Sterling Capital Equity Income Fund Ranks in Top 1% of Lipper Peers
Sterling Capital Management LLC (Sterling Capital) announced today that its Equity Income mutual fund (the Fund) ranked in the top 1% among 467 of its Lipper peers based on total return for the three-year period ended December 31, 2018, for its institutional-class I shares (BEGIX), providing an 11.59% return per year versus a category average of 6.88% per year.View PDF
The Lead - "Value Extremes"
- Value investors have been waiting as long as our beloved Virginia Cavaliers to get back in the spotlight.
- Growth stocks outperformance since 2007 has been historic, but a longer term view shows value stocks should not be counted out.
- In our Equity Income strategy, we’ve been attracted to compelling valuations with attractive and rapidly growing dividends.
The Lead - "Purpose and Performance"
- As socially responsible investing, or ESG (Environmental, Social, and Corporate Governance) continues to gain acceptance, the search for fully defining the approach and any source of outperformance continues.
- This month, we find that another research tool, Glassdoor, has been identified by Bank of America’s quantitative group as not only producing outperformance but also fits into their evolving ESG framework.
- We have used Glassdoor reviews for years as part of our research process with the view that motivated employees should perform at a higher level. Bank of America’s work has now quantified the positive impact this tool provides, as seen in the chart above, to help generate both purpose and performance for client accounts.
The Lead - "Setting the Angel Free"
- We see the passive index as the unhewn slab of marble, and we chip away and eliminate portions in our quest to create a masterpiece.
- Why not employ an active investment process that focuses on companies that earn a profit, have management aligned with shareholders, have the ability to grow a dividend, are taking market share and buy them at compelling valuations in a stock market where returns are not normally distributed?
- Why own segments of an index that lack these characteristics when they can chisel away and own stock characteristics that have a history of outperforming the market?
Associate Spotlight - Colin Ducharme
Executive Director and Portfolio Manager Colin Ducharme is highlighted in the January 2019 Sterling Associate Spotlight. Colin shares insights about himself, tips for working in the industry, and his self-proclaimed 'geekiness!'View PDF
The Lead - "What Worked in 2018? Quality?"
- Asset allocators and advisors perform an important job selecting investment managers who adhere to a specific style, in part because they can have an expectation of how their portfolio should perform in different environments.
- Quality as a characteristic worked across geographies in the challenging month of December and in 2018.
- Owning quality companies is one of the four pillars of the Equities Opportunities group and integral to the selection process for new positions.
Associate Spotlight - Lynne Cannon
Sterling's Associate Spotlight for December 2018 features Lynne Cannon, Director & Compliance Officer. Lynne details why she loves working at Sterling, her love for animals and her favorite place she has traveled. Read more about Lynne in her Q&A.View PDF
The Lead - "ESG in the Secret Sauce"
The preference for ESG (Environmental, Social, and Corporate Governance) investing continues to be reinforced through recent studies like the one above.
Forbes recently noted that “there are 150 different reporting metric systems in place, with none being the overwhelming framework or rating system of choice.”
Empirical Research’s work notes that, “companies with favorable ESG credentials tend to have predictable and higher quality earnings, are lightly shorted, have lower capital intensity, return capital to shareholders whenever they can, and generally trade at lower multiples.” These characteristics are consistent with our investment pillars.
While some investors have laudable goals to change the world, we see ESG investing as investing and use a recent stock purchase as an example.
Associate Spotlight - Mary Weeks Fountain
Sterling’s Associate Spotlight for November 2018 features Mary Weeks Fountain, Managing Director & Senior Portfolio Manager on our Private Client Team. A long-standing Sterling associate, Mary Weeks has been a with the firm for over 30 years. Read more about her in her Q&A.View PDF
The Lead - "Winner Takes All"
- One of our primary investment tenets is investing in companies with exceptional returns on capital.
- A McKinsey Consulting study released this month highlighted that of the 6,000 companies with $1 billion or more in revenue, the top 10% capture 80% of the economic profits, the middle 80% essentially zero, and the bottom 10% destroy value.
- Equity Opportunity Group portfolios tend to have concentrations in sectors that have proved to be fertile areas of economic value creation.
Associate Spotlight - Tim Beyer
The Sterling Associate Spotlight for October features Tim Beyer, Managing Director & Portfolio Manager. Read more about Tim’s passion for working in asset management and what sparked his interest in the industry at a young age.View PDF
The Lead - "Defining Quality"
- As active managers we have heated debates on portfolio holdings, the most recent was on whether a security was a “quality” company.
- While quantitative metrics can try to measure quality, we believe there are shortcoming in merely screening for quality and “setting and forgetting." We highlight former holding General Electric as an example.
- We find having generalists with different perspectives but aligned goals helps in our pursuit of generating above average returns with below average risk.
Associate Spotlight - Lori McCartney
Lori is a Director & Regulatory and Risk Management Analyst and has been with Sterling since 2015. Take a look at her Q&A to learn more about how she started with Sterling, hear advice she would give her younger self, and even the one rule she would have everyone follow if she could.View PDF
The Lead - “Questioning Consensus”
- Assessing the opportunity in emerging market exposure at present requires “questioning consensus.”
- Several recent portfolio additions have various levels of exposure to these markets, with valuations appearing to start to balance risk and reward. We highlight one addition.
- These additions are consistent with our process noted since 2001 where we search for inexpensive quality companies where the fears of the crowd may be misplaced.
Casey McIntyre Joins Sterling as Chief Administrative Officer
Sterling Capital Management LLC (Sterling Capital) announced today that Casey McIntyre has joined the firm as its new Chief Administrative Officer.View PDF
Sterling Capital Welcomes Whitney Stewart
Sterling Capital is pleased to announce that Whitney Stewart, CFA joined the team as an Executive Director and Client Portfolio Manager in August 2018.View PDF
The Lead - "Where is the Big Money Looking to Move?"
- After a recent visit to the world’s largest consulting firm by one of our colleagues, we highlight the trend in looking for investment managers that protect capital as the economic cycle matures.
- Protecting capital has not been top of mind of many investors’ minds as the current bull market becomes the longest in history this month at 114 months per Strategas Research.
- We note that Sterling Equity Opportunities strategies have a history of protecting capital since their inception.
Associate Spotlight - Eddie Watson
Eddie is a Director and Sales Desk Manager and shares a bit about himself and the lessons he has learned throughout his career journey in this month's Q&A.View PDF
Associate Spotlight - J. Travis Pollack
Travis is a Director and Investment Analyst on the Advisory Solutions Team and has been with Sterling since 2005. Check out his Q&A to find out more about him and maybe even get some advice for starting a career in the investment industry.View PDF
The Lead - Value Versus Growth 2018
- “Growth” strategies have blown value oriented strategies out of the water in recent years. Value oriented strategies have underperformed dramatically in recent years if measured on a trailing 10 year basis.
- Currently, “value” stocks trade at one of the lowest relative valuations with improving relative profitability.
- Within Equity Income, Special Opportunities, SMID Opportunities, Insight, and Global Leaders portfolios new money in the first half of the year was placed in stocks where the average price-to-earnings ratio was below the S&P 500, the average growth rate last year was twice that of the S&P 500 and consistent with improving fundamentals, the average return on equity for these purchases increased 40% since 2015.
Charles Durham Joins Sterling as Chief Compliance Officer
Sterling Capital Management LLC (Sterling Capital) announced today that Charles “Charlie” Durham has joined the firm as the new Chief Compliance Officer. Charlie is also the new Chief Compliance Officer of the Sterling Capital Funds. He brings over 15 years of compliance and regulatory experience to Sterling Capital.View PDF
Strategies for a Rising Interest Rate Environment
While rising interest rates may present challenges to bond investors, history shows that a diversified fixed income portfolio can weather difficult periods remarkably well. Read more to find out how we navigate a rising interest rate environment.View PDF
The Lead - "Where is the Opportunity?"
- We are finding more “opportunities” within the value pool in 2018. Since the beginning of the year, the average stock added to the five largest Equity Opportunity portfolios has a forward price-to–earnings ratio below that of the S&P 500.
- Does Value look attractive relative to Growth if we include stocks that trade overseas? Yes. The MSCI World Value stocks trade at 15x earnings versus 25x for growth, the widest difference since 2006 according to Bloomberg.
Associate Spotlight - Farley C. Shiner
Farley C. Shiner is a Managing Director and Senior Client Strategist at Sterling Capital on our Equity Opportunities Team, focusing on operations, marketing and client service. Vie the PDF below to more about Farley and hear some fun stories about his years with Sterling Capital.View PDF
Associate Spotlight - Robert W. Bridges
Robert W. Bridges is an Executive Director, Portfolio Manager and is Co-Head of Factor Investing/Behavioral Finance. Bob has been an integral part of the Sterling team since 1996 and graciously shared a bit about himself in this month’s associate spotlight.View PDF
The Lead - "Focus on Quality Dividends Growers"
- Why own high quality dividend paying stocks in a potential rising rate environment? They have a history of outperforming those simply paying high yields.
- Over the past seven years, S&P 500 companies have increased their debt levels making stock selection more important than ever. This month one stock provided an example.
- Our core investment pillars of focusing on stocks growing quality earnings and dividends by winning in their markets rather than taking on debt to fund growth, should place our strategies to perform well in a rising rate environment.