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Herndon Strategies: Large Cap Core International, abstract image

  1. International Strategies

International ACWI ex-US

International ACWI ex-US

Experience has shown us that the most consistent method for producing better risk-adjusted returns than the peer group over time involves the use of a highly disciplined, risk-managed approach. And while either a growth or value strategy may dominate for certain periods, portfolios constructed with complementary elements of both strategies will produce more dependable benchmark-beating results.

  • Ours are core products, designed to give the client exposure to small cap public companies outside of the US.
  • The goal of the Portfolios is to outperform the MSCI EAFE Small Cap or the MSCI ACWI Small Cap over a market cycle.
  • Our investment process focuses on bottom-up stock selection, but also benefits from macroeconomic analysis. 
  • Outperformance will be accomplished by identifying the most attractive companies in each region, sector and industry and optimally constructing a portfolio which contains them.

Supplemental Information

International Equity Fact Sheet

Our Systematic Process

Initial Screen

Valuation Metrics

  • Price to Forward Earnings
  • Price to Book Value
  • Price to Cash Flow
  • EV to EBITDA

Fundamental Characteristics

  • Return on Equity
  • Return on Invested Capital
  • Cash Flow
  • Earnings Growth
  • Net Debt to EBITDA

Stock Universe

  • ~2000

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Screen for Fundamentals relative to Valuation

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Attractive Stocks


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Bottom-Up Fundamental Research

  • Validate underlying data
  • Verify sustainability of profitability
  • Identify inflection points
  • Find asymmetric opportunities
  • Analyze company specific factors, industry trends and macroeconomic forces

"The stock investor is neither right or wrong because others agreed or disagreed; [the investor] is right because [the] facts and analysis are right."
~Benjamin Graham

Attractive Stocks


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Bottom-up Fundamental Analysis

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Portfolio Construction

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40-70 Stocks

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Active Portfolio Positioning

Risk Management

  • Regional diversication: max/min regional weight ± 20% of index weight
  • Sector diversification: max/min sector weight ± 10% of index weight
  • Security diversification: maximum 5% weight
  • Fully invested: maximum 5% cash position
  • Tracking error range: 3% - 7%

Sell Discipline

Threre are three reasons to sell a stock - one of them reflects a good outocme the other two usually do not

  • Significant change in company fundamentals
  • Change in management or our opinion of management
  • Realization of fair value target price