White Paper

The Revival of Value Investing

Much has been made of the demise of value investing in recent years. This paper will highlight:

  • The current opportunity for value relative to growth
  • The unique opportunity within value
  • The most common counterarguments put forth by growth advocates
White Paper

Banks: Investing in an Unloved Industry

Hotchkis & Wiley explores potential catalysts for improvement in an unloved industry.

  • Poor investor sentiment in banks has created a rare valuation opportunity
  • Banks are generally well-positioned to withstand low interest rates and pandemic-related credit losses
  • Current bank valuations and capitalization levels create a compelling case for investing in this unloved industry

An Unprecedented Opportunity in Value

US valuation spreads are currently at levels last seen during the depths of the financial crisis, creating an unprecedented opportunity for value investors. In the equity markets, the ratio of the lowest quintile of stocks to median stock PE ratios is well over three standard deviations, a level that bodes well for future returns of value stocks. For instance, the Russell 1000 Value Index’s P/B and P/E are currently in the lowest quintile compared to its own history. Similar observations have been made across the market cap spectrum. Extreme value dislocations like we are currently witnessing are rare, and history suggests these market dislocations tend to revert to normal levels, particularly coming out of a significant market downturn like the one we are experiencing now.

Learning Objectives:

Participants will learn:

  • How Value stocks have historically performed during different market cycles
  • How valuation spreads compare today to the long-term historical average
  • What the valuation disconnect looks like across the value-growth and market cap spectrum
  • Why research focused on determining a company’s normal earnings power may lead to superior long-term investment results

High Yield 2020 Outlook

2019 was a very unusual year. Domestic growth whipsawed from strong (over 3%) to concerning (just over 1%). This volatility was compounded by both domestic and global headline factors: a very public trade dispute and very weak global growth.


Avoiding the Losers

In Hotchkis & Wiley's 2014 High Yield 2Q Newsletter, Ray Kennedy, Mark Hudoff, and the rest of Hotchkis & Wiley's high yield team discuss the team's belief "that averting mistakes is the single most important quality in successful high yield investing," and that an "avoid the losers mentality can be achieved by focusing on securities that are senior in the capital structure, emphasizing asset coverage, and looking closely at covenant packages, a third level of defense that the team believes is often overlooked by high yield investors.

Hotchkis & Wiley: Frequently Asked Questions

In Hotchkis & Wiley's 2014 1Q Newsletter, Ray Kennedy, Mark Hudoff, and the rest of Hotchkis & Wiley's high yield team examines the high yield market and attempt to answer the questions it they get asked most frequently, or ones they believe to be particularly relevant in the current market environment.

Ten High Yield Market Takeaways

Mark Hudoff, portfolio manager of the Hotchkis & Wiley High Yield strategy, shares his thoughts on the current opportunities and challenges in the high yield marketplace.

The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans

In its first quarter 2013 newsletter, "The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans," Hotchkis & Wileys high yield team analyzes the behavior of the high yield market and the bank loan market in different interest rate environments to determine whether they can make sensible assumptions about the future.

High Yield Newsletter

The small-cap portion of the high-yield market has offered, and continues to offer compelling opportunities for the astute investor. The small-cap segment of the high-yield market, however, is rarely mentioned by the most prominent high-yield investors - most likely because large asset levels preclude them from investing in this space. As of March 31, 2010, 58 percent of issuers in the high-yield market had less than $500 million in total issuance; 78 percent had less than $1 billion in total issuance.

High Yield Newsletter

Successful investing involves identifying superior issuers at attractive valuations; the nature of the issuer is extraneous. The high yield market's record performance last year is almost certainly not repeatable in 2010. It will more likely be a tame year for high yield investors. On the heels of unprecedented volatility, however, investors would likely embrace a boring year with open arms. Hotchkis is optimistic about the high yield market's prospects, and believes there are abundant opportunities to 'lend freely against good collateral at a penalty rate.'