HOTCHKIS & WILEY

HOTCHKIS & WILEY

Last Update: 2015-01-09

Number of Stocks: 189
Number of New Stocks: 13

Total Value: $27,596 Mil
Q/Q Turnover: 10%

Countries: USA CAN
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HOTCHKIS & WILEY Watch

  • 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 (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. (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. (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 (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. (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 (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. (DO) Reached the 3-year Low of $51.04

      


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