13F: BARROW, HANLEY, MEWHINNEY & STRAUSS

December 14, 2014

13F week 7...BARROW, HANLEY, MEWHINNEY & STRAUSS

CHAPTER 7 – BARROW, HANLEY, MEWHINNEY & STRAUSS

Over the course of the past 30 years, Barrow, Hanley, Mewhinney & Strauss (BHMS) has proven that you do not need to take high risks in order to earn high returns. Started in 1979 in Dallas, today BHMS manages close to $70 billion in large, mid, and small cap equity strategies and in fixed income strategies across the maturity spectrum. The firm continues to operate under the belief that internally-generated, fundamental research and a bottom-up approach to investing ultimately yields the greatest results, regardless of short-term fluctuations in the market.

When it comes to equity, Barrow Hanley looks for strong companies across the globe that are temporarily undervalued for reasons the firm can research, identify, and understand. Specifically, it tends to invest in businesses with price/earnings and price/book ratios below the market, but with dividend yields that are substantially above the market.   While dividends are currently prized by many investors, throughout the three-decade history of the firm, Barrow Hanley has always emphasized the importance of dividends.

Similarly, in the realm of fixed income, Barrow Hanley remains committed to its philosophy that securities should generate significant returns while undertaking lower risks. Barrow Hanley invests primarily in corporate bonds, mortgage securities, and alternative U.S. government issues that are temporarily mispriced and that also promise greater yields than Treasury bonds of comparable maturity.

In addition to managing the assets of the firm, Barrow Hanley is a sub-advisor on more than 30 mutual funds, including the Vanguard Windsor II Fund, which has received much publicity in the financial press. On average, the Windsor II Fund has performed well since inception in 1985, beating the Russell 1000 Value Index and keeping pace with the S&P 500 Index, but with less volatility.

What are some of the top holdings now?

FIGURE – Top Holdings

Source:  AlphaClone

And the performance?

FIGURE – Equity Curve vs. S&P500

Source:  AlphaClone