Ben Whitmore and Dermot Murphy review the TM Brickwood Global Value Fund’s first year and provide an update on the fund’s current positioning and outlook.
Below are the key insights from the TM Brickwood Global Value Fund’s first anniversary webinar with managers Ben Whitmore and Dermot Murphy.
You can watch the webinar replay here:
10 key takeaways
- A disciplined, evidence-based investment process
Brickwood’s approach is grounded in long-term empirical evidence rather than macro forecasting. The process combines:
- Two proven screening tools:
- CAPE Yield (valuation over a 10-year earnings cycle)
- Greenblatt Screen (valuation + quality via EV/EBIT and return on operating assets)
- Deep fundamental analysis of balance sheets, cash flows, and profitability
- Strict risk controls, including diversification and avoidance of weak balance sheets
- Integrated ESG oversight from the outset
The managers’ key principle is to avoid areas where evidence suggests poor outcomes (e.g. highly leveraged companies or weak cash generation).
- Why two screens are better than one
Both CAPE and Greenblatt have strong long-term track records, but they behave differently across market cycles.
- CAPE provides an absolute valuation anchor
- Greenblatt introduces a quality overlay
Using both:
- Smooths performance over time
- Reduces reliance on any single factor
- Allows flexibility when market conditions shift
- Portfolio positioning: unusually cheap and higher quality
Today’s portfolio stands out for combining:
- Very low valuations
- ~80% in the cheapest CAPE quintile
- Above-average quality
- Majority of holdings rank highly on Greenblatt metrics
- Strong overlap
- Over 70% of holdings screen attractively on both measures
This combination is rare. Historically, deep value has often meant sacrificing quality, but that is not the case in today’s environment.
- Performance: solid absolute returns, relative headwinds
- Fund return (Year 1): +13.9%
- Benchmark: +17.5%
- Relative performance: -3.6%
The shortfall was driven primarily by sector positioning, not stock selection.
Key headwinds:
- Overweight:
- Consumer discretionary
- Consumer staples
- Healthcare
- Underweight:
- Energy
- Utilities
- IT
These underweights hurt as the latter sectors led market returns.
Encouragingly:
- Stock selection added value within sectors
- Fundamental returns (dividends + earnings growth) were stronger than the benchmark
- Underperformance was largely due to valuation de-rating vs. market re-rating
- A highly unusual market environment
Two notable dynamics shaped the year:
- CAPE worked as expected (cheap outperformed expensive)
- Greenblatt underperformed in a rare reversal of historical patterns
At the same time:
- Markets favoured asset-heavy, lower-quality businesses
- Earnings momentum, not valuation or quality, dominated returns
The managers’ view this as temporary rather than structural.
- Sector dispersion has narrowed, unlocking new opportunities
One of the most important structural shifts:
- The valuation gap between sectors has compressed significantly
- High-quality sectors (e.g. consumer staples) are now much cheaper relative to history
The implication of this is that value investors can now access higher-quality businesses without paying a premium. This expands the opportunity set beyond traditional “deep value” sectors like financials and energy.
- Sector exposure: more diverse than it appears
While consumer discretionary is the largest allocation, it includes:
- Deep cyclicals (autos, housing)
- Premium brands (luxury, leisure)
- Defensive-like businesses (e.g. contract catering)
Overall, the portfolio has broad diversification across industries and geographies and a balance between cyclical and resilient earnings streams
- Risk management: avoiding value traps
The team acknowledges that value investing inevitably encounters some traps. Their approach:
- Model upside and downside scenarios (not point estimates)
- Adjust expectations where structural change is evident
- Focus on prudent assumptions, not optimistic mean reversion
- Avoid weakest balance sheets and excessive leverage
- Balance sheets remain a key strength
- High proportion of net cash companies
- Low overall leverage (~0.5x)
- Stronger balance sheets than the benchmark
This reflects a core belief that highly leveraged companies are statistically poor hunting ground for value investors.
- Outlook: optimism driven by fundamentals
Despite short-term underperformance, the team is encouraged by:
- Strong underlying earnings growth
- High dividend yield
- Rare combination of low valuation + good quality
Crucially, valuation changes are temporary and fundamental returns are durable
The first year in summary
The first year highlights a key theme: the market is currently offering value investors an unusual opportunity to buy better businesses at cheaper prices.
While short-term performance has been influenced by sector dynamics and factor rotations, the managers believe the portfolio is well positioned for long-term outperformance driven by fundamentals.
- Insights