HOTCHKIS & WILEY

HOTCHKIS & WILEY

Last Update: 2014-07-10

Number of Stocks: 192
Number of New Stocks: 21

Total Value: $26,954 Mil
Q/Q Turnover: 18%

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

HOTCHKIS & WILEY Watch

  • 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.

      


  • 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

      


  • 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.  


  • 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.  


  • 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.  


  • 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.  


  • 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.  


  • 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:  


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