Monthly Strategy Update: Coho ESG US Large Cap Equities
Links to the other Candoris Monthlies:
PAM Senior Loans       DSM GG, US, EME        VanEck EMD        VanEck EME       SIM US High Yield

 

 

Good morning *|FNAME|*,

We are 10+ years into a bull market, the S&P 500 has quadrupled in value over this period (see chart below), company earnings are at record high levels and growth stocks have outperformed value with 6.5% annualized over the last 3 years (S&P 500 Value vs Growth). The train might go on based on low interest rates, high profits and expectations of FAANG and related type of companies, but what if it does not.

The Coho strategy offered protection during the IT crash in 2001, the financial crisis in 2008, the Euro crisis in 2011 and recently during Q4 of 2018. The portfolio has a contrarian overweight towards the demand defensive sectors, which have been out of favor for years. Since inception the strategy has a Beta of 0.7, outperformed the S&P 500 by 3.4% annualized, simply by going down less during corrections and capturing the majority of the upside.

In case you like to learn more about the Coho ESG US Equity investment process and full ESG integration, please click
 here to watch the recent webinar and click here to for the latest report Coho ESG Impact report.

Below 4 interesting charts and the Coho ESG US Equity August commentary 

The Coho portfolio as a whole has become very attractive from a relative valuation point of view. The gab in forward 4 quarter P/E vs the S&P 500 is the widest it has been.
Click here to see the history.

A daily liquid UCITS fund of >USD 200 million is available for European investors: ISIN: IE00BF1XKT19


ESG:
Coho is one of the few US equity managers that has ESG fully integrated in its investment process:

 

Quadrupling of S&P 500, underperformance Value vs Growth on a 3 year basis 6.5% annualized



Coho has always been overweight demand defensives 
       



Cycles always come to an end. The Coho strategy of quality companies with predictable earnings growth, offered protection during the IT crash in 2001, the financial crisis in 2008, the Euro crisis in 2011 and recently during Q4 of 2018.



Relative valuations of the Coho ESG US Large Cap portfolio vs. the S&P 500 in terms of Forward 12-month P/E. In blue Coho ESG Large Cap Equities in green S&P 500



August commentary:

The broader averages finished down for the month.  The S&P 500 Index declined 1.6% and the S&P 500 Value Index fell 2.6%.  The Coho ESG US Equity lost only 0.03% (USD and NET of fees) in August.  The month did have a “defensive” tilt to it with Consumer Staples, Real Estate, and Utilities posting positive returns and Health Care only down about 50 basis points. The worst performing sector was Energy.
 
Year-to-date, we continue to lag the broader averagesOur roughly 10.3% return is below the 18.3% return for the S&P 500 Index and the 15.7% return of the S&P 500 Value Index. We remain disappointed with our relative year-to-date performance, but we have confidence in the fundamentals of our portfolio holdings and continue to believe the market is misjudging their valuations.
 
Second quarter earnings results for our companies solidified our confidenceWith only two companies left to report, we are almost complete with a very strong set of results and future guidanceAll our Health Care holdings posted better-than-expected earnings and all except Quest Diagnostics increased their earnings guidance for the yearThis is important because Health Care remains our largest sector weight and has been one of the biggest detractors to our year-to-date performance as the sector has meaningfully trailed the benchmarks. Fundamentals ultimately matter, however, and the strong earnings reports led to positive absolute and relative returns this month for our Health Care holdings.  Perhaps we are nearing an inflection point. 
 
All our Consumer Discretionary and Financial Services holdings also had better-than-expected earnings and many of them increased guidance as well.  The two star performers within Consumer Discretionary were Dollar General and Lowes, which appreciated 16.5% and 10.7% respectively


Click here for the complete commentary

 

 

Coho's consistent long term track record, true to style resulted in an annualized outperformance of 3.4% over the S&P 500 Total Return index, since inception in 2000

 

 

 

Coho ESG US Large Cap Equities 
The Coho Relative Value Equity (CRVE) strategy has an annualized outperformance of 3.4% over the S&P 500 Total Return index, since inception in 2000. Coho ranks 10th percentile in eVestmentThis strategy of quality companies with predictable earnings growth, offered protection during the IT crash in 2001, the financial crisis in 2008, the Euro crisis in 2011 and recently during Q4 of 2018. The strategy is fully invested, without using of derivatives. Over the last 18+ years, the down-market capture has been 71.86%, the up-market capture 87.57%. This combination resulted in superior performance with lower risk versus the benchmark and most peers. While keeping the characteristics of the CRVE strategy in place, the ESG portfolio was established in 2011. Coho Partners manages about USD 7.8 billion in US Large cap Equities. Coho is an independent firm, employee owned. The valuation of the Coho strategy versus the S&P 500 has become relative attractive after the outperformance of economic sensitive stocks. This defensive strategy is a strong candidate in an environment of gradual rising, steady or declining markets.


The Coho ESG US Equity strategy only deviates marginally from the original Coho Relative Value strategy. The ESG approach is fully integrated in the investment process while keeping the original characteristics in place. A daily liquid UCITS fund of USD 200 million is available for European investors: ISIN: IE00BF1XKT19


ESG:
Coho is one of the few US equity managers that has ESG fully integrated in its investment process:

 

 


Performance and StD since inception in 2000 vs S&P 500TR and peers:

 

 

 ESG

  • Coho is UN PRI signatory, the fund has ESG fully integrated in their investment strategy. Please click here for the latest presentation.
  • The Sin Free/ESG track record dates back till 2011. Sin Free is the predecessor of the ESG strategy. As of January 2018 the Sin Free portfolio changed its name into ESG.
  • The Coho ESG US Large Cap strategy ranks 6th% when it comes to ESG score according to Morningstar 30/6/2019. (Morningstar/Sustainalitics globes). Click here for the latest Morningstar Globe ranking.
  • Coho actively engages with the companies in the Coho ESG 200 universe to better understand their commitment to ESG issues and to advocate for positive change.
  • Coho actively seeks increased transparency through more frequent and robust disclosure and through establishment of tangible goals.
  • Coho measures it’s impact via an impact report, please click here for the most recent impact report.
  • The Coho ESG US Large Cap Equity strategy measures the carbon footprint, water usage, % women in the board of their holdings, ESG disclosure score of holdings in the portfolio (figure 1 below).
  • Needles to say Coho excludes tobacco, cluster bombs.

Figure 1:

Data as of 30-6-2019

Valuation and Firm/strategy 

  • Coho is a stable, employee owned firm, no analyst or PM has ever left the firm since start in the year 2000.
  • Focus is on one strategy only, true to style since inception in the year 2000 with a low turnover (15-20% per year) and low standard deviation (figure 2 below).

Figure 2:
              

  • Long term since 2000, over multiple cycles 3.4% annualized outperformance over the S&P 500 and 2.51% over the Russell 1000 Value, beating peers, with a lower risk profile. (Data as of 31-7-2019) Click here for the presentation Coho vs Peers.
  • Assets under management of the firm are aboutBillion USD, plenty of capacity left as they invest in US Large Cap.
  • Broad client base, to name a few: SEI, Russell, two Nordic pension funds.
  • Focus on capital preservation, predictable pattern of return, aiming for a down market capture of 65-75% (figure 3 below).
  • After 9 years into the bull market a correction may occur in which Coho is expected to outperform (down market capture 65-75%) if rally continues Coho is expected to capture most of the upside (figure 3 below).

Figure 3: Participate in mature bull markets, benefit from low downside capture


 

 

 

Coho ESG US LC Equity Composite data                                    Coho ESG US LC Equity Fund Facts

Alpha

4.11

 

 

 

ISIN

IE00BF1XKT19

Beta

0.77

 

 

 

Benchmark

S&P 500 TR

Std Dev

12.05

 

 

 

Currency

USD

UMC

87.57

 

 

 

Bloomberg ticker

COHIUSD

DMC

71.83

 

 

 

Asset Class

Equity

Information Ratio

0.59

 

 

 

Type

Core

Tracking Error

5.67

 

 

 

Region

United States

Sharpe Ratio

0.64

 

 

 

Dividend policy

Accumulating

 

Active Share

90.8%

as of 30-6-2019

 

 

 

 

Data as of 30-8-2019 source eVestment

 

 

The Coho strategy offered protection during the IT crash in 2001, the financial crisis in 2008, the Euro crisis in 2011. Historical downmarket capture over the last 17 years has been 71.86%. This in combination with an upmarket capture of 87.52% results in superior performance versus benchmarks and peers with an annualized outperformance of 3.4% since inception over the S&P 500 Total Return index. The strategy is available in a UCITS fund with ESG integrated in the process. Please follow the institutional share class of the Irish based UCITS fund via: ISIN: IE00BF1XKT19 and Bloomberg Ticker: COHIUSD.

 

 

 

 

 

Performances are annualised. The latest data is still preliminary. Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate.. "This email is intended to be reviewed by only the intended recipient and may contain information that is privileged and/or confidential. If you are not the intended recipient, you are hereby notified that any review, use, dissemination, disclosure or copying of this email and its attachments, if any, is strictly prohibited. If you have received this email in error, please immediately notify the sender by return email and delete this email from your system."
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