| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.3% | -6.7% | -6.7% |
Lyrical Asset Management's U.S. Value Equity strategy underperformed in 1Q26, declining 6.7% net versus the S&P 500's 4.3% decline. Despite excellent fundamental performance with 92.4% of portfolio companies increasing next twelve months earnings per share by an average of 5.7%, the portfolio suffered from significant valuation compression affecting 75.5% of holdings. Sector allocation was a minor headwind as the portfolio was underweight the best performing sectors. The manager emphasizes that if valuations had remained unchanged, returns would have been 11 percentage points higher. Portfolio positioning appears attractive going forward with a 11.3x NTM P/E ratio that declined 7% during the quarter, combined with average historical growth rates of 10.9% that exceed the S&P 500 by over 4 percentage points. Additionally, the portfolio's earnings are characterized as less economically sensitive than the broader market, providing potential defensive characteristics.
Value investing approach focused on companies trading at attractive valuations with strong earnings growth potential and lower economic sensitivity than the broader market.
Portfolio positioning looks attractive with NTM P/E of 11.3x down 7% over the quarter, average historical growth rate of 10.9% that is 4+ percentage points faster than the S&P 500, and earnings that are less economically sensitive than the S&P 500.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 16 2026 | 2026 Q1 | ARW, EBAY, EXPE, FFIV, FIS, FLEX, GEN, ICLR, JCI, NRG, SSNC, UBER, WCC | earnings, financials, healthcare, industrials, technology, value | - | Lyrical's value strategy underperformed in 1Q26 despite strong earnings growth from 92% of holdings, as valuation compression offset fundamental gains. Portfolio trades at attractive 11.3x P/E with 10.9% historical growth rates exceeding S&P 500 by 4+ points and lower economic sensitivity. |
| Jan 15 2026 | 2025 Q4 | AAPL, AER, AMG, AMZN, EBAY, EXPE, FFIV, FLEX, GOOGL, HCA, JCI, META, MSFT, NRG, NTAP, NVDA, SNX, TSLA, UBER, URI | EPS Growth, growth, international, Performance, valuation, value | - | Lyrical delivered 17.9% returns in 2025, matching the S&P 500 without Magnificent Seven exposure while outperforming value benchmarks. Their portfolio trades at a 78% discount to the market with superior 10.6% earnings growth. Strong travel sector performance offset payment processor weakness. The firm sees opportunity in current wide valuation spreads. |
| Oct 14 2025 | 2025 Q3 | AAPL, AMP, CI, CNC, CPAY, EBAY, EXPE, FIS, FLEX, GOOGL, GPN, HCA, JCI, LKQ, MSFT, NRG, NVDA, TSLA, UBER, URI | earnings, growth, Outperformance, Performance, value | - | Lyrical's value strategies are outperforming in 2025 with the CS strategy up 15.7% year-to-date, beating the S&P 500 by 90bps. The portfolio combines deep value trading at 12.2x P/E with strong 10%+ EPS growth, creating an uncommon value-growth combination. Despite Q3 underperformance from mega-cap headwinds, the historically wide 80% valuation discount provides compelling upside potential. |
| Aug 25 2025 | 2025 Q2 | AAPL, AIZ, AMZN, CNC, CPAY, EXPE, FLEX, GOOGL, GPN, HCA, JCI, META, MSFT, NRG, NVDA, SU, TSLA, UBER, URI, WEX | growth, international, Outperformance, stock selection, valuation, value | - | Lyrical delivered strong outperformance in Q2 2025, beating the S&P 500 by 180 basis points through idiosyncratic stock selection. The firm maintains deep value characteristics with higher growth than the broader market, trading at a significant discount. International strategies also outperformed meaningfully, positioning the firm well for potential valuation normalization. |
| Apr 1 2025 | 2025 Q1 | 6723.T, AHT.L, AMP, BERY, ELIS.PA, ENXTPA.PA, FLEX, JCI, LAD, LEA, RXL.PA, SU | global, international, Quality, Recession, tariffs, value | - | Lyrical's global value strategy delivered strong Q1 outperformance as international markets finally began reversing 15 years of underperformance versus US stocks. The portfolio benefits from extreme valuation discrepancies between equally attractive international and US fundamentals, while maintaining defensive positioning against both tariff disruptions and potential recession through focus on resilient, capital-light businesses with flexible cost structures. |
| Feb 12 2025 | 2024 Q4 | 005930.KS, ACN, AER, BAER.SW, BATS.L, BNP.PA, BP.L, ENX.PA, HSBA.L, MBG.DE, SAN, SHEL.L, TEP.PA | Asia, banks, EAFE, Europe, growth, international, Quality, value |
005930.KS TEP.PA |
Lyrical's international value strategy underperformed in 2024 due to mega-cap concentration and AI fears affecting Samsung and Teleperformance. The portfolio trades at 10.4x earnings with superior growth versus EAFE at 13.8x. With 75% upside to intrinsic value and expected technology convergence at Samsung, the managers anticipate strong future returns from their quality value approach. |
| Feb 15 2024 | 2023 Q4 | AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA | earnings, global, Magnificent Seven, Non-US, valuation, value | - | Lyrical's Global Value strategy outperformed its style benchmark despite missing the Magnificent Seven rally, delivering superior earnings growth of 6.2% versus 4.0% for MSCI World. Trading at a 43% discount with better fundamentals, the portfolio is positioned to benefit from valuation normalization in both undervalued non-U.S. markets and the cheapest U.S. stocks. |
| Feb 2 2023 | 2022 Q4 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
EarningsPortfolio companies delivered excellent earnings growth with 92.4% of holdings increasing next twelve months EPS by an average of 5.7%. This strong fundamental performance was offset by significant valuation compression affecting 75.5% of the portfolio. |
EPS Growth Fundamentals |
ValuePortfolio trades at attractive 11.3x NTM P/E ratio, down 7% over the quarter, with average historical growth rate of 10.9% that is 4+ percentage points faster than S&P 500. Valuation compression created headwinds but positions look attractive going forward. |
Valuation P/E Discount | |
| 2025 Q4 |
ValueLyrical emphasizes their value approach delivered strong returns in 2025, with their US strategy returning 17.9% while avoiding Magnificent Seven stocks. The firm highlights an uncommon combination of value and growth, with their portfolio trading at a 78% discount to S&P 500 while generating 10.6% EPS growth versus 6.6% for the index. |
Value Investing Valuation Growth Discount EPS |
AIThe document discusses AI's role in driving S&P 500 returns, noting that mega-cap growth stocks including AI leaders have outperformed significantly. However, Lyrical's strategy achieved similar returns without owning these AI-driven names, suggesting a neutral stance on AI valuations and concentration risks. |
Artificial Intelligence Technology Mega Cap Growth | |
TravelAir transportation industry analysis shows strong cash flow recovery for air lessors compared to airlines and aircraft manufacturers. Lyrical holds positions in Expedia and AerCap Holdings, with both being top contributors in 2025, reflecting positive views on travel recovery and aviation leasing. |
Airlines Aviation Leasing Recovery Cash Flow | |
| 2025 Q3 |
ValueThe portfolio maintains an uncommon combination of deep value and growth characteristics. The value spread between the portfolio and S&P 500 is historically wide at 80%, with portfolio trading at 12.2x-12.6x P/E versus S&P 500 at 22.7x. Despite value characteristics, portfolio EPS growth exceeds 10% annually, significantly outpacing S&P 500 growth of 6.4%. |
Value Growth P/E Earnings Valuation |
| 2025 Q2 |
ValueLyrical maintains an uncommon combination of deep value and growth, with S&P 500 forward P/E 73% higher than Lyrical's CS composite despite higher growth profile. The firm attributes outperformance to idiosyncratic stock selection in a difficult environment where only 29% of S&P 500 constituents outperformed. |
Valuation Growth Stock Selection Outperformance Deep Value |
| 2025 Q1 |
ValueInternational stocks have been massive underperformers over the past decade due to valuation expansion in US markets, not fundamentals. The EAFE is trading at less than 14x earnings while the S&P 500 trades 25% above its long-term average multiple. The S&P 500 is about 45% more expensive than EAFE despite equally attractive fundamentals. |
International Valuation EAFE Multiples Fundamentals |
Trade PolicyThe portfolio is well-positioned for tariff impacts with 53% of revenues derived from within the US and focus on capital-light businesses. 50% of holdings have no direct tariff impact, 39% have low exposure, and only 10% are in higher impact category. Companies like Flex could benefit long-term from increased outsourcing trends. |
Tariffs Trade War Outsourcing Supply Chain Manufacturing | |
ResilienceThe portfolio is strongly positioned for economic downturns with 30% of holdings historically growing even in challenging environments. During the Global Financial Crisis, portfolio companies' EPS only fell 21% compared to 30% for MSCI World. Companies have flexible cost structures and countercyclical cash flow characteristics. |
Recession Defensive Cash Flow Economic Sensitivity Downturn | |
| 2024 Q4 |
AIAI deployment is creating both opportunities and challenges for portfolio companies. Samsung is experiencing margin pressure as AI favors High Bandwidth Memory technology where it currently lags behind SK Hynix. Teleperformance faces uncertainty as AI threatens to automate customer service functions, though the manager believes the company can adapt and benefit from increased complexity in remaining work. |
Memory Automation Technology Semiconductors Business Process |
ValueThe portfolio trades at 10.4x forward earnings versus 13.8x for MSCI EAFE, representing a 33% valuation discount. The manager emphasizes finding quality companies at attractive valuations, with more than 75% upside to estimated intrinsic value. This deep value approach is combined with quality growth characteristics. |
Valuation Quality Growth Earnings Intrinsic Value | |
SemiconductorsSamsung Electronics represents the crown jewel semiconductor exposure, leading in DRAM/NAND memory and foundries. The company faces near-term challenges in High Bandwidth Memory for AI applications but is expected to close the technology gap by end of 2025 given its scale and 70% higher R&D spending than peers. |
Memory DRAM NAND Foundries Technology | |
| 2023 Q4 |
ValueThe fund focuses on deep value investing, with their Global portfolio trading at a 43% discount to MSCI World valuation. They emphasize the cheapest quintile of stocks globally, which trade at just 9.4x NTM EPS compared to 19.2x for the median U.S. stock. The valuation spread between the market and cheapest stocks is at historically wide levels similar to the Global Financial Crisis and tech bubble periods. |
Deep Value Valuation Spreads Cheapest Quintile P/E Ratios Discount |
EarningsPortfolio companies delivered superior earnings growth of 6.2% in 2023 versus 4.0% for MSCI World, with a long-term growth history of over 8% per annum since 2007 compared to 5.1% for the index. The managers emphasize that their outperformance was driven by better fundamentals rather than multiple expansion, positioning them well for future returns as earnings growth continues to outpace the market. |
EPS Growth Fundamentals Outgrowth Long-term Growth Earnings Quality |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| - | Fund Letters | Lyrical Asset Management | TEP.PA | Teleperformance SE | Information Technology | IT Services | Bull | Euronext Paris | AI, BPO, Business process outsourcing, Customer service, Europe, france, IT services, technology, Value | Login |
| - | Fund Letters | Lyrical Asset Management | 005930.KS | Samsung Electronics Co., Ltd. | Information Technology | Technology Hardware, Storage & Peripherals | Bull | Korea Stock Exchange | AI, DRAM, HBM, memory chips, Nand, semiconductors, South Korea, technology hardware, turnaround, Value | Login |
| TICKER | COMMENTARY |
|---|---|
| JCI | Johnson Controls (JCI) was a top contributor in 1Q26 with +9.7% net performance contributing +0.5% to returns, and was also a top contributor in 2025 with +54.0% net performance contributing +2.5% to returns. |
| FLEX | Flex (FLEX) was a top contributor in 1Q26 with +8.3% net performance contributing +0.4% to returns, and was also a top contributor in 2025 with +57.4% net performance contributing +2.2% to returns. |
| ARW | Arrow Electronics (ARW) was a top contributor in 1Q26 with +30.2% net performance contributing +0.4% to returns. |
| FFIV | F5 (FFIV) was a top contributor in 1Q26 with +13.3% net performance contributing +0.4% to returns. |
| WCC | WESCO International (WCC) was a top contributor in 1Q26 with +12.1% net performance contributing +0.3% to returns. |
| EXPE | Expedia Group (EXPE) was a bottom contributor in 1Q26 with -18.3% net performance contributing -1.1% to returns, but was a top contributor in 2025 with +53.3% net performance contributing +2.2% to returns. |
| FIS | Fidelity National Information Services (FIS) was a bottom contributor in 1Q26 with -28.8% net performance contributing -1.0% to returns, and was also a bottom contributor in 2025 with -15.8% net performance contributing -0.7% to returns. |
| ICLR | ICON (ICLR) was a bottom contributor in 1Q26 with -39.3% net performance contributing -1.0% to returns. |
| SSNC | SS&C Technologies (SSNC) was a bottom contributor in 1Q26 with -22.4% net performance contributing -0.9% to returns. |
| GEN | Gen Digital (GEN) was a bottom contributor in 1Q26 with -30.4% net performance contributing -0.8% to returns. |
| NRG | NRG Energy (NRG) was the top contributor in 2025 with +78.9% net performance contributing +4.0% to returns. |
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