| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.4% | 2.7% | 2.7% |
Schafer Cullen's Value Equity strategy returned 2.9% gross in Q1 2026, outperforming both the Russell 1000 Value (2.1%) and S&P 500 (-4.3%) during a volatile quarter dominated by geopolitical conflict and AI disruption concerns. The Iran war and closure of the Strait of Hormuz drove oil prices up 77% to $101 per barrel, while software stocks declined sharply on fears that AI advances could render traditional business models obsolete. The manager benefited from strong stock selection in Healthcare, with Johnson & Johnson, Merck, and Pfizer all posting double-digit gains on strong fundamentals and new product cycles. Technology holdings Applied Materials and Arrow Electronics also outperformed on AI infrastructure demand. The quarter marked an acceleration of the Growth-to-Value rotation, with Russell 1000 Value outperforming Growth by 11.9 percentage points and achieving a technical Golden Cross signal. The manager sees this as the beginning of a durable trend, given AI disruption risks, historic market concentration levels, and narrowing earnings differentials between mega-cap technology stocks and the broader market.
Value stocks are experiencing a significant rotation as AI disruption risks and historic market concentration create compelling opportunities in defensive, cash-generative businesses trading at attractive valuations.
The manager sees a compelling case for value investing given AI disruption risks, geopolitical uncertainty, and historic concentration levels in growth stocks. They expect the rotation from Growth to Value to continue as earnings differentials narrow and capital intensity pressures free cash flow generation of mega-cap technology companies.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 30 2026 | 2026 Q1 | AMAT, ARW, AXTA, BA, CMCSA, JNJ, MRK, PFE, SIEGY, VZ | AI, energy, Geopolitical, healthcare, Iran, oil, technology, value | - | Schafer Cullen outperformed in Q1 2026 as Value stocks rotated higher amid AI disruption fears and geopolitical turmoil from the Iran war. Strong Healthcare stock selection drove performance while Energy underweight hurt. The manager sees compelling value opportunities as Growth stock concentration reaches historic extremes and earnings differentials narrow between mega-caps and broader market. |
| 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 |
|---|---|---|
| 2026 Q1 |
ValueThe manager emphasizes a significant rotation from Growth to Value stocks, with Russell 1000 Value outperforming Growth by 11.9 percentage points. They highlight that Value stocks are transitioning to an uptrend via a Golden Cross technical signal, marking the most significant move in three years. The case for value investing has rarely been more compelling given AI disruption risks and concentration concerns. |
Value Growth Rotation Russell Outperformance |
AIThe manager expresses significant concerns about AI disruption risks across industries, particularly software companies and other asset-light business models. They worry about AI proliferation potentially disrupting industries long viewed as durable compounders. Software stocks sharply declined as investors worried that rapid AI advances could render traditional software tools obsolete or compress margins dramatically. |
AI Disruption Software Technology Risk | |
OilOil prices spiked dramatically due to the Iran war and closure of the Strait of Hormuz, which handles 20% of global oil supply. WTI oil jumped 77% from $57 to $101 per barrel during the quarter. Energy was the best performing sector, up 38.3%, though the manager was underweight and this detracted from performance. |
Oil Energy Iran Geopolitical Supply | |
GeopoliticalThe quarter was dominated by geopolitical conflicts, including the capture of Venezuelan President Maduro and escalating tensions leading to US and Israeli strikes on Iran. The Iran war has created significant market uncertainty and supply disruptions, particularly affecting oil markets through the closure of the Strait of Hormuz. |
Geopolitical Iran Venezuela War Conflict | |
Private CreditThe manager notes stress in private credit markets has intensified, particularly within Financials and Technology sectors. This has contributed to wider credit spreads, tightening financial conditions, and rising liquidity concerns, adding another layer of market uncertainty. |
Private Credit Stress Financials Liquidity Credit | |
| 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 |
|---|---|
| JNJ | Johnson & Johnson (+18.7%) has benefited from its shift towards higher-growth products, with a path to double-digit top-line growth by 2030, driven by momentum in its Innovative Medicine and MedTech segments. Tremfya sales grew 41% in 2025 as it expanded into new use cases. Late in the quarter, the FDA approved J&J's Icotyde oral pill for severe plaque psoriasis, ahead of expectations, a positive sign for its new product cycle. |
| MRK | Merck (+15.1%) outperformed as Keytruda sales grew 7% y/y, expanding uptake into earlier-stage cancer indications. More broadly, management expressed strong confidence in its overall oncology pipeline, with multiple Phase III studies expected to deliver results in 2026-27. |
| PFE | Pfizer (+14.7%) saw double-digit operational growth from its recently launched and acquired product portfolio, led by strong demand for the Vyndaqel family (+9% y/y), Eliquis (+10% y/y), and the rapid uptake of its RSV vaccine Abrysvo (+143% y/y). Management reaffirmed its 2026 revenue guidance, focusing on a disciplined cost realignment program expected to deliver $5.7 billion in net savings by year-end to bridge the gap toward a return to growth later this decade. |
| AMAT | Applied Materials (+33.2%) reported strong 1Q'26 earnings that beat expectations. Performance was driven by record DRAM and services revenue, fueled by strong demand for high-bandwidth memory (HBM) and advanced packaging tied to AI infrastructure buildout. Management expects its semiconductor equipment business to grow over 20% in 2026 as continued AI infrastructure buildout offsets broader market volatility, reinforcing confidence in a sustained upcycle. |
| ARW | Arrow Electronics (+30.2%) reported better-than-expected 4Q'25 results, with earnings exceeding the high end of guidance and revenue increasing over 20% year-over-year. Performance was driven by record results in the Enterprise Computing Solutions segment alongside early signs of a cyclical recovery in electronic components demand. Management highlighted a constructive 2026 outlook, including a record $14 billion in design wins and a continued strategic shift toward higher-margin AI infrastructure and cloud services, supporting confidence in future growth. |
| VZ | Verizon (+25.4%) reported strong 4Q'25 results, highlighted by postpaid phone net additions of 616,000, significantly exceeding expectations and signaling improving execution under new leadership. The company also announced a $25 billion share repurchase program and a dividend increase, alongside the completion of its Frontier acquisition to expand its fiber footprint. Management guided to 750,000–1,000,000 postpaid phone net additions in 2026 and outlined approximately $5 billion in cost savings, supporting confidence in a broader operational turnaround. |
| CMCSA | Comcast (+3.7%) beat 4Q'25 consensus EPS by 12% driven by strong earnings in its media and theme parks along with resilient wireless trends. The company completed its spin-off of Versant Media on January 2, simplifying the NBC Universal portfolio. |
| SIEGY | Siemens (-11.1%) underperformed as investors became concerned about AI disruption of its software business. Despite this concern, the industrial software business accounts for just 8% of Siemens' sales, while the company reported strong fiscal 1Q'26 earnings in January. Late in the quarter, shares fell further as investors anticipated slower European industrial activity given rising energy and freight costs related to the Iran War. |
| BA | Boeing (-8.3%) faced continued execution challenges across key programs during the quarter. The company recorded a nearly $5 billion reach-forward loss tied to further delays of the 777X aircraft, with first deliveries now expected in 2027, while ongoing manufacturing issues and charges on fixed-price defense programs weighed on profitability. These pressures more than offset improving commercial deliveries, despite the company reporting its highest quarterly revenue since 2018. While production on the 737 and 787 programs continues to stabilize, investor sentiment remains cautious as the company works through a multi-year operational recovery. |
| AXTA | Axalta Coating Systems (-14.3%) reported 4Q'25 revenue down 4% year-over-year, driven by volume pressures and macro headwinds across North America and Europe. Performance was particularly impacted by a 7% decline in Refinish sales, reflecting continued distributor destocking and low claim activity, as well as a 5% decline in Industrial sales amid softer demand. While the company delivered record full-year adjusted EBITDA of $1.13 billion, investor sentiment was weighed down by ongoing top-line pressure, though management expects destocking headwinds to ease and volumes to improve in the second half of 2026. |
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