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Q4 2022 Snow All Cap Value Commentary

Market Summary

While the broad markets were extremely volatile during 2022, with multiple mini rallies but ultimately finishing down for the year, major indexes posted solid positive results for the fourth quarter. Better than expected corporate earnings reports, a pullback in commodity prices and cooling inflation data fueled the market’s appetite for capital assets.

The S&P 500 declined -18.1% in 2022, after gaining 7.6% in the 4th quarter. The Russell 3000 Value declined only -8.0% during the year, increasing over 12% during the final three months. Only a monthly basis, Value indexes outperformed Growth fairly consistently over the course of the year, with the Russell 3000 Growth ultimately falling -29.0% in 2022.

During the most recent Federal Reserve Board meeting, the central bank raised its benchmark interest rate by 0.5%, taking it to a target range of 4.25% to 4.50%. The half-point increase follows four consecutive hikes of 0.75%. The Fed slightly eased the pace of tightening as it balances the need to tame soaring consumer prices in an effort to prevent the economy from falling into a recession. After a difficult two years, inflation does appear to be loosening its grip on the economy, which is encouraging. Overall, the Consumer Price Index increased by a mere 0.1% in November, with the annual rate falling from 7.7% to 7.1%. Meanwhile, the unemployment rate held steady at 3.7%, remaining historically low; however, layoffs are on the rise and we expect the trend to continue.

Many businesses have announced plans to reduce staff including Meta, Cisco, Amazon, Salesforce, Twitter, Morgan Stanley and Goldman Sachs, mostly due to adjustments in business plans as they overstaffed during the pandemic.

Performance Highlights

The Snow All Cap Value strategy outperformed the benchmark by 70 basis points for the quarter, returning 12.89% gross of fees (12.69% net of fees), while the Russell 3000 Value index gained 12.18%. For the year, the strategy returned -5.98% gross of fees (-6.64% net of fees), again outperforming the Russell 300 Value, which declined -7.98%.

The Snow All Cap Value strategy’s relative performance was entirely driven by stock selection, as sector positioning detracted from relative performance. Stock selection in Information Technology, Materials, and Consumer Discretionary were the largest contributors, while Energy and Communication Services were the largest detractors. From a sector positioning perspective, a larger than usual allocation to cash, along an underweight position in Industrials and overweight position in Information Technology lead to the poor allocation effect.

Portfolio Attribution

Top 5 Performance Contributors

StockAvg Weight %Contribution %
Super Micro Computer4.011.52
Commercial Metals4.511.44
American Eagle Outfitters2.750.93
JPMorgan Chase3.420.92

Super Micro Computer (SMCI)
Shares of SMCI appreciated during the quarter as the company issued an upbeat earnings report and forecast. The company continues to execute on growth initiatives and is taking share in the server market. Despite the rise in the stock, we believe the stock remains significantly undervalued, trading for approximately 9x forward earnings estimates.

Commercial Metals (CMC)
Shares of CMC positively contributed to performance as the market began to appreciate the company’s longer-term earnings power. The company also provided an upbeat outlook, bucking recessionary concerns, reporting that despite slowing residential demand, commercial and industrial indicators remain strong. CMC has momentum from idiosyncratic factors including the closing of the Tensar acquisition, leading market share in the US, benefits from the infrastructure bill, and augmented rebar capacity.

American Eagle Outfitters (AEO)
AEO shares positively contributed to performance as the company posted better than expected results on the top and bottom line. We continue to find the stock attractive. As AEO right sizes its inventory, we believe the reduced promotional activity will lead to margin expansion, driving higher earnings than the market is forecasting.

Top 5 Performance Detractors

StockAvg Weight %Contribution %
Lincoln National2.44-0.77
Cinemark Holdings1.17-0.41
Lions Gate Entertainment1.00-0.28
Walt Disney1.64-0.13

Lincoln National (LNC)
LNC underperformed during the quarter after the company announced weaker results, which were impacted by a reserve charge to their life insurance business. LNC management has taken appropriate action to improve reserves and continue to focus on earnings growth. The valuation has become more attractive given the stock weakness and the limited impact on earnings.

Cinemark (CNK)
CNK shares detracted from performance alongside the broad decline in Consumer Discretionary stocks. Despite an encouraging third quarter report, shares sold off in December as the opening weekend box office result for Avatar: The Way of Water fell short of expectations. CNK has demonstrated share gains versus pre-pandemic levels and is positioned for significant earnings recovery as the box office recovers.

Lions Gate Entertainment (LGF)
LGF pulled back during the quarter after announcing they would pivot their strategic review to focus on their Studio assets, after spending nearly a year attempting to sell or separate their STARZ business. While we still see substantial value in the underlying title library that they license to other platforms, we have exited our position given increasing stress on the balance sheet as costs bloat and free-cash-flow compresses.

Trailing Performance

*as of December 31, 2022

QTD1 Yr3 Yr5 Yr7 Yr10 YrSince Inception**
Composite (Gross)12.89%-5.98%9.91%6.52%9.03%9.53%9.24%
Composite (Net)12.69%-6.64%9.15%5.78%8.27%8.78%8.49%
Russell 3000 Value12.18%-7.98%5.87%6.49%9.06%10.16%6.87%

Calendar Year Performance

Composite (Gross)-5.98%28.06%10.25%26.53%-18.39%14.46%16.49%-12.36%8.17%43.20%
Composite (Net)-6.64%27.04%9.33%25.87%-19.22%13.32%15.35%-13.24%7.11%41.78%
Russell 3000 Value-7.98%25.37%2.87%26.26%-8.58%13.19%18.40%-4.13%12.70%32.69%

Source: SEI Global Services
* Returns for periods greater than a year are annualized. Past performance is not indicative of future results.
** Inception: 4/1/1998

Top 10 Holdings

Commercial Metals4.66%
Super Micro Computer4.31%
Marathon Petroleum4.12%
JPMorgan Chase3.54%
American Equity Investments3.36%
Hartford Financial Services3.35%
American Eagle Outfitters3.06%

Total Effect Attribution vs Russell 3000 Value

ACV attribution


As we have discussed in the past, we believe the economy is in a period of higher structural inflation and we expect it to remain above its long-term average. This environment bodes well for the value style given its historical correlations with increasing interest rates and rising inflation. Furthermore, from a growth and value index construct perspective, the largest relative sector weights in the value index are Financials and Energy, both of which are poised to perform well going forward.

Disinflation and global economic desynchronization will be the dominant macro themes for 2023. With fears of a recession looming and the central bank in an aggressive tightening cycle, the path for a soft landing is narrowing.

Variables including employment, interest rates and consumer price index reports will likely keep volatility levels elevated and pressure on capital asset prices. In our view, given the array of macroeconomic headwinds, the direction of equity prices will be more modest and driven by idiosyncratic reasons.

The consistent application of our investment approach has led to strong performance over all types of market environments. In turn, we continue to hold companies with compelling business fundamentals, skilled management teams, reoccurring cash flows and the flexibility to adapt to an inflationary environment.

We believe the strong cash flow generation and capital flexibility of our businesses will provide meaningful protection if market fundamentals deteriorate. Our portfolio of stocks is significantly discounted based on relative multiple valuations, compared to its benchmark. We remain dedicated to delivering strong long-term performance and transparent communications to our investors. As always, we welcome your comments and questions. Thank you for your commitment to Easterly Investment Partners.


Easterly Investment Partners (EIP) is a registered investment adviser. Registration of an Investment Advisor does not imply any level of skill or training. This composite has been assigned to Easterly Investment Partners (EIP) effective July 1, 2021. Performance presented prior to July 1, 2021, occurred while the Portfolio Manager(s) and the research team were affiliated with a prior firm (Snow Capital Management, L.P.). EIP claims compliance with the Global Investment Performance Standards (GIPS®). A fully compliant GIPS presentation along with a complete list and description of all composites is available upon request. The Snow Capital Management All Cap Value Equity Composite contains fully discretionary all cap value equity accounts and for comparison purposes is measured against the S&P 500 and Russell 3000 Value indices. Beginning July 1, 2005, there is no account minimum for this composite. Prior to July 1, 2005, the minimum account size for this composite was $200 thousand. Prior to October 1, 2002, the minimum account size was $300 thousand and prior to January 1, 2000, the minimum account size was $100 thousand. On January 1, 2008, the benchmark was changed retroactively from the Russell 3000 to the Russell 3000 Value to better reflect the All Cap Value Equity investment strategy. The U.S. Dollar is the currency used to express performance. Leverage is not used in this composite. Investing involves risk; clients may experience a profit or a loss. Past performance is not indicative of future results. Performance is preliminary. Composite returns are shown gross of fees and do not reflect the deduction of advisory fees. Actual returns are shown gross of fees and do not reflect the deduction of advisory fees. Actual returns will be reduced by advisory fees and other expenses incurred in the management of the account. EIP’s advisory fees are outlined in our Form ADV Part 2A (Brochure), which is available upon request. The effect of an advisory fee compounded over a period of years, on the total value of a client’s portfolio is represented by the following example. Assuming an initial portfolio of $1 million earning a 10% return each year which incurs an annual advisory fee of 1.0% payable quarterly in advance, the portfolio would be worth $1.53 million net of fees and $1.61 million gross of fees after 5 years, $2.37 million net of fees and $2.59 million gross of fees after 10 years and $3.58 million net of fees and $4.15 million gross of fees after 15 years. Past performance is not guarantee of future results. The performance of any individual portfolio may vary from the Composite’s performance.

The performance figures are based on a composite of many accounts and not all accounts owned the securities mentioned in this commentary. Holdings and sector allocations are subject to change. The latest copy of our Form ADV Part 2A (Brochure) and a complete list and description of EIP’s composites and/or a presentation that adheres to the Global Investment Performance Standards (GIPS®) is available upon request.

Russell 3000® Value Index

The Russell 3000 Value Index measures the performance of the broad value segment of U.S. equity value universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. Indexes are unmanaged. It is not possible to invest directly in an index.

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