Four cheap shares Schroders is excited about

TL;DR

Roberto Barr discusses the Schroeder Global Sustainable Value Equity Fund, which focuses on investing in undervalued companies that are ESG leaders.

Transcript

hello and welcome to latest Insider interview Our Guest today is Roberto Barr manager of the Schroeder Global sustainable value Equity Fund Roberta thank you very much for coming to the studio my pleasure thank you for for having me sir so tell me a bit about the fund how do you invest and what makes it sustainable of course so very simply this is ... Read More

Key Insights

• 🪐 The Schroeder Global Sustainable Value Equity Fund focuses on undervalued companies that are ESG leaders and have a net positive benefit on society.
• 🥺 The fund has its own definition of ESG leaders, considering both positive societal impact and leading sustainability practices within their industry.
• 🥇 Revenue-based exclusions may apply, but the fund places more emphasis on its own ESG leader definition.
• 🤩 Value and quality are key factors in the fund's investment strategy, with a focus on identifying companies with significant value and market irrationality.
• 💪 Opportunities for value investing can be found globally, with Europe and Japan offering attractive valuations and strong sustainability practices.
• 🍧 The current macroeconomic environment presents uncertainties, highlighting the importance of diversification and having exposure to different investment styles.
• 😀 Sustainable investing is crucial during challenging times, and companies face the challenge of balancing various stakeholder expectations while working towards sustainability goals.
• 😀 Supermarkets, despite facing difficulties such as cost of living crises and supply chain issues, offer attractive valuations due to the market undervaluing them.

Questions & Answers

Q: What is the investment strategy of the Schroeder Global Sustainable Value Equity Fund?

The fund focuses on investing in undervalued companies that are considered ESG leaders, meaning they have a net positive benefit on society and are leading the way to a sustainable future within their industry peer group.

Q: Are there any exclusions from the fund based on sectors?

The fund theoretically excludes sectors like thermal coal and tobacco, but it also takes into account revenue-based exclusions and its own definition of ESG leaders, which may result in certain companies being excluded despite not being explicit exclusions.

Q: How does the fund define value and quality in its investment strategy?

A value company for the fund is one that is in the cheapest 20% of the market based on various valuation metrics. Quality is determined by companies that are undervalued due to market irrationality or other factors. Examples of valuation metrics used include EV to EBIT, free cash flow yield, and price to tangible book.

Q: Can you provide examples of trades where the fund identified undervalued sustainable leaders that other investors overlooked?

Two examples highlighted are NatWest and eBay. NatWest is trading at a valuation below its tangible book value despite strong return on tangible equity and a healthy dividend yield. eBay, while not part of the "FANG bubble," offers attractive valuations and has a strong sustainability story in supporting a circular economy.

Summary & Key Takeaways

• The Schroeder Global Sustainable Value Equity Fund is a value portfolio that holds undervalued companies trading below their intrinsic value and are also ESG leaders.

• The fund defines an ESG leader as a company that has a net positive benefit on society and is Best in Class within its industry peer group.

• The fund has revenue-based exclusions, which may exclude sectors like thermal coal and tobacco, but places more emphasis on its own definition of ESG leaders.