Monthly commentary - Mackenzie Cundill Team

Written by the Mackenzie Cundill Team

The Mackenzie Cundill Value Fund adheres to a disciplined value investing philosophy. The fund focuses on buying undervalued, out-of-favour, or misunderstood stocks. The goal is to generate competitive long-term returns as these stocks’ re-price in the market. The fund has a global mandate, allowing it to invest in high-conviction ideas from industries, sectors, and countries around the world. The team looks for stocks with identifiable catalysts that can unlock value over time.

Cundill Value Fund top 10 explained

We provide an explanation on the Top 10 names held in the Mackenzie Cundill Value Fund and why favor these investments by identifying catalysts that can generate consistent returns.

1. Broadcom: Broadcom trades at a discount based on our discounted cash flow model. The VMWare acquisition has been highly successful, simplifying the software portfolio and raising prices, leading to a significant increase in free cash flow. Broadcom is also capturing market share from Nvidia in the AI ASIC (application-specific integrated circuit) and networking sectors, signing new hyperscale customers as its value proposition becomes clearer. We initiated our position in September 2024 when the stock dropped to the $140 range.
2. Wells Fargo: Despite lagging in growth due to an asset cap, Wells Fargo is poised for a valuation uplift with the expected removal of the cap within the next 18 months. The US economy remains healthy, and Wells Fargo has gained market share in investment banking. Significant cost improvements are anticipated, with a P/E ratio of 13x and a 2% yield.
3. Salesforce (CRM): CRM trades at a discount to our discounted cash flow model value, with a P/E ratio of 24x, which is low for a recurring subscription revenue business. This P/E does not account for its compounding growth and margin expansion opportunities. CRM is well-positioned to benefit from enterprise AI adoption, with clean and organized data and integrated AI agents in its Sales and Service offerings. We started our position in CRM in 2022 when the stock dropped from $300 to the $150 range.
4. Siemens: Siemens is a global leader in industrial technologies with a sum-of-the-parts (SOTP) story, as management can spin off Healthineers to investors. The company is exposed to data center growth through its Smart Infrastructure segment and is seeing a recovery in automation due to destocking and a recovering China. Siemens boasts a strong balance sheet and an attractive dividend yield of 3%.
5. Brookfield Corp: Brookfield Corp is a very undervalued alternative asset manager with substantial growth ahead, backed by quality management. There is a secular trend globally for institutions to move assets into the alternative space. Brookfield's compelling strategy involves investing in long-duration, inflation-protected real assets. The stock is very cheap at 14x P/E.
6. Citigroup: Citigroup is a deep value global bank undergoing a multi-year restructuring in operations. It stands to benefit from deregulation under the new administration in the US. The stock trades below tangible book value, with a P/E of 10x and a 2.9% dividend yield.
7. Alstom: Alstom is the world's largest rail rolling stock company, benefiting from urbanization, aging rolling stock replacement, and growth in emerging markets. The company is a margin expansion story driven by growth in services and is improving its free cash flow and balance sheet as it recovers from deep value territory in early 2024.
8. Skechers: Skechers is the third-largest footwear brand, with exposure to a large and growing mid-to-low-end consumer segment. Its international business remains the biggest growth opportunity. The stock trades at 13x P/E but offers double-digit three-year earnings CAGR, making it much cheaper than Nike and Adidas with more upside potential.
9. UBS Group: UBS Group is a top global wealth manager and investment bank with substantial synergies since taking over Credit Suisse. It is a market share leader in Swiss banking and offers a very compelling valuation at 16x P/E and only 1.2x P/Book. UBS is the leading bank for international billionaires who prefer not to bank with a US institution.
10. Hewlett Packard Enterprise (HPE): HPE will benefit from the recent recovery in enterprise networking demand, which had been weak following a post-COVID digestion period. HPE's Aruba brand is a leading enterprise networking brand. Additionally, HPE has a strong liquid cooling portfolio, gaining share as the market transitions from Nvidia's Hopper to Blackwell GPUs, which require liquid cooling. The stock is extremely cheap, trading at sub-9x P/E.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

The contents of this document (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) are not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

This document may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of February 28, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.