Earnings Risk Appetite | |
DividendsInvestor interest in dividend and defensive value strategies is now near record lows, creating a compelling buying opportunity. The combined weights of defensive sectors have fallen to just 19% of the S&P 500, less than half their 2009 weight, while Value and Dividend stocks remain well positioned for improved relative performance. |
Value Quality Buybacks Risk Appetite | |
Capital MarketsSpeculative trading activity has reached multi-year highs with Goldman Sachs' speculative trading indicator in the 88th percentile. Market concentration has reached new extremes with the top 10 S&P 500 stocks comprising a record 39% of the index. High beta and momentum factors are trading at historical extremes around the 90th percentile. |
Risk Appetite Momentum Growth ETFs | |
Private CreditPrivate credit has ballooned to nearly $2 trillion, and investors are beginning to see a rise in payment-in-kind distributions and outright defaults. This represents a growing area of credit stress as the market has little risk priced in with credit spreads at multi-year lows. |
Credit Stress Risk Appetite Liquidity | |
| 2025 Q2 |
ValueValue stocks continue to trade at a meaningful discount relative to the broader market and Growth equities. The valuation gap between Growth and Value stocks has reached historically extreme levels, with Growth stocks trading at a 130% premium to Value stocks. This valuation gap, combined with the potential for a shift in sentiment and improving asset flows as relative growth rates converge, serves as a catalyst for improved relative performance. |
Value Discount Premium Rotation Catalyst |
AIRenewed optimism around the AI investment theme has driven markets higher, with the rebound in the Magnificent 7 pushing the group's valuation back to record highs. The trillions of dollars being invested into agentic AI will eventually need to be monetized. Capital expenditures among the top four hyperscalers have surged in recent years as these companies race to establish leadership in generative AI. |
AI Hyperscalers Monetization Investment Leadership | |
Trade PolicyPresident Trump announced his April 2nd Liberation Day reciprocal tariffs that were far more sweeping and extensive than equity markets had expected. The Trump administration paused reciprocal tariffs on April 9th for 90 days. On May 12th, the US and China announced their own 90-day pause, with the US reducing tariffs on Chinese goods to 30% from 145%. |
Tariffs Trade China Policy Pause | |
EarningsYear-over-year S&P 500 earnings growth estimates fell from 11% from the start of the year to 7% by quarter-end, though they have since stabilized. Leading technology stocks are experiencing a marked slowdown in earnings growth and returns, bringing their performance closer to that of the broader market. |
Growth Estimates Technology Slowdown Stabilized | |
| 2025 Q1 |
ValueValue stocks significantly outperformed Growth in Q1 with Russell 1000 Value up 2.1% versus Russell 1000 Growth down 10.0%. Growth stocks trade at a 94% premium to Value stocks, well above the 57% historical average. The rotation into Value stocks is in early stages of a potentially longer-term resurgence presenting compelling investment opportunities. |
Value Growth Rotation Valuation Premium |
Defense SpendingDefense companies benefited from anticipated increased NATO defense spending. RTX outperformed on expectations of growth in integrated missile defense systems with strong international exposure. General Dynamics expected to benefit from increased defense spending as NATO countries replenish ammunition stockpiles and foreign militaries increase combat vehicle purchases. |
Defense NATO Military Spending International | |
AIAI investment theme came under scrutiny with DeepSeek's emergence sparking debate over tech platform companies' competitive moats. DeepSeek developed R1 AI model at fraction of ChatGPT's cost using less powerful semiconductors. This raised questions about enormous capital expenditures being spent on AI industry and sustainability of tech companies' growth profiles. |
AI DeepSeek Competition Capital Technology | |
Trade PolicyTrump's tariff-centric agenda created uncertainty with numerous tariff proposals on Canada, Mexico, EU, China and other nations leading to threats of retaliatory tariffs. Specific sector targeting included 25% tariff on auto imports and promised tariffs on imported pharmaceuticals. Policy uncertainty spiked to elevated levels affecting market sentiment. |
Tariffs Trade Policy Uncertainty International | |
DividendsDefensive, higher-yielding stocks rallied during the quarter as market tone shifted toward defensive stance. High dividend yield was among top-performing factors in sharp reversal from 2024. Healthcare and Consumer Staples sectors with higher yields were among best performers. |
Dividends Yield Defensive Income Sectors |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Nov 8, 2025 | Fund Letters | James Cullen | BDX | Becton, Dickinson and Company | Health Care | Medical Instruments & Supplies | Bull | NYSE | Consumables, deleveraging, Margins, Medtech, restructuring | Login |
| Nov 8, 2025 | Fund Letters | James Cullen | SW | Smurfit WestRock | Materials | Paper Packaging | Bull | NYSE | ecommerce, Margins, Packaging, Sustainability, synergies | Login |
| Nov 8, 2025 | Fund Letters | James Cullen | UNH | UnitedHealth Group, Inc. | Health Care | Managed Health Care | Bull | NYSE | dividends, healthcare, Managedcare, Medicare, Moats, services, turnaround, valuation | Login |
| Aug 27, 2025 | Fund Letters | James Cullen | ORCL | Oracle Corporation | Information Technology | Systems Software | Bull | NYSE | AI, backlog, CapEx, cloud, Databases, infrastructure, Software | Login |
| Aug 27, 2025 | Fund Letters | James Cullen | AMAT | Applied Materials, Inc. | Information Technology | Semiconductor Equipment | Bull | NASDAQ | China, DRAM, Foundry, Margins, Nand, Packaging, semiconductors | Login |
| Aug 27, 2025 | Fund Letters | James Cullen | KVUE | Kenvue Inc. | Consumer Staples | Personal Care Products | Bull | NYSE | brands, consumer, Currency, inflation, profitability, resilience | Login |
| TICKER | COMMENTARY |
|---|---|
| UNH | UnitedHealth Group was purchased in the Value strategy during the quarter. UNH is the largest diversified managed care organization in the United States, operating a leading health insurer (UnitedHealthcare) and a powerful healthcare services platform (Optum). The company is undergoing a multi-year turnaround under new leadership, pairing cultural reform with operational discipline. Management, led by returning CEO Stephen Hemsley, has reset expectations by guiding to at least $16 in adjusted EPS for 2025. UnitedHealth trades at an attractive valuation of ~16x 2027 earnings with a 2.6% dividend yield. |
| BDX | Becton Dickinson was purchased in the Value strategy. BDX is a global medical technology company engaged in the development, manufacture and sale of a broad range of medical supplies, devices, laboratory equipment and diagnostic products. BDX now trades at its lowest P/E multiple in over a decade, at 12.0x versus a 10-year average of approximately 19x. Shares of BDX were purchased at a P/E of 12.0x with a 2.5% dividend yield. |
| MBGYY | Mercedes-Benz Group was purchased in the Value strategy during the third quarter. Mercedes-Benz is one of the world's largest premium automakers, designing and manufacturing luxury cars and vans while offering financing, leasing, fleet management and mobility services. The company is repositioning for structurally higher profitability via a combination of an absolute reduction of fixed costs and a significant improvement in pricing discipline. Shares of the company are valued at 7.8 times forward earnings and offer a 5.5% dividend yield. |
| NEE | NextEra Energy was purchased in the Value Equity strategy. NextEra is a Florida-based regulated utility (70% of revenue) and renewables company (30% of revenue). The valuation of the stock is currently at the Utilities' sector average at 19x forward earnings with a 2.8% dividend yield. |
| KVUE | Kenvue was sold from the strategy during the quarter. The company continues to face multiple challenges, including pressures on US consumer spending, a prolonged winter season that likely delayed allergy and sun care season, and persistent headwinds from China destocking and distribution issues. At 19x 2025 EPS, the stock's valuation is less compelling than when it was initially added to the portfolio in 2023. Kenvue came under pressure after the U.S. administration issued a public warning advising pregnant women to avoid acetaminophen. |
| SRE | Sempra was sold from the strategy during the quarter. Sempra is an electric and gas utility company with businesses in California and Texas. However, the company's California utility received a negative rate case decision, with both the electric and gas utilities in South California receiving lower rates than they had requested. Sempra's 20x P/E multiple provides a less compelling valuation than the 16x P/E multiple it had when the stock was purchased in 2024. |
| ORCL | Oracle outperformed following the announcement of a massive cloud services contract valued at $30 billion annually, nearly triple the size of Oracle's current $10.3 billion cloud infrastructure business. The deal, expected to begin generating revenue in fiscal 2028, offers good visibility into future growth and validates Oracle's aggressive cloud strategy. The position was trimmed in the quarter. |
| JPM | JPMorgan Chase passed the Federal Reserve's annual stress tests this summer and subsequently raised their dividends. The group should benefit from interest rate cuts that spur economic activity, loan growth, and M&A activity. The position was trimmed in the quarter. |
| MS | Morgan Stanley reported record Capital Markets revenue in the second quarter, driven by equity capital markets activity and equities trading volumes. The company's Wealth Management division reported 14% y/y revenue growth, as fund flows grew 7% and market share was strong. The position was trimmed in the quarter. |
| C | Citigroup's restructuring and turnaround plan has exceeded expectations so far, and management said on their 2Q earnings call that certain priorities are now largely complete. The increased efficiency is leading to improved returns, with ROTCE rising 150 bps y/y to 8.7%. The stock has re-rated higher, now trading above 1.0x tangible book value. |
| BAC | Bank of America passed the Federal Reserve's annual stress tests this summer and subsequently raised their dividends. The group should benefit from interest rate cuts that spur economic activity, loan growth, and M&A activity. |
| MU | The anticipated spend on data center buildouts in the US, along with the associated growth in memory chip demand, lifted Micron shares 35.9% in the third quarter. |
| AMAT | Applied Materials reported better-than-expected fiscal third-quarter results, driven by strength in foundry, logic, and services, even as China demand moderated. The company continues to benefit from structural growth in AI-related semiconductor capital spending, supported by leadership in gate-all-around, advanced DRAM, and packaging technologies. |
| BWA | BorgWarner delivered impressive second quarter results that exceeded expectations and led management to raise full-year guidance. The company announced new turbocharger and high-voltage coolant heater programs in Europe and North America, including its first hybrid platform award. BorgWarner also raised its quarterly dividend by 55%, reflecting confidence in cash generation and shareholder returns. |
| LOW | Lowe's reported strong second quarter earnings, with comparable sales up 1.1%, its strongest result since 2022, driven by growth in both Pro and DIY segments. The company also announced the $8.8 billion acquisition of Foundation Building Materials, broadening its Pro customer base and advancing its Total Home strategy. |
| CMCSA | Comcast management noted that competitive pressure in broadband from fiber and fixed wireless access remained intense, while promotional offers such as five-year price locks and free mobile lines weighed on near-term ARPU and segment margins. |
| DIS | Disney reported third quarter results that modestly missed expectations in Entertainment and came in below forecasts for streaming growth. Direct-to-Consumer revenue increased 6% but was held back by softer advertising and limited subscriber gains in the U.S. Disney+ base. Management raised full-year EPS guidance to $5.85, signaling confidence in ongoing cost discipline and earnings recovery. |
| MDLZ | Mondelez International declined after cocoa futures rose amid renewed concerns about crop yields in West Africa driven by dry weather conditions. Cocoa remains a key input cost for Mondelez, one that the company is working to de-risk by expanding its supply base beyond Africa to Southeast Asia. |
| CI | Cigna reported third quarter results that modestly exceeded expectations but reflected continued elevated medical cost trends and softer commercial membership. The company's medical loss ratio of 83.2% was consistent with broader utilization pressures across managed care, though management reaffirmed full-year guidance. |
| BMY | Bristol Myers Squibb reported results that beat expectations across both its Growth and Legacy portfolios but lowered EPS guidance due to one-time R&D charges and persistent loss-of-exclusivity pressures. Growth products such as Opdivo, Reblozyl, and Camzyos continue to gain traction. |
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