Investment Solutions

Large Cap Value Strategy

The objective of the Strategy is to generate alpha over a full market cycle by investing in a diversified group of equities with a market capitalization that exceeds $10 billion at the time of purchase. The majority of portfolio holdings are domestic securities, but foreign securities may be included.

Management Approach: Team
Benchmark: S&P 500® Value Index
Assets Under Management: $86.42 million*
Strategy Inception: August 2003

Fact Sheet: 3Q21 Large Cap Value

*as of 9/30/21

Typical Portfolio Attributes
Market Cap Range$10 billion and greater
Number of Holdings25 - 50
Position Sizes1 - 5%
Maximum Sector Weightings
Relative to the Benchmark
No formal restrictions
Portfolio Turnover Range30 - 60%
Cash Levels< 5%
Portfolio ManagerTeam managed

Data subject to change.

Annualized Performance (%)

for period ended 9/30/21
 1 Year3 Year5 Year7 Year10 YearSince
Large Cap Value Composite (Gross)33.8414.5313.889.6812.829.97
Large Cap Value Composite (Net)32.9913.7613.158.9712.149.14
S&P 500® Value Index32.0210.6911.709.8413.768.89

Calendar Performance (%)

for period ended 9/30/21
Large Cap Value Strategy Composite (Gross)15.0317.7924.03-6.4518.727.45
Large Cap Value Strategy Composite (Net)14.4916.9323.22-7.0117.996.85
S&P 500® Value Index15.311.3731.92-8.9615.3617.41


The Large Cap Value Equity Strategy underperformed its benchmarks slightly in the quarter. When making investment decisions, we seek to own good businesses at good prices so our sector allocations are byproducts of the businesses we own. We comment on those companies that have the most significant impact on estimated security selection.

Among the companies negatively impacting security selection:

Premium athletic shoe and apparel retailer Foot Locker, Inc. operates through multiple store banners also including Champs Sports, Footaction and Runners Point. Its operating segments are defined geographically and include North America, EMEA (Europe Middle East and Africa), and Asia Pacific. Quarterly results were strong, and the shares responded favorably, however results from its largest supplier, Nike, were impacted by supply chain issues and pressured the shares. Additionally, it agreed to acquire two new store banners during the quarter WSS which has a southwestern footprint in the United States and is focused on the Latino community, and Atmos a digitally led premium retailer from Japan. It’s omni-channel capabilities bridge the digital world into physical stores and are used to maximize the shopping experience based on evolving behaviors. These changes include pivoting away from malls to new standalone stores and continued development and integration of digital capabilities. We expect financial performance in the way of cash flow generation and capital deployment to create shareholder value while maintaining a strong balance sheet.

Western Digital Corporation is a leading developer, manufacturer, and provider of data storage devices including flash based solid-state drives (SSDs) and hard-disk drives (HDDs). Component shortages and industry wide supply chain issues weighed on the equity during the quarter. Longer term, we believe its shares do not reflect the value of the SSD business, a joint venture with Kioxia. Although there are challenges to be resolved, value could be unlocked either through a Kioxia initial public offering or Western Digital purchasing Kioxia outright.

Nielsen Holdings plc is a global measurement and data analytics company. It provides unbiased and reliable metrics on viewership, listening and analytics primarily to media publishers and marketers. Media clients use this information to understand their audiences, value advertising inventory and maximize the value of content. Marketers use it to plan and optimize spending. Nielsen ratings lost its Media Rating Council (MRC) accreditation as the minimum size of its household sample of panels, known as Nielsen families, fell below the target level. It was difficult to bring new families into the panels without access to homes to setup measuring devices as media measurement wasn’t considered an essential service. Families are currently being added and the panels are expected to reach the target level by the end of 2021, and it will seek re-accreditation in 2022. We like Nielsen as it has an entrenched competitive position supported by delivering on customer needs for increased measurement and analytic capabilities. A prime example is Nielsen ONE, a single measurement, used as currency to seamlessly buy and sell advertising across various forms of media including, TV and digital. Nielsen ONE leverages an expanding list of partners including DirecTV, Dish, Vizio, and more recently Roku.

Skyworks Solutions, Inc. engineers and produces highly innovative analog semiconductors integrated into a system to enable wireless connectivity for mobile phones and other broad markets such as connected home and connected car. Quarter results included revenues and diluted earnings per share growing over 50% and 70% respectively when compared to 2020. However, guidance was viewed either as conservative or reflective of the potential for supply chain disruptions. Also, on July 26th it closed the acquisition of the industrial and automotive semiconductor business from Silicon Labs and it sees opportunities to sell those products into its existing customer base. The mobile phone 5G upgrade cycle is in the early stages and leads to higher content per phone. The broad markets business is expected to benefit from expanded use cases enabled by 5Gs blink of an eye response time. Additionally, a hybrid manufacturing model leverages both internal and outsource manufacturing capacity.

PayPal Holdings, Inc. offers digital services to make the movement of money easy, including peer-to-peer transfers, banking services, online payment acceptance, and alternative forms of payments including cryptocurrencies. It’s core business, excluding Ebay, continued to perform very well with quarterly revenues up 32% compared to a year ago. Ebay’s transition to another payments provider is creating a short-term headwind as completion is expected by the end of the third quarter. Additionally, the acquisition of Paidy expands its payments business in Japan, the third largest ecommerce market in the world. PayPal’s strategy is to expand services that make routine financial transactions simpler by partnering with – rather than competing against — other financial players. We believe it will continue to be effective attracting new users and increasing average transaction size.

Among the companies positively impacting security selection:

Palo Alto Networks, Inc. is one of the top providers of enterprise network security used to secure all users, applications, data, networks, and devices with comprehensive visibility and context, continuously and across all locations. Fourth Quarter results came in much better than expectations with billings advancing 34% year-over-year and well above the guided range of 22% to 23% and revenue growth of 28% also above the top-end of the guided range. Growth was driven by strong demand across all geographies and product areas with subscription and support based revenues increasing 36% and accounting for 72% of the total. Cybersecurity has become a focus for enterprises as the incidence of breaches continue to increase and user and customer data is lost, especially as the enterprise network perimeter has disappeared. Those offering enterprise-wide security solutions are best positioned as the IT landscape moves towards less vendors and complexity is increasing with distributed infrastructure and end user flexibility.

Fortinet, Inc. is global leader in cybersecurity solutions for a wide range of organizations, including enterprises, communications, governments, and small and medium businesses. Its solutions provide broad network visibility and features automated protection, detection, and response. Second quarter results for revenue and billings growth were at five-year highs. Growth was broad based and across FortiGate brand products and non-FortiGate brands, as well as across all geographies. We believe it will remain one of the leaders in the small and medium business market while taking share in large enterprises. We feel its full enterprise suite that includes a large complement of products in networking, infrastructure security, cloud security, and endpoint protection, provides a performance advantage over much of the competition.

CF Industries Holdings, Inc., is a leading global manufacturer and distributor of nitrogen products, primarily fertilizer. Its nitrogen products are upgraded from ammonia and include granular urea, urea ammonium nitrate and ammonium nitrate. Manufacturing facilities in the United States, Canada, and the United Kingdom are supported by extensive storage, transportation, and distribution capabilities. On August 17th, the US International Trade Commission (ITC) decided there is a reasonable indication that fertilizer imports from Russia and Trinidad are being sold below cost and harming the U.S. nitrogen industry. The ITC may make a final injury determination based on the US Department of Commerce investigation. Also, higher natural gas prices in Europe, coal prices in the Far East and shipping costs to the United States are placing its global competitors at a larger disadvantage. We believe CF Industries is well positioned as the low-cost leader with access to low-cost natural gas and to the largest end market – corn.

F5 Networks, Inc. is a leader in application delivery and security used to direct and manage network traffic. Its broad range of solutions deliver and secure applications, facilitate speed to market, reduce costs and human intervention. It has transformed from hardware and associated software solutions to software and services. Quarterly revenue beat expectations and grew double digits for the third consecutive quarter. Software revenues grew 34% accounting for 42% of combined product revenues. We expect it to continue to benefit from high data traffic growth, the need to control costs and quickly deliver applications, and the aggressive shift to software-based solutions.

Booking Holdings Inc. operates an Online Travel Agency (OTA), providing vehicle, hotel, and flight reservations for traveling needs through brands including, Priceline, and Kayak. Additionally, value added services have expanded the platform including dining reservations and tickets to events and tours. Lower travel restrictions and increased vaccination rates have improved the outlook for international and domestic travel, although the delta variant may pressure the recovery. Strategically, it’s expanding flight products to increasingly give consumers the ability to attach a flight to vacation plans. These flight products reached six new markets this past quarter and now twenty-four in total with the intent of creating more opportunities for connected trips. As the largest OTA, it benefits from great scale and substantial inventory and we believe travelers prefer its price transparency and efficient trip planning. Booking’s connected trip strategy creates one convenient package of multiple reservations for related travel needs which we see enhancing its already best in class profitability.

During the quarter we traded in the following companies not otherwise mentioned above:

We added shares of ONEOK, Inc. to the strategy. It is an Oklahoma-based midstream service provider with one of the nation’s premier natural gas liquids (NGL) systems, connecting supply in the Rocky Mountains, Permian and Mid-Continent regions with key market centers and an extensive network of natural gas gathering, processing, storage and transportation assets. More than 10 billion cubic feet per day, about 10% of the US natural gas production, is reliant on OKE’s infrastructure to get to market. We believe natural gas as a commodity is undervalued based on abundant supply domestically and a cleaner emissions profile. We see increased market share for natural gas in electricity generation and transportation.

Performance Attribution (%)

for quarter ended 9/30/21
Consumer Discretionary0.000.000.00
Consumer Staples0.000.000.00
Information Technology0.000.000.00
Real Estate0.000.000.00
Communication Services0.000.000.00

Top Ten Holdings

for quarter ended 9/30/21
 % of Portfolio
Fortinet, Inc.6.05
Palo Alto Networks, Inc.5.40
CVS Health Corporation4.97
CF Industries Holdings, Inc.4.85
AmerisourceBergen Corporation4.63
Berkshire Hathaway, Inc. - CL B4.33
F5 Networks, Inc.4.26
PayPal Holdings, Inc.4.04
AbbVie Inc.3.69
Microsoft Corporation3.45

Top Contributors (%)

for quarter ended 9/30/21
 Average WeightContribution
Fortinet, Inc.5.641.27
Palo Alto Networks, Inc.4.391.27
CF Industries Holdings, Inc.3.910.36
ONEOK, Inc.2.430.28
F5 Networks, Inc.4.010.26

Top Detractors (%)

for quarter ended 9/30/21
 Average WeightContribution
Paypal Holdings, Inc.4.19-0.45
Skyworks Solutions, Inc.3.63-0.50
Nielsen Holdings plc2.42-0.53
Western Digital Corporation3.59-0.74
Foot Locker, Inc.4.05-1.04

Composite Characteristics

for period ended 9/30/21
Price/Earnings Ratio46.3820.31
Price/Book Value Ratio45.442.72
Dividend Yield (%)1.602.20
Weighted Average Market Cap180.54161.74
3 Year Annualized Tracking Error (%)6.18N/A
3 Year Annualized Standard Deviation (%)18.1119.54
3 Year Alpha4.22N/A
3 Year Beta0.88N/A
3 Year Information Ratio0.62N/A
5 Year Annualized Tracking Error (%)6.05N/A
5 Year Annualized Standard Deviation (%)15.0116.04
5 Year Alpha2.76N/A
5 Year Beta0.87N/A
5 Year Information Ratio0.36N/A

Sector Weights

for period ended 9/30/21
Consumer Discretionary6.259.40
Consumer Staples7.809.71
Information Technology35.0813.84
Real Estate0.003.87
Communication Services2.446.04

Sources for all data are Stewart Capital Advisors and Bloomberg.

Past performance is not indicative of future results. There is no guarantee a specific investment strategy will be successful.

Portfolio attributes, sector weightings, and holdings represent individual equity holdings excluding cash, pooled investments, and other non-equity holdings and may change without notice.

Performance attribution does not incorporate the effects of cash, unclassified securities or expense. Positions smaller than 0.05% round to 0.0%. Total may not match stated returns due to rounding effects of cash, and timing of trades.

Top contributors/detractors = average weight x total return during the time period.

The contributors/detractors listed do not represent all securities purchased or sold for our clients. To obtain a list showing the contribution of each holding that contributed to overall performance during the quarter and the calculation methodology, please call 855.783.9227.

The S&P 500® Value Index is an unmanaged index, which measures stocks using three factors: the ratios of book value, earnings, and sales to price. Constituents are drawn from S&P 500®.

The information contained herein does not constitute a solicitation or recommendation by Stewart Capital Advisors, LLC (SCA). The views expressed by the portfolio managers are as of the quarter-end specified. The information may contain opinions or forward-looking statements that are subject to change at any time without notice, and is not intended to predict the performance of any individual security, market sector, or portfolio. No assurance can be given that these opinions or statements will

prove accurate or profitable. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings.

This information is solely for supplemental information purposes, intended for institutional investors, and may not be provided unless directly accompanied by the fully compliant Global Investment Standards (GIPS) disclosure.