3Q 2025 Update Webinar Replay
Original broadcast details
Date: Tuesday, October 14, 2025
Executive Summary
Third quarter returns continued an already strong year in the U.S. Lyrical-CS returned 3.4% in the quarter, bringing the year-to-date return to 15.7%. The S&P 500 continued to be boosted by mega-cap growth stocks and returned 8.1% in the quarter, outperforming our CS composite by 470 basis points, but we still lead that index by 90 bps for the year.
Third quarter returns continued an even stronger year for International. TThe MSCI EAFE index returned 4.8% in the quarter and is now up 25.1% year-to-date, outperforming the S&P 500 by 10.3 percentage points. Lyrical’s International composite returned 2.6% in the quarter, underperforming the EAFE, but is still outperforming for the year by a wide margin with a 30.6% return, 550bps ahead of the EAFE index.
Like U.S. and International, Global Value and GIVESunderperformed in the quarter, butare outperforming for the year. Lyrical Global returned 2.5% in the quarter, bringing the year-to-date return to 18.8%. The MSCI World Index was also boosted by U.S. mega-cap growth stocks and returned 7.3% in the quarter, outperforming our Global composite by 480 basis points. Year-to-date we still lead that index by 140 bps. GIVES returned 5.6% in the quarter, compared to 10.1% for the MSCI Sustainable Impact Index. Year-to-date GIVES returned 27.7%, 10.6 percentage points ahead of the index.
We believe our uncommon combination of value and growth is as attractive as ever. In regard to valuation, the value spread in the U.S. between our portfolio and the S&P 500 is historically wide at 80%. This compares to about a 30% average spread during the first decade of our firm. Regarding growth, our U.S. companies have an average historical EPS CAGR of over 10%, more than three percentage points faster than the S&P 500 growth of 6.4%. If our companies keep compounding earnings, their stock prices should follow. And if that growth continues to match or outpace that of the S&P 500, their valuation multiples should rise too, and their stock prices should rise even more.
The Wall Street Transcript: Interview with Andrew Wellington
The following interview is reprinted from June 16, 2025
2Q 2025 Update Webinar Replay
Original broadcast details
Date: Tuesday, July 15, 2025
Executive Summary
Lyrical’s U.S. CS composite had a great quarter with a 12.7% return.Lyrical-CS outperformed the S&P 500 by 180 bps, despite a difficult environment. Mega-cap stocks outperformed, and the large-cap value indices underperformed. Lyrical was able to overcome those headwinds due to our idiosyncratic stock selection. Year-to-date, Lyrical-CS is 570 bps ahead of the S&P 500 and 860 bps ahead of the S&P 500 Value.
It was an even better quarter for our International Value composite.The MSCI EAFE index is up 19.5% year-to-date, outperforming the S&P 500 by 13.3 percentage points. On top of that, our International composite is outperforming the EAFE benchmark by 7.7 percentage points, returning 27.2% year-to-date.
Global Value also strongly outperformed.Our Global portfolio returned 13.9% in the quarter, ahead of the MSCI World Index by 240 bps and ahead of our style benchmark, the MSCI World Value Index, by 850 bps.
Our Global Value Impact Strategy, GIVES, crossed the 5-year mark with a strong track record. Since its launch in June 2020, GIVES has delivered a 15.1% annualized net return, nearly 1,000 bps per year better than the MSCI Sustainable Impact Index. This outperformance has come from avoiding expensive impact stocks and focusing on the overlooked impact stocks in the cheapest parts of the market.
We believe we remain well-positioned with our uncommon combination of value and growth.The S&P 500 forward P/E is 73% higher than Lyrical’s CS composite, despite our higher growth profile. In International, we also have the same combination of lower valuation and higher growth. We believe these valuation spreads should normalize, which would provide a significant performance tailwind in the future.
Global Strategy Update: Assessing Tariff Risk and Resilience
Our Global portfolio delivered a return of 1.7% in the first quarter. This performance outpaced the MSCI World index by 350 bps. In a reversal of the trend of the prior two years, the Magnificent Seven mega-cap growth stocks on average declined by over 15%, dragging down the MSCI World. While we trailed our value style benchmark by 310 bps, we are encouraged by the meaningful outperformance versus the MSCI World benchmark.
The broader market story this quarter was the remarkable strength of markets outside the U.S. While the S&P 500 declined 4.3%, the MSCI EAFE index rose 6.9%, an 11.2 percentage point difference and the widest quarterly spread between the two since Q2 of 2002, nearly 23 years ago.
Non-U.S. markets have been shunned and with reason, given the dominating performance of the S&P 500 over the past 15 years. But in the wake of investors passing over stocks outside the U.S., we’ve found plenty of opportunities. Heading into this year, we had 9 high-quality non-U.S. businesses trading for less than 10x forward earnings and the overall portfolio traded at a P/E of just 11.0x. In the first quarter, we benefited from this extreme valuation potential in non-U.S. stocks, and we believe there is substantially more remaining.
Global Impact Value Equity Strategy (GIVES) Update: Assessing Tariff Risk and Resilience
Our Global Impact portfolio delivered a return of 3.9% in the first quarter. This performance outpaced the MSCI World index by 570 bps. In a reversal of the trend of the prior two years, the Magnificent Seven mega-cap growth stocks on average declined by over 15%, dragging down the MSCI World. We also outperformed our style benchmark, the MSCI World Sustainable Impact Index, by 370bps.
The broader market story this quarter was the remarkable strength of markets outside the U.S. While the S&P 500 declined 4.3%, the MSCI EAFE index rose 6.9%, an 11.2 percentage point difference and the widest quarterly spread between the two since Q2 of 2002, nearly 23 years ago.
Non-U.S. markets have been shunned and with reason, given the dominating performance of the S&P 500 over the past 15 years. But in the wake of investors passing over stocks outside the U.S., we’ve found plenty of opportunities. Heading into this year, we had six high-quality non-U.S. businesses trading for less than 10x forward earnings and the overall portfolio traded at a P/E of just 11.8x. In the first quarter, we benefited from this extreme valuation potential in non-U.S. stocks, and we believe there is substantially more remaining.
International Strategy Update: Assessing Tariff Risk and Resilience
We’re pleased to report that our International portfolio delivered a strong return of 9.0% in the first quarter. This performance outpaced the MSCI EAFE index by 210 bps and beat the MSCI EAFE Equal Weighted index by 280 bps. While we trailed our value style benchmark by 260 bps, we are encouraged by the absolute return and the meaningful outperformance versus broad and equal-weighted international benchmarks.
The broader market story this quarter was the remarkable strength of markets outside the U.S. While the S&P 500 declined 4.3%, the MSCI EAFE index rose 6.9%, an 11.2 percentage point difference and the widest quarterly spread between the two since Q2 of 2002, nearly 23 years ago.
Non-U.S. markets have been shunned and with reason, given the dominating performance of the S&P 500 over the past 15 years. But in the wake of investors passing over stocks outside the U.S., we’ve found plenty of opportunities. Heading into this year, we had 14 high-quality businesses trading for less than 10x forward earnings and the overall portfolio traded at a P/E of just 10.4x. In the first quarter, we benefited from this extreme valuation potential, and we believe there is substantially more remaining.
Lyrical Investing Perspectives from Warren E. Buffett
“SHARES ARE NOT MERE PIECES OF PAPER. THEY REPRESENT PART OWNERSHIP OF A BUSINESS. SO, WHEN CONTEMPLATING AN INVESTMENT, THINK LIKE A PROSPECTIVE OWNER.” – WARREN BUFFETT
With the recent news that Warren Buffett will be stepping down from his position as CEO of Berkshire Hathaway, we wrote this piece to illustrate how his teachings have influenced us as investors. While Lyrical’s approach of investing in the “gems amid the junk” is homegrown, our philosophy and process has been influenced by great investors that came before us. And there is none greater than the Oracle of Omaha, Warren Buffett.
The investment community is blessed with a treasure chest that includes nearly 70 years of writings and commentary from Buffett. In each section below, we match a key pillar of Lyrical’s investment process with one of his influential quotes.
Gems Amid the Junk™
The simplest way to summarize our investment approach is that we seek to own the gems amid the junk. It is all about getting more for less. More quality and earnings growth for lower valuations.
To our core, we are value investors. We seek to own the cheapest stocks in our universe, because the cheapest stocks historically have had the highest returns. Incredibly, in the U.S. the cheapest stocks have outperformed the S&P 500 by nearly 400 bps per annum over the last 40+ years. Over that same period, the cheapest stocks outside the U.S. did even better, and outperformed the MSCI EAFE by over 400 bps per annum.
While cheap stocks have been strong performers, they are often junky companies with low quality characteristics and low earnings growth. Despite these weaker fundamentals, the cheapest stocks still have outperformed over most time periods, and by a wide margin.
This counterintuitive outperformance is driven by the cheap stocks being too cheap. Yes, most of these stocks deserve lower valuation multiples than the rest of the market, but they are so unpopular that their multiples become too low. Over time, these stocks see their multiples expand from “too low” to appropriately low, and that expansion is what has driven their strong performance.
While most of the cheapest stocks are junk, within that junkyard there are gems waiting to be discovered. These gems are companies that have the quality and growth characteristics of pricier stocks, yet their valuations are in line with the cheapest stocks. Undeniably, these gems are rare exceptions that take effort and skill to discover, but they do exist. Given that the cheap junk has outperformed over time, we expect these cheap gems to outperform by even more.
By owning the gems amid the junk, we have built portfolios with the uncommon combination of both deep value and quality growth characteristics. This combination is quantifiable and demonstrates our investment proposition relative to our peers. Compared to most of our peer group, especially those that closely track the value benchmarks, our portfolio not only has a lower P/E valuation, but also a superior earnings growth profile.
Finding gems amid the junk. Getting more for less. That is our formula for success.
1Q 2025 Update Webinar Replay
Original broadcast details
Date: Tuesday, April 15, 2025
Executive Summary
The S&P 500 lost 4.3% in 1Q25, its worst quarter since 2022.The Magnificent Seven declined by over 15% on average, dragging down the S&P 500, reversing the trend of the prior two years. The rest of the S&P 500 on average performed much better, and the S&P 500 Equal Weight index declined only 0.6%.
Lyrical CS outperformed the S&P 500 by 360 bps.The main driver of the outperformance was that our value portfolio did not own Magnificent Seven mega-cap growth stocks.
International stock performance was the big story of the first quarter.While the S&P 500 lost 4.3%, the MSCI EAFE index gained 6.9%, an 11 percentage point difference. Our International Value composite performed even better with a 9.0% return. Even after this quarter’s performance, we believe the opportunity in International stocks remains extreme, and even more so in International value stocks.
The tariffs announced on April 2nd have roiled the equity markets, overshadowing whatever happened in the first quarter.We believe Lyrical’s focus on quality and analyzability has positioned us well to manage through this current unpredictable environment. Our portfolio should also be well positioned to handle any economic stress that arises from tariff fallout.
Additionally, our portfolio carries a steeply discounted valuation, and a superior growth history.Lyrical CS composite P/E is attractive at 11.7x. Meanwhile, the S&P 500’s P/E is 20.1x, 25% above its average since our inception, and 72% above that of Lyrical-CS. Furthermore, Lyrical-CS’s current portfolio EPS growth history is more than two percentage points faster than the S&P 500’s.
2024 Global Impact Value Equity Strategy (GIVES) Review
In 2024 our Global Value Impact Equity Strategy (GIVES) had a strong year, proving that our value approach to sustainable investing can deliver strong financial returns even as the impact index suffers. We generated a +5.7% net return, significantly outperforming our style benchmark of the MSCI Sustainable Impact Index, which returned -9.4%. As in 2023, concerns about the speed of adoption for major sustainability trends like EVs and renewables dragged down the valuations of many of the more obvious impact stocks. At the same time, our cheaply valued impact stocks managed to post reasonable financial returns, while also delivering positive change including almost four million tonnes of portfolio-weighted emissions avoided.