The final quarter of the year was a positive environment for value investing. All of the Cundill Funds performed favourably relative to their benchmarks, as should be expected in this type of environment.
It has been our view that value-oriented, cyclical stocks have been ripe for rotation throughout the first half of 2016. We encountered a speed bump in the rotation to value with a surprisingly low U.S. employment number in May and the unexpected results from the UK referendum vote in June.
The second quarter was marked by volatility surrounding the UK vote to exit the European Union. Notably toward the end of the quarter, a “risk-off” sentiment in the market depressed the valuation of many value stocks as investors seek the perceived “safety” of largely expensive, but low volatility sectors such as Consumer Staples, Telecommunications, and Utilities.