HOTCHKIS & WILEY

HOTCHKIS & WILEY

Last Update: 01-10-2017

Number of Stocks: 177
Number of New Stocks: 11

Total Value: $23,885 Mil
Q/Q Turnover: 7%

Countries: USA CAN
Details: Top Buys | Top Sales | Top Holdings  Embed:

HOTCHKIS & WILEY Watch

  • Stocks With Low P/Es and Margins of Safety

    Here are eight stocks gurus are buying that are trading with a very low price-earnings (P/E) ratio. Most of them are greatly undervalued, according to the DCF calculator.


    Unum Group (UNM) with a market cap of $10.3 billion is trading with a P/E ratio of 11.64 and a price-sales (P/S) ratio of 0.97. The price has risen 47% during the last 12 months and is now 1.68% below its 52-week high and 85.04% above its 52-week low.

      


  • Bernard Horn Gains 2 Holdings, Cuts 3 Others

    Bernard Horn (Trades, Portfolio) of the Polaris Global Value Fund purchased two new holdings and exited three others in the third quarter.


    Horn founded Polaris Capital Management in 1995. The firm invests in discounted but high-quality stocks in developed and emerging markets. All trades are managed on a team basis using a consistent process and approach. The investment philosophy is based on two basic beliefs: country and industry are important factors in price, and global market fluctuations produce mispriced stocks.

      


  • Hotchkis & Wiley Trims Corning, Microsoft, Exits HP

    HOTCHKIS & WILEY was formed in Los Angeles in 1980 and has focused exclusively on finding and owning undervalued companies that have a significant potential for appreciation. During the third quarter the guru’s largest sells were the following:


    The firm reduced its stake in Corning Inc. (GLW) by 31.63% with an impact of -1.24% on the portfolio.

      


  • John Burbank Boosts Alibaba, Exits Yahoo

    John Burbank (Trades, Portfolio) III is the chief investment officer of Passport Capital LLC, the global investment firm he founded in 2000. During the third quarter the guru’s largest trades were the following:


    The guru bought 18,783,715 shares in Marvell Technology Group Ltd. (MRVL) with an impact of 5.21% on the portfolio.

      


  • Mariko Gordon Adds 5 New Holdings to Portfolio

    Daruma Capital Management’s Mariko Gordon (Trades, Portfolio) acquired five new holdings in the third quarter.


    Gordon founded Daruma in 1995 in New York and currently serves as CEO. Gordon runs a concentrated portfolio of small to mid-cap stocks because she believes a concentrated portfolio is crucial to truly active management. She believes the best time to acquire a stock is when it offers good value and the factor that will propel the price higher can be identified.

      


  • Richard Perry Exits AIG, Time Warner

    Richard Perry (Trades, Portfolio) co-founded private investment management firm Perry Capital LLC in 1988. During the third quarter the guru’s largest sells were the following:


    His stake in American International Group Inc. (AIG) was closed with an impact of -13.65% on the portfolio.

      


  • Arnold Schneider's Best-Performing Stocks

    Arnold Schneider is president, chief investment officer and principal of Schneider Capital Management Corp. He manages a portfolio composed of 68 stocks with a value of $534 million. The following are the best performers of his investments.


    Marathon Oil Corp. (MRO) with a market cap of $12.01 billion has gained 17.0% year to date. Schneider's stake represents 0.11% of the company's outstanding shares and 2.66% of his total assets.

      


  • Hotchkis & Wiley Narrows Navistar International Position

    Hotchkis & Wiley Capital Management reduced its stake in Navistar International Corp. (NYSE:NAV) by 27.5% on Sept. 30.


    Hotchkis & Wiley was founded in 1980 in Los Angeles. The firm is interested in undervalued companies with considerable potential for appreciation. The investment team examines a company’s tangible assets, sustainable cash flow and potential for improving performance.

      


  • High Yield Small and Mid Caps Opportunities and Risks - Hotchkis & Wiley

    An overlooked opportunity or undue risk?

      


  • Kahn Brothers Trims Pfizer, Citigroup

    Irving Kahn, along with brothers Alan and Thomas, founded Kahn Brothers (Trades, Portfolio) & Company in 1978. The company has more than $800 million in assets under management. During the second quarter the firm’s largest trades were:


    The guru raised its shares in GlaxoSmithKline PLC ADR (GSK) by 188.24% with an impact of 2.08% on the portfolio.

      


  • Guru Buys Barclays, Office Depot, Morgan Stanley

    HOTCHKIS & WILEY was established in Los Angeles in 1980. In both the first and second quarters the guru bought shares in the following stocks:


    Barclays PLC ADR (BCS)

      


  • Hotchkis & Wiley Sells JPMorgan, Boosts Wells Fargo

    HOTCHKIS & WILEY was formed in Los Angeles in 1980 and has focused exclusively on finding and owning undervalued companies that have a significant potential for appreciation. During the second quarter the company traded the following stocks.


    The company reduced its stake in Great Plains Energy Inc. (GXP) by 76.09% with an impact of -0.77% on the portfolio.

      


  • Hotchkis & Wiley Large Cap Diversified Value

    The S&P 500 Index returned +2.5% during the second quarter of 2016. There was wide performance dispersion across sectors, with the best-performing sector (energy) outperforming the worst-performing sector (technology) by more than 14 percentage points. Despite the partial rebound in energy this quarter, over the last 12 months we have observed a massive flight away from cyclical market segments in favor of non-cyclicals. Pundits have described this trend as “risk off”, “flight to safety”, “low volatility”, “bond proxy” etc., but the reality is that non-cyclical businesses now appear to trade at an unusually high premium to cyclical businesses. Macroeconomic shocks like Brexit have only exacerbated the divergence. True to Benjamin Graham, we view stocks trading at discounts to intrinsic value as having a margin of safety. Ironically, it has become difficult to identify a margin of safety in businesses currently perceived as “safe” because their valuations have become stretched. Accordingly, our modest overweight allocation to cyclicals reflects the risk-adjusted valuation opportunities available and not a macroeconomic outlook. The most attractive individual opportunities reside within financials and energy, though we remain slightly underweight both sectors relative to the Russell 1000 Value as only select segments within the sectors offer compelling risk adjusted valuations—albeit highly compelling. Relative to the Russell 1000 Value Index the portfolio is overweight consumer discretionary and technology, underweight consumer staples, and relatively equal-weight other sectors. We do not know when value dislocations will revert, nor are we certain that these dislocations will not widen further before reverting. We have learned from past experience, however, that these cycles inevitably do normalize and we believe that our portfolio is well-positioned to benefit.


    Interest rates declined during the quarter, largely influenced by investors’ flight to US Treasuries in the aftermath of Brexit. The low rate environment has been a stubbornly persistent macroeconomic headwind for most financials, with banks disproportionately affected because their net interest margins are pressured. From a bottom-up fundamental perspective, however, the strengthening posture of US banks has been quite encouraging. Profitability has been solid and capital ratios are at/near all-time highs. All companies subjected to the Fed’s stress test have passed, which improves the potential for increased returns of capital to shareholders. Buying back shares at/below book value can be highly accretive and this group’s payout yield (dividends + share repurchases) currently stands at 8%1. Financials represent the portfolio’s largest sector, though the weight is about equal to that of the Russell 1000 Value—we are overweight banks and underweight REITs.

      


  • Hotchkis & Wiley's Best Investments Year to Date

    HOTCHKIS & WILEY are value investors focusing on important investment parameters such as a company's tangible assets, sustainable cash flow and potential for improving business performance. It manages a portfolio composed of 173 stocks with total value of $23.763 billion.


    Marathon Oil Corp. (MRO)

      


  • Bed Bath & Beyond Among Companies With Growing EPS

    Companies with growing EPS are often good investments as they can return a good profit to investors. Here is a selection of the most undervalued companies, according to the DCF calculator, that have a five-year growing EPS.


    Earnings per share of Bed Bath & Beyond Inc. (BBBY) grew by 10% over the last five years and according to the DCF calculator, the stock at the price of about $45 is undervalued and trading with a margin of safety of 50%.

      


  • Hotchkis & Wiley Boosts Stake in Discovery Communications

    Hotchkis & Wiley, an independent investment firm, increased its position in Discovery Communications Inc. Class A (NASDAQ:DISCA) by 50.02% as the company increased revenues and operating income during the first half of 2016.


    The firm initially purchased 3,888,600 shares of Discovery Communications at an average price of $31.39 during the first quarter of 2015. Throughout 2015, Hotchkis and Wiley raised their position to 9,875,281 shares, finishing the first quarter of 2016 with 10,347,018 shares. As of June 30, the independent firm owned 15,522,485 shares of Discovery Communications after purchasing 5,175,467 shares at an average price of $25.23.

      


  • Hotchkis & Wiley Buys Morgan Stanley, Citigroup, AIG in 1st Quarter

    HOTCHKIS & WILEY was founded in 1980 by John Hotchkis and George Wiley, value investors focusing on important investment parameters such as a company's tangible assets, sustainable cash flow and potential for improving business performance. During the first quarter the firm bought shares in the following stocks:


    The firm increased its stake in Marathon Oil Corp. (MRO) by 44.55% with an impact of 0.8% on the portfolio.

      


  • Companies Fall to 5-Year Lows

    According to GuruFocus' list of five-year lows, these guru stocks have reached their five-year lows: Guess? Inc. (NYSE:GES), Quality Systems Inc. (NASDAQ:QSII), RPX Corp. (NASDAQ:RPXC) and Ruby Tuesday Inc. (NYSE:RT).


    Guess? reaches $15.71

      


  • Valuing Best Buy for Potential Catalyst

    Best Buy (NYSE:BBY) is the largest specialty retailer of consumer electronics in the U.S. As of February, it had 1,037 stores in the U.S., whereas the number of international Best Buy stores stood around 216 with 350 stand-alone Best Buy mobile stores in the U.S. that focus on mobile phones and accessories. Currently the stock is trading at a P/E multiple of 10.30 while comparing it with peers, and it has an upside potential of 30% from the market price of $30.06.


    Company overview

      


  • Growing EPS, Margin of Safety: Herbalife, Viacom

    Companies with growing EPS are often a good investment as they can return a good profit to investors. Here is a selection of the most undervalued companies, according to the DCF calculator, that have a five-year growing EPS.


    Earnings per share of Silicom Ltd. (NASDAQ:SILC) grew by 23% over the last five years and according to the DCF calculator, the stock at Thursday's price of $28.4 is undervalued and trading with a margin of safety of 52%.

      


  • Hotchkis & Wiley Global Value Fund 1st Quarter Commentary

    MARKET COMMENTARY


    The Russell Developed Index had a flat -0.04% return during the first quarter of 2016, though it was anything but a flat trajectory. On February 11th, the index was down by more than 11% for the year before recovering over the quarter’s final seven weeks. This date also represented a turning point in the value/growth cycle. From the beginning of the year through February 11th, Russell Developed Index stocks with the lowest price-to-book ratios (lowest quintile) underperformed the index -20.5% vs. -11.7%. From February 11th through the end of the quarter, however, this lowest valued quintile outperformed the index +16.5% vs. +13.2%. While it is too early to proclaim a new value cycle is upon us, it is noteworthy that such cycles have lasted between 5 and 8 years historically once they have taken hold—this would be a welcomed tailwind for our approach.

      


  • Hotchkis & Wiley Large Cap Value Fund First Quarter Commentary

    MARKET COMMENTARY


    The S&P 500 Index returned +1.35% during the first quarter of 2016, though it was anything but a steady trajectory. On February 11th, the S&P 500 Index was down by more than 10% for the year before recovering over the quarter’s final seven weeks. This date also represented a turning point in the value/growth cycle. From the beginning of the year through February 11th, S&P 500 Index stocks with the lowest price-to-book (P/B) ratios (lowest quintile) underperformed the index -16.1% vs. -10.3%. From February 11th through the end of the quarter, however, this lowest valued quintile outperformed the index +16.2% vs. +13.0%. While it is too early to proclaim a new value cycle is upon us, it is noteworthy that such cycles have lasted between 5 and 8 years historically once they have taken hold—this would be a welcomed tailwind for our approach.

      


  • Bed Bath & Beyond Is a Serious Buy Right Now

    The 20% off standard has served the company well over the years, helping it grow from $3 billion in sales in 2002 to over $12 billion today. Just looking through Bed Bath & Beyond’s (NASDAQ:BBBY) 15-year financial record is impressive, but the past does not equal the future.


      


  • Hotchkis & Wiley Diversified Value Fund First Quarter Commentary

    The S&P 500 Index returned +1.35% during the first quarter of 2016, though it was anything but a steady trajectory. On February 11th, the S&P 500 Index was down by more than 10% for the year before recovering over the quarter’s final seven weeks. This date also represented a turning point in the value/growth cycle. From the beginning of the year through February 11th, S&P 500 Index stocks with the lowest price-to-book ratios (lowest quintile) underperformed the index -16.1% vs. -10.3%. From February 11th through the end of the quarter, however, this lowest valued quintile outperformed the index +16.2% vs. +13.0%. While it is too early to proclaim a new value cycle is upon us, it is noteworthy that such cycles have lasted between 5 and 8 years historically once they have taken hold—this would be a welcomed tailwind for our approach.


    In most market environments, some sectors/industries are coveted while others are shunned depending on the market’s disposition at the time. This behavior often results in a market that exhibits a bifurcation in stock valuations. Currently, this dichotomy is quite pronounced. Investors are fearful that the economic woes in China and other emerging economies will spill over into the US and other developed markets. This fear has caused investors to pay 20x earnings or more for the perceived safety of non-cyclicals like consumer staples or real estate and sell cyclicals like energy or industrials at a fraction of the valuation. We believe when “safe” stocks trade at excessive valuations they become risky, not safe, which is the market’s current paradox. Taking the long-term view, we see compelling risk-adjusted valuation opportunities in select market segments that have been shunned. Our bottom-up search for value in today’s market yields a portfolio that trades for 8.3x normal earnings and 1.2x book value, which represents a considerable discount to the Russell 1000 Value Index (13.2x and 1.7x, respectively) and an even larger discount to the S&P 500 Index (15.9x and 2.6x, respectively).

      


  • Hotchkis & Wiley Sells Out of Comstock Resources

    Hotchkis & Wiley sold its 4,669,830-share stake in Comstock Resources Inc. (NYSE:CRK) on March 31.


    Comstock Resources is based in Frisco, Texas, and is engaged in the acquisition, development, production and exploration of oil and natural gas with operations concentrated in Texas, Louisiana and Mississippi. The company's proven oil and natural gas reserve base is 91% natural gas and 9% oil and was 59% developed as of Dec. 31, 2015.

      


  • Hotchkis & Wiley Sells Stake in Most Heavily Weighted Sector

    Financial Services is the most heavily weighted sector in HOTCHKIS & WILEY’s portfolio, and the guru’s most noteworthy fourth-quarter transaction was in that sector, but it was a divestiture, not an acquisition.


    HOTCHKIS & WILEY sold its 2,466,713-share stake in Chubb Ltd. (NYSE:CB), an insurance and finance company based in Zurich, for an average price of $118.27 per share. The divestiture had a -1.21% impact on the guru’s portfolio.

      


  • Stocks Bring High Dividend Yields to HOTCHKIS & WILEY

    HOTCHKIS & WILEY has focused exclusively on finding and owning undervalued companies that have a significant potential for appreciation. Following are the stocks that have high dividend yields in that portfolio.


    Denbury Resources Inc. (DNR)

      


  • Hotchkis & Wiley Invests in International Paper, Packaging Corp. of America and Eaton

    Hotchkis & Wiley Capital Management LLC made a dozen new buys in the third quarter.


    Hotchkis & Wiley was founded in 1980 by John Hotchkis and George Wiley. They shared the belief that discipline and independent analysis are the keys to finding undervalued securities that have the potential for appreciation. For more than 35 years, Hotchkis & Wiley has been managing value portfolios for institutional and individual investors. Following are the stocks that got new positions in the portfolio during the third quarter.

      


  • Tom Gayner Buys Harley-Davidson and JPMorgan in 3rd Quarter

    Tom Gayner (Trades, Portfolio) is the executive vice president and chief investment officer of Markel Corp. (NYSE:MKL) and president of Markel Gayner Asset Management Inc. He thinks stock is part of a business, and the business is worth what the present value of the future cash flows are.


    His portfolio is composed of 122 stocks, and the following are the most heavily weighted trades during the third quarter.

      


  • Hotchkis & Wiley Sells Stake in UnitedHealth Group

    Hotchkis & Wiley was founded in 1980 and is based in Los Angeles. The firm follows a value strategy, focusing on important investment parameters such as a company's tangible assets, sustainable cash flow and potential for improving business performance.


    Hotchkis & Wiley sold the following stocks in the third quarter and had good gains of 83%, 62% and 52% from UnitedHealth Group, Lowe's Companies and Symetra Financial Corp.

      


  • HOTCHKIS & WILEY Buys More Than 7 Million Shares in Oil and Gas Company

    Since its founding in 1980, HOTCHKIS & WILEY has emphasized finding and owning undervalued companies with significant potential for appreciation. Its approach has regularly produced double-digit returns for its clients in recent years.


    HOTCHKIS & WILEY’s most noteworthy third-quarter transaction was its purchase of a 7,683,558-share stake in Hess Corp. (NYSE:HES), a New York-based oil and gas company, for an average price of $57.23 per share. The deal had a 1.54% impact on HOTCHKIS & WILEY’s portfolio.

      


  • 3 Investment Opportunities Both Insiders and Gurus Are Buying

    As I consider myself something of a cratedigger of a value investor, GuruFocus is a valuable source of information. I’m always looking for new ideas and one cool screen GuruFocus has is the Double Buy screen. It allows you to see which stocks have been bought by both gurus and insiders. Separately that is data I am already interested in but screening for both at the same time is beyond good. These are currently the top three stocks that come up on the screen:


    gurufocus.jpg

      


  • Insiders' Trades of the Week: Citizens Financial

    The All-In-One Screener can be used to find insider buys and sales over the last week by clicking on the Insiders tab and changing the settings for All Insider Buying/All Insider Selling to “$1,000,000+” and duration to "November 2015."


    According to the above filters, the following are the recent buys from company insiders in the past week.

      


  • A Look at Recent Insider Trades

    The All-In-One Screener can be used to find insider buys and sales over the last week by clicking on the Insiders tab and changing the settings for All Insider Buying/All Insider Selling to “$1,000,000+” and duration to "October 2015."


    According to the above filters, the following are the recent buys from company insiders in the past week.

      


  • Hotchkis & Wiley Diversified Value Fund Q3 Commentary

    The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Investment return and principal value of the fund will fluctuate, and shares may be worth more or less than their original cost when redeemed. Click quarter-end or month-end to obtain the most recent fund performance.


    Manager Commentary

      


  • HOTCHKIS & WILEY Sells Stake in Time Warner Cable

    HOTCHKIS & WILEY looks for undervalued companies with loads of potential in which to invest. “Our ability to deliver long-term performance is the key to our success,” the firm’s website proclaims. That success seems indisputable. The large cap value fund produced returns of nearly 40% year before last.


    HOTCHKIS & WILEY’s most noteworthy deal of the second quarter was its sale of a 2,918,984-share stake in Time Warner Cable Inc. (NYSE:TWC), a New York City-based cable telecommunications company. HOTCHKIS & WILEY received an average price of $165.41 per share in a transaction that had a -1.52% impact on HOTCHKIS & WILEY’s portfolio.

      


  • Madison Street Partners Buys Citigroup and Morgan Stanley

    Madison Street Partners LLC is a hedge fund based in Colorado founded by Steven Owsley in 2004. Its portfolio reported a total value of its portfolio of $74 million, with a decrease of 24% since the previous quarter. During 2015, Q2, it bought 20 new stocks and increased four of its existing stakes. The following are the most heavily weighted buys during the quarter.



      


  • Weekly CEO Buys Highlight: Shutterstock, Endurance Specialty Holdings, Opko, Air Products, KapStone

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below:


    Shutterstock Inc.: CEO and 10% owner Jonathan Oringer bought 200,000 shares

      


  • Kahn Brothers' Most Weighted Trades in Q2 2015

    Irving Kahn, along with brothers Alan and Thomas, founded Kahn Brothers (Trades, Portfolio) & Company, Inc., in 1978. The firm is a money manager and Registered Investment Advisor. Its principals manage approximately $1 billion of institutional and private funds.


    Its portfolio is composed of 40 stocks and has a total value of $593 million and the following are the most heavily weighted trades the hedge fund closed during the Q2 2015.

      


  • 5-year lows: Rowan Companies, Linn Energy LLC, Greif Inc, and Hatteras Financial Corp

    According to GuruFocus list of 5-year lows, these Guru stocks have reached their 5-year lows: Rowan Companies, Linn Energy LLC, Greif Inc, and Hatteras Financial Corp.


    Rowan Companies PLC (NYSE:RDC) Reached $16.79

      


  • Hotchkis & Wiley Large Cap Diversified Value Q2 2015 Commentary

    The S&P 500 Index returned a modest +0.3% during the second quarter of 2015 and is now up +1.2% since the beginning of the year. Growth and value performed similarly during the quarter but value stocks have lagged considerably over the past 12 months. Typically, such environments present a headwind for our value-focused strategy but we have managed to navigate the past twelve months satisfactorily considering the circumstances. Naturally, however, we would welcome a value tailwind which our experience has taught us should inevitably emerge in due course.


    Hotchkis & Wiley Large Cap Diversified Value

      


  • Hotchkis & Wiley Large Cap Diversified Value Q2 Market Commentary

    The S&P 500 Index returned a modest +0.3% during the second quarter of 2015 and is now up +1.2% since the beginning of the year. Growth and value performed similarly during the quarter but value stocks have lagged considerably over the past 12 months. Typically, such environments present a headwind for our value-focused strategy but we have managed to navigate the past twelve months satisfactorily considering the circumstances. Naturally, however, we would welcome a value tailwind which our experience has taught us should inevitably emerge in due course.


    The economic perils in Greece have reemerged as an important concern that is giving investors pause. The good news is that Greece is small, representing about 2% of the total economic output of all countries that use the euro as their currency. The primary risk for equity investors is that a Greek exit from the Eurozone sets a new precedent, and investors may ponder the possibility that a larger European economy (e.g. Italy, Spain) may share a similar fate if/when stressed, which could trigger economic turmoil throughout the region. Thus far, the market appears to perceive the Greece situation as largely quarantined—government bond spreads for other European periphery countries have remained relatively tight versus the German Bund. Nonetheless, we are monitoring the situation closely and have evaluated in detail each of our positions’ exposure to changes in the value of the dollar; we remain confident that we are not bearing unnecessary risk.

      


  • Five Stocks With Low P/E Gurus Are Buying (Part II)

    With these articles, thanks to the All-In-One screener of GuruFocusI give a selection of stocks that are trading with a very low P/E(ttm) ratio and that are catching the attention of multiple Gurus.


    Discover Financial Services (DFS)

      


  • Hotchkis & Wiley Adds to Banking, Insurance Stakes

    In its 35-year existence, value investor HOTCHKIS & WILEY has built its reputation on identifying undervalued companies that have great growth potential. But in the first quarter, most of its emphasis was on well-established companies, especially those in banking and insurance.


    HOTCHKIS & WILEY‘s most significant new buy in the first quarter was its investment in 2,604,383 shares of Chubb Corp (NYSE:CB), a New Jersey-based property and casualty insurer. HOTCHKIS & WILEY paid an average price of $101.24 per share in a deal that had a 0.92% impact on the portfolio.

      


  • Hotchkis & Wiley Large Cap Value Fund Q1 2015 Commentary

    Following six years of positive returns, the S&P 500 Index opened 2015 with a modest +1.0% return in the first quarter. The unprecedented corporate cost-cutting measures and general economic recovery following the financial crisis has fueled impressive earnings growth. Over the last six years, the S&P 500 is up +194% cumulatively. While such a rampant appreciation of market prices would normally give us pause, equity valuations are scarcely higher than historical averages due to these robust earnings.


    After six years of zero interest rate policy, investors are acutely focused on the Federal Reserve’s plan to taper its lax monetary policy. Equity investors are not fully insulated from such actions, however, we believe the effect on equities should be more subdued than many investors expect. Firstly, increasing interest rates are often correlated with positive economic developments, which is good for corporate cash flows. Secondly, long bond rates are a component of the cost of capital used to discount corporate cash flows. Fed tapering should impact short term interest rates disproportionately to long term rates, which already reflect expectations of a less intrusive Fed. Finally, the premium equity investors require above treasuries is considerably higher than historical averages. If interest rates rise, we may see a reversion of the equity premium back to normal levels, resulting in equity prices remaining stable despite higher interest rates.

      


  • Hotchkis & Wiley Keeps Buying Navistar

    Since its inception in Los Angeles in 1980, Hotchkis & Wiley (Trade, Portfolio) has focused exclusively on finding and owning undervalued companies that have a significant potential for appreciation. Hotchkis & Wiley are value investors focusing on important investment parameters such as a company's tangible assets, sustainable cash flow, and potential for improving business performance.


    Last quarter, Hotchkis & Wiley increased its position in Navistar (NYSE:NAV) by buying 1,305,300 shares. In the previous quarters also, the investment firm was seen buying Navistar's shares. The following chart shows its holding history in the company.

      


  • Hotchkis & Wiley First Quarter 2015 Large Cap Diversified Value Commentary

    Following six years of positive returns, the S&P 500 Index opened 2015 with a modest +1.0% return in the first quarter. The unprecedented corporate cost-cutting measures and general economic recovery following the financial crisis has fueled impressive earnings growth. Over the last six years, the S&P 500 is up +194% cumulatively. While such a rampant appreciation of market prices would normally give us pause, equity valuations are scarcely higher than historical averages due to these robust earnings.


    After six years of zero interest rate policy, investors are acutely focused on the Federal Reserve’s plan to taper its lax monetary policy. Equity investors are not fully insulated from such actions, however, we believe the effect on equities should be more subdued than many investors expect. Firstly, increasing interest rates are often correlated with positive economic developments, which is good for corporate cash flows. Secondly, long bond rates are a component of the cost of capital used to discount corporate cash flows. Fed tapering should impact short term interest rates disproportionately to long term rates, which already reflect expectations of a less intrusive Fed. Finally, the premium equity investors require above treasuries is considerably higher than historical averages. If interest rates rise, we may see a reversion of the equity premium back to normal levels, resulting in equity prices remaining stable despite higher interest rates.

      


  • 5-year lows: Extreme Networks Inc, Dynamic Materials Corp, Electro Scientific Industries, and LMI Aerospace Inc.

    According to GuruFocus list of 5-year lows, these Guru stocks have reached their 5-year lows: Extreme Networks Inc, Dynamic Materials Corp, Electro Scientific Industries, and LMI Aerospace Inc.


    Extreme Networks Inc (NASDAQ:EXTR) reached $2.42

      


  • Hotchkis & Wiley Commentary - Active vs. Passive Equity Investing

    The debate over active versus passive investing has spurred numerous studies, which in turn, have produced many thoughtprovoking theories on the subject. Despite countless data, sophisticated statistical techniques, and brilliant researchers tackling the issue, there are few palpable and universal conclusions one can draw from these studies. This is somewhat predictable given that these studies use unique data sources, evaluate different periods, and employ diverse statistical methods—not to mention are subject to human biases. As such, we are not brash enough to claim that we could conduct a better study as we would be subject to these same shortcomings, including our own biases. Rather than recreate analysis that has been recreated many times over already, we are going to focus on the few common findings from these studies that appear to be largely undisputed. We will first describe these conclusions, illustrate why they exist, and then explain why we believe markets are inefficient and why active management can add value net of fees.


    I. The Three Findings

      


  • Hotchkis & Wiley’s Large Cap Fundamental Value Q4 2014 Commentary

    Market Commentary


    Period ended December 31, 2014

      


  • Top 4 Undervalued stocks in Hotchkis & Wiley’s Portfolio

    Started in Los Angeles in 1980, Hotchkis and Wiley has focused exclusively on finding and owning undervalued companies that have a significant potential for appreciation.


    Web Page: http://www.hwcm.com/

      


  • Hotchkis & Wiley Adds to Third-Largest Stake

    Hotchkis & Wiley, a Los Angeles-based investment firm, has been successfully managing portfolios for more than 30 years. In 2013, its investment advice yielded a 39.95% return for its clients, more than double its performance in 2012.


    Value investors, Hotchkis & Wiley emphasizes a company's tangible assets, sustainable cash flow and potential for improving business performance.

      


  • Hotchkis & Wiley Value Opportunities Fund Q4 2014 Commentary

    MARKET COMMENTARY


    The S&P 500 Index returned +13.7% in 2014, its sixth consecutive positive year—the longest such streak since the mid to late 1990s. Unlike the extended bull market of the 1990s, which was driven by irrational growth expectations and swelling price-to-earnings multiples, the stock market’s rise over the past six years has been powered by broad corporate earnings growth. Moreover, household debt has been reduced by about 25% and corporate debt has been more than halved—an unprecedented deleveraging cycle that has de-risked the market considerably. Stock prices are up, earnings are higher, balance sheets are stronger, interest rates are lower, and inflation remains subdued. The U.S. economy has demonstrated clear progress though growth in Europe, Asia, and emerging markets has somewhat disappointed. Taking into account the confluence of these factors, we find the broad equity market reasonably valued for the risks at hand; it is neither especially compelling nor overextended. We have identified valuation opportunities selectively, as demonstrated by the portfolio’s discount to the market, but we remain highly reluctant to assume undue risk. The portfolio trades at 9.6x our estimate of normal/sustainable earnings compared to the S&P 500 Index trading at 16.6x normal earnings and 17.2x next year’s consensus earnings. We remain keenly focused not only on valuation support as a primary risk control, but also on strong balance sheets, sustainable cash flows, and prudent use of capital.

      


  • Hotchkis & Wiley Large Cap Fundamental Value Q3 Commentary

    The S&P 500 Index returned a modest +1.1% over the three months ended September 30th, the seventh consecutive positive quarter for the index. In August, the index closed above 2,000 for the first time, peaking at 2,011 in mid-September before a slight pullback. Unlike prior market peaks (e.g. 1999, 2007), elevated stock prices today are supported by both strong corporate earnings and an improving economic environment. At 16.5x forward earnings, the S&P 500 Index trades at a valuation slightly higher than the 25-year median of 16.0x. Meanwhile, the 10-year Treasury yields 2.5% versus the 25-year median of 4.8%; considering the low interest rate environment equity valuations appear reasonable. The U.S. housing market continues to recover, with new home sales considerably higher than consensus expectations and home prices on the rise. Higher home values create a wealth effect that boosts confidence and drives consumer spending, which accelerated during the quarter—consumer spending comprises two-thirds of U.S. GDP, so the housing market’s economic impact is material. Meanwhile, employment has steadily improved and inflation has remained in check. The U.S. dollar strengthened as a result of the productive economy, appreciating by more than 6% relative to a basket of major developed market currencies1. While the tense geopolitical landscape poses risks to the equity market, the earnings power of our portfolio holdings provides considerable valuation support. The portfolio trades at 10.8x our estimate of normal/sustainable earnings, a significant discount to the market average2.


    Concerns about decelerating growth in emerging markets triggered a precipitous decline in commodities over the quarter. Crude oil, natural gas, precious metals, most industrial metals, and most agricultural commodities declined considerably—some by more than 10%. Consequently, sectors exposed to commodity price changes lagged the overall market. Energy, utilities, and industrials were the only three S&P 500 sectors that declined during the quarter. Healthcare, technology, and telecommunications were the top-performing sectors, rising +3% to +5%. Value underperformed growth for the quarter, largely because energy is a larger weight and technology a smaller weight in value indices as compared with growth indices. Small cap stocks lagged large cap stocks by a wide margin in the quarter3. As of one year ago (9/30/13), small cap equities had outperformed large cap equities by more than 50 percentage points since the market bottom in March of 2009. This resulted in a large valuation premium for small cap stocks relative to large cap stocks compared to historical averages—this premium has eroded over the past twelve months toward levels more typically observed because small cap stocks have since underperformed.

      


  • News Corporation's Efforts to Change the Traditional Model

    In this article, let's take a look at News Corporation (NASDAQ:NWSA), a $9.1 billion market cap company, which is a diversified media company that has interests in newspapers, books and sports cable programming, and operates online properties, primarily in the United States, Australia and the United Kingdom.


    Business model

      


  • Hotchkis & Wiley Webinar Highlights - High Yield Outlook with Mark Hudoff

    On our October 22nd webinar, Mark Hudoff, portfolio manager of the Hotchkis & Wiley High Yield strategy, discussed the changing high yield environment and its impact on investors. The following recap highlights his views.


    Top Takeaways

      


  • Hotchkis & Wiley’s Large Cap Value Fund Q3 2014 Manager Commentary

    MARKET COMMENTARY


    The S&P 500 Index returned a modest +1.13% over the three months ended September 30th, the seventh consecutive positive quarter for the index. In August, the index closed above 2,000 for the first time, peaking at 2,011 in mid-September before a slight pullback. Unlike prior market peaks (e.g. 1999, 2007), elevated stock prices today are supported by both strong corporate earnings and an improving economic environment. At 16.5x forward earnings, the S&P 500 Index trades at a valuation slightly higher than the 25-year median of 16.0x. Meanwhile, the 10-year Treasury yields 2.5% versus the 25-year median of 4.8%; considering the low interest rate environment equity valuations appear reasonable. The U.S. housing market continued to recover, with new home sales considerably higher than consensus expectations and home prices on the rise. Higher home values create a wealth effect that boosts confidence and drives consumer spending, which accelerated during the quarter—consumer spending comprises two-thirds of U.S. gross domestic product, so the housing market’s economic impact is material. Meanwhile, employment has steadily improved and inflation has remained in check. The U.S. dollar strengthened as a result of the productive economy, appreciating by more than 6% relative to a basket of major developed market currencies1. While the tense geopolitical landscape poses risks to the equity market, we believe the earnings power of our portfolio holdings provides considerable valuation support. The portfolio trades at 10.8x our estimate of normal/sustainable earnings, a significant discount to the market average2.

      


  • Johnson Controls Trading at a Premium Compared to Peers

    In this article, let's take a look at Johnson Controls Inc. (NYSE:JCI), a leading manufacturer of automotive interior systems, automotive batteries and automated building control systems.


    Three in One

      


  • The Evolving High Yield Market - Hotchkis & Wiley Q3 Newsletter

    Given the recent volatility in high yield markets, we thought it would be useful to examine how the market has evolved since the 2008 financial crisis. Specifically, we will explore three major developments in the high yield market since the global financial crisis: 1) the role of Exchanged Traded Funds (ETFs), 2) trading/liquidity influences, and 3) the changing high yield investor base.


    I. The Role Of High Yield Exchanged Traded Funds

      


  • It Is the Right Moment to Bet On Yum

    In this article, let's take a look at Yum! Brands, Inc. (NYSE:YUM), a $30.98 billion market cap company, which is a global restaurant brand, with more than 40,000 units in more than 100 countries, including the KFC, Pizza Hut and Taco Bell chains.


    Core Brands

      


  • Hotchkis & Wiley Q2 Manager Commentary

    The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Investment return and principal value of the fund will fluctuate, and shares may be worth more or less than their original cost when redeemed. Click quarter-end or month-end to obtain the most recent fund performance.


    MARKET COMMENTARY
      



  • Hotchkis & Wiley Large Cap Value Fund June 2014 Manager Q&A

    An Interview with Sheldon Lieberman, Portfolio Manager


    Recently, Sheldon Lieberman, Portfolio Manager and 20-year member of the firm, shared his thoughts on the current equity markets and the Hotchkis & Wiley Large Cap Value Fund.

      


  • Hotchkis & Wiley Comments on Vodafone

    Stock selection in telecommunications also detracted from performance, as our lone position (Vodafone 3.0%*) lagged the market. Vodafone (VOD) reported modest results and a disappointing outlook due to elevated capital expenditures. Vodafone , Bank of America (BAC) (3.3%)*, and Target (TGT) (2.7%)* were the largest individual performance detractors.


    From Hotchkis & Wiley's Large Cap Value Fund Second Quarter 2014 Commentary.

      


  • Hotchkis & Wiley Comments on Oracle

    Stock selection in technology was the largest performance detractor for the quarter. Oracle (ORCL) (2.7%)* lagged after reporting results slightly below consensus estimates, though our investment thesis remains fully intact.


    From Hotchkis & Wiley's Large Cap Value Fund Second Quarter 2014 Commentary.

      


  • Hotchkis & Wiley Large Cap Value Fund Second Quarter 2014 Commentary

    Market Commentary


    Despite several bouts of geopolitical unrest, the S&P 500 Index gained +5.23% during the second quarter and has returned +7.14% since the beginning of the year. Equity investors appeared to largely dismiss both the Russia/Ukraine and Iraq/ISIS conflicts as economically inconsequential. In fact, the VIX Index, often used as a proxy for overall investor apprehension, reached a seven-year low in mid-June. Economic activity over the past quarter was positive and seems to have invigorated investor confidence. The unemployment rate fell to a post-financial crisis low, and now stands at 6.1% compared to 10.0% in late 2009. The housing market demonstrated signs of improvement, with new home sales reaching six-year highs and pending sales of existing homes reaching four-year highs. Corporate performance continued to be robust with more than 75% of S&P 500 Index companies exceeding consensus earnings estimates this quarter. In response to these developments, the Federal Open Market Committee’s official statement in mid-June struck a more optimistic tone than its late-April statement, which helped boost equity prices. With the VIX Index reaching a multi-year low, however, we would not be surprised to encounter stints of increased volatility in the near/medium term.

      


  • High-Yield Covenant Trends - Hotchkis & Wiley Second Quarter Newsletter

    Avoiding the Losers At Hotchkis & Wiley, we believe that averting mistakes is the single most important quality in successful high yield investing. We are not immune from making mistakes, but avoiding high defaults and low recovery rates is a key tenet of our strategy. This “avoid the losers” mentality is achieved by focusing on several factors. First, we have a preference for securities that are senior in the capital structure, i.e. we prefer senior or senior secured to subordinated bonds. Second, we emphasize asset coverage, where the value of the assets provides morethan- sufficient support. Covenant packages represent a third layer of defense that we believe is often overlooked.


    A tight covenant package guards against management behaviors that might be favored by equity shareholders or other stakeholders, but could put bondholders at risk. The level of conservatism exhibited by covenant packages varies with the credit cycle. When spreads rise and investors become more risk-averse, covenant packages tend to become more restrictive. Conversely, when spreads narrow and investors become less risk-averse, covenant packages tend to become lax. Today’s spread environment resembles the latter, so we thought analyzing covenant trends would be a productive exercise. This newsletter will attempt to identify broad trends in covenant packages by dividing covenants into three categories: 1) redemption flexibility; 2) negative covenants; and 3) change of control provisions.

      


  • Hotchkis & Wiley Large Cap Value Fund First Quarter 2014 Market Commentary

    Market Commentary


    The S&P 500 Index finished the first quarter of 2014 with a +1.81% return but experienced some turbulence along the way. In early February, the S&P was down nearly 6% for the year, fueled by developments in several of the largest emerging market economies. Chinese manufacturing slowed and the country’s banking regulator signaled increased credit scrutiny. Also, Argentina devalued its peso triggering a selloff in several other emerging market currencies, revealing that contagion is alive and well. This rattled US equity investors, sending the VIX Index from 14 at the beginning of the year to 21 in early February.

      


  • Weekly CEO Buys Highlight: LGCY, OPK, FELP, FULL, ENH

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below:



    Legacy Reserves LP (NASDAQ:LGCY): Chairman, President and CEO Cary D Brown Bought 200,000 Shares

      


  • A Look at a Global Multi Industrial Company

    In this article, let's take a look at Johnson Controls Inc. (NYSE:JCI), a leading manufacturer of automotive interior systems, automotive batteries and automated building control systems.


    Joint Venture and Partnership

      


  • Hotchkis & Wiley First Quarter Newsletter - 'Frequently Asked Questions'

    The opportunity to visit with clients and prospects with exceptionally diverse backgrounds and personalities is one of the most interesting facets of our job. No two meetings are the same, and the thought-provoking discussions ensure that our profession never goes dull. Question topics range from broad market views to credit-specific details, with everything in between. In this newsletter, we address the questions that seem to be asked most frequently and/or we believe are particularly relevant in the current market environment.


    In your opinion, is the current high yield market compelling? Relative to history, high yield valuations are less attractive than average but high yield fundamentals are more attractive than average (technicals are average). Also, the forward yield curve provides some reason for caution. Our collective view on the high yield market, therefore, is positive but tempered. Valuations

      


  • Hotchkis & Wiley Comments on IBM

    We took a new position in IBM (NYSE:IBM) (1.5%)*, which we believe is a well-positioned, diversified technology company with a strong balance sheet, prudent capital allocation, and an attractive valuation.


    From Hotchkis & Wiley's fourth quarter 2013 manager commentary.

      


  • Hotchkis & Wiley Large Cap Value Fund Fourth Quarter Manager Commentary

    The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Investment return and principal value of the fund will fluctuate, and shares may be worth more or less than their original cost when redeemed. Click quarter-end or month-end to obtain the most recent fund performance.


    Manager Commentary Period ended December 31, 2013

      


  • Weekly 3-Year Low Highlights: DO, BIG, PGEM, CCG

    According to GuruFocus list of 3-year lows; Diamond Offshore Drilling Inc, Big Lots Inc, Ply Gem Holdings Inc, and Campus Crest Communities have all reached their 3-year lows.


    Diamond Offshore Drilling, Inc. (NYSE:DO) Reached the 3-year Low of $51.04

      


  • Fallen Angels - A Neglected Segment of the High Yield Market: Hotchkis & Wiley Q4

    The high yield market can be segmented in a multitude of ways — credit rating, sector, and seniority to name a few. The market can also be split into original high yield issues and fallen angel . Original high yield issues are credits that were high yield rated when issued (BB+ or below), and fallen angels are credits that were investment grade rated when issued (BBB - or above) , but have since been downgraded. The two market segments often exhibit considerably dif ferent characteristics and behaviors. We believe fallen angels represent an often-overlooked segment of the market that habitually offers compel ling risk/reward opportunities, particularly for bottom - up credit pickers.  


  • Weekly 3-Year Low Highlight: EXC, RVBD, IRWD, SHOS

    According to GuruFocus list of 3-year lows, Exelon Corp, Riverbed Technology Inc, Ironwood Pharmaceuticals, and SEARS HOMETOWN have all recently reached their three year lows.

    Exelon Corp (NYSE:EXC) Reached the 3-year Low of $27.96  


  • High Yield and the Business Cycle - Hotchkis & Wiley Commentary

    While history may not repeat itself verbatim, visceral human behavior often produces distinct cycles. We may learn from past mistakes, but collectively we exhibit the same instinctual traits as preceding generations. Many have attributed various social, cultural, and even military cycles to perpetual behavioral tendencies that society exhibits through time. Nowhere is this phenomenon more apparent than in economics, where cycles reign supreme. This newsletter's objective is to evaluate the business cycle and its influence on the high yield market. We will explore various economic, fundamental, and policy-related metrics to assess where we stand in the business cycle currently, and the underlying implications for high yield investors.  


  • Top Guru-Held European Companies as of the Second Quarter

    By using the Aggregated Portfolio Screener, we filtered through the 51 highest rated gurus to find out what international companies they liked the best. The following companies are each held by 10 gurus as of the second quarter.

    Sanofi (SNY)(XPAR:SNY)
      


  • Hotchkis & Wiley Mid-Cap Value Strategy - Q&A with Stan Majcher, Portfolio Manager

    Mid caps are an attractive but often overlooked way to participate in the equity market. Portfolio Manager Stan Majcher shares his insight on the mid cap market, the management of the Fund, and illustrates why mid caps make sense for the long-term investor.

    Q1: It is often reported that Wall Street research on mid cap companies is limited. What implications does this have for managers in this space?  


  • Hotchkis & Wiley Diversified Value Fund Commentary Q2 2013

    Market Commentary During the second quarter, 10-year US Treasury bond yields bottomed at 1.6% before ballooning to 2.6% once the Fed suggested it might taper its proactive bond purchasing program. The rapid interest rate rise has focused attention on "low risk" bond portfolios and reminded investors that it is possible to lose money in high grade fixed income. Meanwhile, US equity markets continued to reward investors as the S&P 500 Index ended the quarter with a +2.91% return and the Russell 1000 Value Index rose +3.20%. While an extended rise in equity prices would normally portend a cautious outlook, corporate earnings have improved such that valuation multiples remain below historical averages—particularly considering widespread balance sheet deleveraging and improved capital allocation policies. In addition to reasonable valuations, the US economy appears to be on the mend. A recovery in the US housing sector has improved consumer balance sheets as well as confidence, which should further stimulate economic activity. Moreover, employment and manufacturing have continued to exhibit signs of progress. Unfortunately, the outlook for equities is not entirely upbeat—Europe has struggled, emerging markets (China) have slowed, and the US political landscape remains divided.

    Taking a closer look at the US equity market during the quarter, performance dispersion by sector was rather significant as the financials, consumer discretionary, and healthcare sectors posted returns in the mid-to-high single digits. Commodity-tied sectors lagged as prices for Brent crude oil (-6%), industrial metals (-10%), and natural gas (-11%) declined. Consequently, energy, materials, and utilities had negative returns during the quarter.  


  • Hotchkis & Wiley Q2 Newsletter: The State of the High Yield Market Fundamentals, Technicals, & Valuation

    During our regular meetings with investors, the question we are asked most often is a rather simple one: "What is your outlook for the high yield market?" The question's form can take one of several iterations (e.g. Are you bullish or bearish and why? What past environment best resembles the current environment?), but each is straightforward and the underlying objective for each is indistinguishable. Unfortunately, a simple question is not always a prelude to a simple answer.  


  • Hotchkis & Wiley Webinar Highlights - A Review of the Current High-Yield Environment

    On our April 17th webinar, Mark Hudoff, portfolio manager of the Hotchkis & Wiley High Yield strategy shared his thoughts on the current opportunities and challenges in the high yield marketplace.

    The following recap highlights his views.  


  • Hotchkis & Wiley Q1 Newsletter - The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans

    Introduction: It has been over four years since the Federal Open Market Committee ("FOMC") voted to lower the overnight rate at which banks lend to each other ("fed funds rate") to a range of 0.00% - 0.25%. The FOMC has maintained this target ever since and Treasury rates of all maturities have persisted near record lows as a consequence. The prevailing environment has prompted many investors, Hotchkis & Wiley included, to question how long it will be before interest rates rise once again.

    Based on discussions with economists, strategists, and other industry experts, the consensus view appears to be an inevitable rise in interest rates but with highly uncertain timing. In its most recent meeting minutes, the FOMC stated that it will keep the target fed funds rate at the current level until employment improves, inflation remains in check, and "other" market conditions comply. Such an opaque framework is unsettling. The timing and direction of interest rate movements, while nearly impossible to forecast precisely, has material implications for investment returns. Interest rate changes can affect equity markets but influence fixed income markets disproportionately— particularly when the change is unexpected. We recognize that there is a risk of rising rates, but given the headwinds facing the economy, we also understand that rates could persist at low levels for an extended period. Because our outlook for interest rates is rather ambiguous, we will contrast two credit instruments in a variety of interest rate environments: high yield bonds and bank loans. Our goal is to ascertain whether one, the other, or both are appealing investments in today's environment.  


  • The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans - Hotchkis & Wiley Q1 Newsletter

    Introduction: It has been over four years since the Federal Open Market Committee (“FOMC”) voted to lower the overnight rate at which banks lend to each other (“fed funds rate”) to a range of 0.00% - 0.25%. The FOMC has maintained this target ever since and Treasury rates of all maturities have persisted near record lows as a consequence. The prevailing environment has prompted many investors, Hotchkis & Wiley included, to question how long it will be before interest rates rise once again.

    Based on discussions with economists, strategists, and other industry experts, the consensus view appears to be an inevitable rise in interest rates but with highly uncertain timing. In its most recent meeting minutes, the FOMC stated that it will keep the target fed funds rate at the current level until employment improves, inflation remains in check, and “other” market conditions comply. Such an opaque framework is unsettling. The timing and direction of interest rate movements, while nearly impossible to forecast precisely, has material implications for investment returns. Interest rate changes can affect equity markets but influence fixed income markets disproportionately— particularly when the change is unexpected. We recognize that there is a risk of rising rates, but given the headwinds facing the economy, we also understand that rates could persist at low levels for an extended period. Because our outlook for interest rates is rather ambiguous, we will contrast two credit instruments in a variety of interest rate environments: high yield bonds and bank loans. Our goal is to ascertain whether one, the other, or both are appealing investments in today’s environment.  


  • Weekly CEO Buys Highlight: UTHR, DNR, RICK, PERF

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below:

      


  • Hotchkis & Wiley Large Cap Diversified Value Fund Q3 Commentary

    MARKET COMMENTARY: Despite macroeconomic and geopolitical uncertainties, U.S. equities climbed in the third quarter with the S&P 500 Index returning +6.4% and the Russell 1000 Value Index returning +6.5%. Investors appeared to take notice of Corporate America's improving health. Of the S&P 500 constituents reporting earnings during the quarter, more than 70% beat Wall Street estimates and one out of four beat estimates by more than ten percent. Strong cash flows, which had been predominantly retained in an effort to improve balance sheets, are now being returned to shareholders with increased regularity via dividends and share repurchases.

    European economic woes and the subsequent policy responses continue to be debated in full public view. While the drama roiled U.S. equity markets in the second quarter, signs of progress transpired in the third quarter. Indications of Eurozone cohesion, like the European Central Bank's unlimited bond purchasing program announced in September, have been well-received by investors. European sovereign debt yields fell and equity markets rose following the announcement. In the U.S., the elephant in the room has been the so-called "fiscal cliff"—the combination of tax cut expirations and sequestration (i.e. forced spending cuts) set to take place in 2013. If the fiscal situation remains status quo, the fallout would have a negative effect on GDP growth next year and could pose a recession threat. Consensus expectation, however, is for some form of transitory relief which would buy the newly-elected government additional time to configure a longer-term resolution. This appears to be the expectation regardless of the November election outcomes. Meanwhile, housing and employment have continued to show subtle signs of improvement.  


  • Hotchkis & Wiley - The Advantages of Limiting Assets

    Introduction As our lives become longer, it seems, our memories become shorter. Behavioral psychologists have studied this paradox ad nauseam in an attempt to explain why people make the same mistakes over and over again. We are all guilty of such behavior. Have you ever said to yourself, “I sure am glad I stayed up late again last night to watch that rerun I’ve already seen five times”? How about, “Boy, I always feel so much better when I go for that third donut”? Neither have we, but that doesn’t mean we won’t repeat these behaviors at some point in the future. The reason defective behaviors are repeated with such regularity is debatable—shortsightedness, delusion, greed—but we’ll leave that for the psychologists to sort out. Instead, we simply acknowledge that most of us are predisposed to making repeated mistakes despite our better judgment.

    The investment industry has certainly demonstrated a tendency to repeat the same mistakes. This newsletter will explore one of the most commonly repeated mistakes, particularly in high yield—asset bloat. Allowing assets under management to swell excessively is almost universally acknowledged as detrimental to investors, yet it has become such commonplace that it is often just accepted as standard practice. This newsletter will explore the advantages of limiting high yield assets to responsible levels, or equivalently, the perils of allowing assets to grow uninhibited.  


  • Guru Stocks at 52-Week Low: VALE, MCD, FB, EXC, CHT

    According to GuruFocus list of 52-week lows, these Guru stocks have reached their 52-week lows.

    Vale SA (NYSE:VALE) Reached the 52-Week Low of $17.81  


  • Weekly CEO Buys Highlight: SYMC, TDY, PNK, FNFG, OCR

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below:

    Symantec Corporation (NASDAQ:SYMC): Chairman, President & CEO Stephen M Bennett Bought 89,300 Shares  


  • Weekly CEO Buys Highlight: UTHR, PMC, ABR, AIR, SCHS

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below: Utd Therapeutic (NASDAQ:UTHR): CEO Martine A Rothblatt Bought 20,858 Shares

    CEO of Utd Therapeutic (NASDAQ:UTHR) Martine A Rothblatt bought 20,858 shares during the past week at an average price of $47.94. UTD THERAPEUTIC is a biotechnology company focused on combating cardiovascular, inflammatory, and infectious diseases with unique therapeutic products. Utd Therapeutic has a market cap of $2.57 billion; its shares were traded at around $47.94 with a P/E ratio of 10.8 and P/S ratio of 3.5.  


  • Hotchkis & Wiley's First Quarter Commentary: Optimistic Outlook Due to Corporate Fundamentals

    Fundamental improvements across the corporate sector are making Hotchkis & Wiley's managers optimistic for the near future, after a quarter in which financials, technology and consumer discretionary stocks contributed the most to their portfolios:

    MARKET COMMENTARY: The U.S. equity market delivered its best opening quarter since 1998, as the S&P 500 Index posted a 12.6% return. The market’s advance was prompted by continued signs of a strengthening U.S. economy and the absence of new negative global macroeconomic developments. Consequently, the VIX Index (i.e. the “Fear Index”) declined from well above its historical average at the beginning of the quarter, to well below its historical average at the end of the quarter. As short-term fears subsided and became a less prominent driver of investor behavior, we observed a shift in the market’s focus toward underlying fundamentals and valuations of individual stocks. This type of shift tends to reduce the correlation of returns across stocks and forms an environment conducive for bottom-up, fundamental value investors.  


  • Guru Stocks Raising Dividends: PNY, MLR, MAIN, GD, SPLS

    This is the group of companies who raised their dividend during the week: Piedmont Nat Ga, Miller Inds Inc, Main Street Cap, Genl Dynamics, and Staples Inc.

    Piedmont Nat Ga (NYSE:PNY)  


  • Weekly CEO Buys Highlight: AHT, SPN, WINA, PMC, ULBI

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below: Ashford Hosptly (NYSE:AHT): CEO Montgomery J Bennett Bought 57,472 Shares

    CEO of Ashford Hosptly (NYSE:AHT) Montgomery J Bennett bought 57,472 shares during the past week at an average price of $8.7. Ashford Hospitality Trust Inc is a self advised Maryland corporation and real estate investment trust organized to pursue opportunities in the lodging industry. Ashford Hosptly has a market cap of $590.5 million; its shares were traded at around $8.7 with a P/E ratio of 4.6 and P/S ratio of 0.7. The dividend yield of Ashford Hosptly stocks is 4.6%. Ashford Hosptly had an annual average earnings growth of 12.6% over the past 10 years.  


  • Stocks Bought by Other Hedge Funds from Hotchkis and Wiley

    Hotchkis and Wiley is an investment manager set up in 1980 that has a disciplined investment approach. The firm finds companies whose stock is below market price but with potential for appreciation, and companies with tangible assets and sustainable cash flow too.

    Hotchkis and Wiley applies several value equity approaches, the Large Cap Diversified Value Strategy and the Large Cap Fundamental Value Strategy, which are similar regarding their goals but differ in their market-cap ranges, number of portfolio holdings and income requirements. Their goal is to invest in large-cap companies with sustainable cash flows and strong balance sheets undervalued stock vis-à-vis their tangible assets and long-term earnings power. The construction of the portfolio under these two approaches is based on a severe and independent research and bottom-up security selection. While the Large Cap Diversified Value Strategy was developed 10 years ago, the Large Cap Fundamental Value Strategy has been put into practice for almost 30 years.  


  • Hotchkis & Wiley - Top 10 Reasons to Invest in High Yield in 2012

    Introduction: From the Eurozone’s sovereign debt crisis to the United States’ uncooperative Congress, raging geopolitical uncertainty continues to give investors pause. In addition to precipitating undue stress, uncertainty can also precipitate opportunity. The combination of high yields and low defaults is quite uncommon, and in our opinion, presents an unusual opportunity for the astute investor.

    Fundamentals in the high yield market are strong, valuations are compelling, and technicals reasonable. This is a tasty recipe for high yield investors and we are optimistic about the market’s prospects—this newsletter will highlight our top 10 reasons to invest in high yield in 2012.  


  • Stocks That Hotchkis & Wiley Keeps Buying

    Hotchkis and Wiley focuses exclusively on finding and owning undervalued companies that have a significant potential for appreciation.

    The main features of the company are the following:  


  • Hotchkis & Wiley Mid-Cap Value Q3 Commentary

    MARKET COMMENTARY
    Geopolitical concerns dominated financial headlines and triggered extreme volatility during the third quarter. Macroeconomic uncertainty in the US, Europe, and emerging markets combined with skittish market sentiment translated into double-digit equity market losses. These apprehensions overshadowed individual company fundamentals, which have continued to become increasingly compelling.  


  • Hotchkis & Wiley Q3 Commentary: Large Cap Fundamental Value

    MARKET COMMENTARY
    Geopolitical concerns dominated financial headlines and triggered extreme volatility during the third quarter. Macroeconomic uncertainty in the US, Europe, and emerging markets combined with skittish market sentiment translated into double-digit equity market losses. These apprehensions overshadowed individual company fundamentals, which have continued to become increasingly compelling.  


  • Hotchkis & Wiley: Large Cap Diversified Value Q3 Commentary

    Geopolitical concerns dominated financial headlines and triggered extreme volatility during the third quarter. Macroeconomic uncertainty in the US, Europe, and emerging markets combined with skittish market sentiment translated into double-digit equity market losses. These apprehensions overshadowed individual company fundamentals, which have continued to become increasingly compelling. In the US, the debt ceiling issue prompted a contentious debate entwined with political gamesmanship, which resulted in a loss of confidence in policymakers’ ability to reach effective resolution. Meanwhile in Europe, the European Commission, European Central Bank, and International Monetary Fund (coined the “Troika”) have been working with Greece to reach a compromise addressing its deteriorating fiscal situation. Investors appear most concerned about the ramifications of a disorderly Greek default that would result in Greece departing from the euro. This could destabilize existing contractual relationships within the Eurozone and test the euro’s long term sustainability. In addition, this could result in a mass exodus of bank deposits from peripheral Europe to healthier economies (e.g. Germany, France). This “run on banks” coupled with a Greek default would likely necessitate bank bailouts throughout Europe. An orderly default in which Greece remains part of the Eurozone, should allow these bailouts to occur in a more controlled fashion. The strongest Eurozone countries foot the bill in any of these scenarios.

    Equity and fixed income market prices reflect mounting pessimism that an orderly compromise will transpire. The price-to-forward earnings multiple of the S&P 500 is lower today than it was at the end of the first quarter in 2009 during the depths of the financial crisis; high yield bond spreads have also ballooned to mid/late 2009 levels. Predicting political outcomes is difficult, but a result that does not involve a disorderly default should provide a tailwind for depressed equity and high yield bond prices. Corporate America has laid a solid foundation from which to build—it has generated robust earnings, strong free cash flows, and put hoards of cash on its balance sheets.  


  • CFO of Merck & Co. Peter Kellogg Buys 15,800 Shares

    Executive Vice President & CFO of Merck & Co. Inc. (NYSE:MRK) Peter N. Kellogg bought 15,800 shares on 08/12/2011 at an average price of $31.8. The total transaction amount is $502,440. Merck & Co., Inc. is a global research-driven pharmaceutical company dedicated to putting patients first. Merck & Co. Inc. has a market cap of $96.73 billion; its shares were traded at around $31.2 with a P/E ratio of 8.71 and P/S ratio of 2.1. The dividend yield of Merck & Co. Inc. stocks is 4.85%.

    HOTCHKIS & WILEY owns 6,140,469 shares as of 03/31/2011, an increase of 896.03% from the previous quarter. This position accounts for 1.13% of the $17.91 billion portfolio of Hotchkis & Wliey Capital Management LLC. Joel Greenblatt owns 89,085 shares as of 06/30/2011, an increase of 376.87% from the previous quarter. This position accounts for 0.4395% of the $715 million portfolio of Gotham Capital. Charles Mark Hillman owns 37,444 shares as of 03/31/2011, a decrease of 29.34% of from the previous quarter. This position accounts for 0.3% of the $415 million portfolio of Hillman Capital Management. George Soros sold out his holdings in the quarter that ended on 06/30/2011.  


  • Hotchkis & Wiley's Strategies and Top Picks: JPM, HPQ, RDS.B, COP, WFC

    Hotchkis and Wiley Capital is an investment management firm located in Los Angeles, Calif. The firm is led by George H. Davis Jr., a career investment professional who started his career with Hotchkis and Wiley in 1988. Davis is a graduate of Stanford University, receiving both his BA in Economics and his MBA from the institution. In addition, Hotchkis and Wiley boasts of the utilization of 13 CFA charter holders on their primary investment team, all with a rich history of experience and contacts in the industry.

    The stated vision of the firm is to “place clients’ interests above all else by promoting a disciplined investment approach and superior service.” In order to execute this objective, the firm utilizes four primary principles: a disciplined philosophy, commitment to independent research, the expertise of an experienced team, and an uncompromisable independence that, all in conjunction, seeks the best results for their client first and foremost. These four principles serve as the foundation to the institutional strategies offered at Hotchkis and Wiley.  


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