Invesco US Value Equity Fund
1st Quarter 2014
This marketing document is exclusively for use by Professional Clients and Financial Advisers in Continental
Europe and Qualified Investors in Switzerland. This document is not for consumer use, please do not
redistribute.
Important information about this fund
The Invesco US Value Equity Funds investment objective is to provide reasonable long
term capital growth, measured in US Dollars. Investments will be sought in equity
securities that the Company believes to be undervalued relative to the stock market in
general at the time of purchase. The Fund will invest primarily in the common or preferred
stocks of companies which are located in the US. A company will be considered located in
the US if (i) it is organised under the laws of the US and has its principal office in the US
or (ii) it derives 50% or more of its revenues from businesses in the US. The Fund may
also invest, on an ancillary basis, in the equity securities of companies traded principally
on US stock exchanges, convertible debt securities, US Government securities (securities
issued or guaranteed as to principal and interest by the US Government or its agencies
and instrumentalities) and investment grade corporate debt securities. Furthermore, the
Fund may, in accordance with the investment restrictions provided for in Appendix A,
invest on an ancillary basis in money market instruments when, in the opinion of the
Investment Adviser, the projected total return on such securities is equal to or greater
than the expected total return on equity securities or when such holdings might be
expected to reduce the volatility of the portfolio (for the purposes of this provision, the
term "total return" means the difference between the cost of a security and the aggregate
of its market value and income earned).
The Invesco US Value Equity Fund was formerly named Morgan Stanley US Value Equity
Fund, and it became the Invesco US Value Equity Fund on 9 June 2010 as part of
Invesco’s acquisition of Van Kampen Investments/Morgan Stanley Retail Asset
Management Business.
The investment objective is not guaranteed and may be subject to change.
2
Table of contents
Fund profile
Investment team
Investment process
Performance and characteristics
Appendix
3
Fund profile
Fund profile: Invesco US Value Equity Fund
As of 31 March 2014
Fund Launch
30 June 20111
Legal Status
Luxembourg SICAV with UCITS status
Share Class Base Currency
USD
Benchmark
S&P 500 Index
Russell 1000® Value Index
Fund Assets
US$205.66 million
Portfolio Team
Kevin Holt, CFA
Devin Armstrong, CFA
Matthew Seinsheimer, CFA
Jason Leder, CFA
Jay Warwick
Umang Khetan
Investment Philosophy
and Process
Through a bottom up, deep value/contrarian stock selection process, we identify
stocks that appear undervalued.
Typical Number of Holdings
65-100
Market-cap
Large Cap ($5 billion+)
Annual Turnover
10%-30%
1 The Invesco US Value Equity Fund was formerly named Morgan Stanley US Value Equity Fund, and it became the Invesco US Value Equity Fund on 9 June 2010
as part of Invesco’s acquisition of Van Kampen Investments/Morgan Stanley Retail Asset Management Business. The fund was merged into the Invesco Funds
(Luxembourg SICAV with UCITs status) on 30 September 2011.
The Chartered Financial Analyst® (CFA®) designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study
program in the field of investment management and research analysis. The S&P 500®Index is an unmanaged index considered representative of the U.S. stock
market. The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a
trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. An investment cannot be made directly in an index. Data as at
31 March 2014.
5
Fund profile: Invesco US Value Equity Fund
Portfolio

Management Team

Investment
Philosophy
Other
Differentiators
Data as of 31 March 2014.
6
Fundamental, bottom-up, deep value/contrarian stock pickers
Sector specialists

Specialized team of six portfolio managers; average over 20 years experience

Stock prices often fail to reflect the true, intrinsic value of companies

Contrarian approach to stock selection

Focus on maximizing risk/reward trade-off

Rigorous fundamental research is key to taking advantage of pricing anomalies

Each PM is responsible for specific sectors and independently contributes to
portfolio based on sector expertise

Valuation metrics are aligned by sector/industry and allows us to identify
statistically cheap stocks
Investment
Performanceteam
team
Team approach
 Each Portfolio Manager is
responsible for specific sectors
and industries
– Employs preferred valuation metrics
– Idea generation
– Research and analysis
– Portfolio construction, including
buy and sell decisions
 Lead Portfolio Manager is also
responsible for oversight
– Checks and balances for all investment
decisions
– Facilitates weekly meetings/
dialogue within team
– Ensures diversification, sound decisionmaking and policy adherence
Holt — Team Lead
 Consumer
Discretionary
 Healthcare
 Banks/Diversified
Financials
 Telecom Service
Seinsheimer —
Armstrong —
Portfolio Manager
Portfolio Manager
 Materials
 Utilities
 Technology
 Automotive
 Industrials
 Energy
 Insurance
 Consumer Staples
 Asset Managers
Leder —
Manager of All-Cap
Value Strategy
Analysis for:
 Financials
Warwick —
 Technology
Portfolio Manager
 Cash Management
 Currency
 Separately Managed
Accounts
– Certifies sector allocations are derived
from individual stock selections rather than
macroeconomic calls
Data as of 31 March 2014. Subject to change without notice. For illustrative purposes only.
8
Khetan —
Analyst/
Projects
Investment process
Investment process: Overview
Investment process identifies attractive securities through multi-factor screening and
thorough, hands-on fundamental analysis.
Distilling the Universe
Fundamental Security Analysis
Selected Stocks
Begin with all US
denominated stocks
greater than $5 billion1,
including ADRs
Fundamental analysis with a focus on:
Attractive on basis of:
Focus on:
 Liquidity
 Valuation
Result:
Identifies potential
attractive candidates
 Financial statements
 Sensitivity analysis
 Due diligence
 Disciplined, company-level conclusions
 Fundamentals
 Valuation
 Outlook
 Risks
Establish price target
Result:
Determines attractiveness and
captures deeper understanding
1 The strategy may invest in small-, medium- or large-sized companies, but the primary focus is on stocks greater than $5 billion.
For illustrative purposes only.
10
Investment process: Distilling the universe
Sector screens attempt to identify attractively valued companies with ample liquidity;
emphasis on valuation metrics differs across sectors.
Potential Investment Candidates
Primarily liquidity driven with market cap greater than $5 billion1
Multi-Factor Screens
Identifies stocks with highest probability of meeting investment criteria
based on historical efficacy of valuation metrics
Liquidity
Daily trading volume large enough to allow for
buying/selling without imposing excess liquidity
risks
Cyclical sectors:
 Price to sales
Identifies attractive
large-cap stocks for
additional analysis
 Price to cash flow
 Price to book value
Valuation
 Relative dividend yield
Growth sectors:
 Price to earnings (P/E) to historical sector P/E
 P/E to growth rate
 P/E to historical earnings
 Price to sales
1 The strategy may invest in small-, medium- or large-sized companies, but the primary focus is on stocks greater than US$5 billion.
For illustrative purposes only.
11
Investment process: Fundamental security
analysis
We believe a company’s potential attractiveness is a function of its upside potential relative
to downside risk.
Financial statement
analysis
 Conservative accounting practices
 Balance sheet, cash flow statement, income statement
Sensitivity Analysis
 Project normalized earnings and free cash flow
 Perform sensitivity analysis based on changes that could fundamentally affect
earnings and growth projections
 Determine a security’s upside potential relative to its downside risk
Due diligence
Disciplined,
company-level
conclusions
Price target
For illustrative purposes only.
12
 Management’s long-term strategy, ability to execute and historical record
 Assessment of customers, suppliers, competitors
 Identification of key issues and capital allocation strategies
 What is the outlook for the company and stock?
 What are the critical drivers of growth?
 What are the risks — macro, industry, stock specific?
 Buys and sells based on rigorous financial and fundamental analysis
 Security is purchased only if the potential stock price appreciation materially
outweighs downside risk
Investment process: Portfolio construction and
risk management
Portfolio construction is based solely on bottom-up stock selection and risk is managed
at the individual stock level.
Diversification by
Sector/Industry
Diversification
by Security
 Can invest up to
25% in a given
industry
 Positions weighted
by risk/return
characteristics
 Price target reached
 No sector exposure
limitations
 Maximum position
5% at cost
 Better risk/reward
opportunities
 Cash position less
than 5%
Sell Discipline
 Investment thesis
has changed
Optimal Portfolio
Reviewed with
CIO to ensure
adherence to
stated philosophy
and process
 Can invest up to
25% in foreign
securities1
Result:
Helps manage
non stockspecific risk
Result:
Manages risk by
limiting
concentration,
controlling costs
Result:
Focuses capital on
high-conviction
holdings
1 For the lifetime of the strategy, the historical range for foreign securities is between 5% and 15%.
Diversification does not guarantee a profit or eliminate the risk of loss.
For illustrative purposes only.
13
65-100 stocks
Performance and characteristics
Performance and characteristics:
Invesco US Value Equity Fund
Presented in US$ terms
Performance Returns as of 31 March 2014
Average Annual
QTD
Rates of Return (%)
YTD
1 Year
3 Years
5 Years
10 Years
Since
Inception1
Invesco US Value Equity Fund,
Class A Acc Shares (Gross)
1.83
1.83
22.85
14.29
22.66
7.83
5.12
Invesco US Value Equity Fund,
Class A Acc Shares (Net)2
1.40
1.40
20.77
12.27
20.50
5.96
3.43
S&P 500 Index
1.81
1.81
21.86
14.66
21.16
7.42
4.31
Russell 1000 Value Index
3.02
3.02
21.57
14.80
21.75
7.58
6.20
Past performance is not a guide to future returns.
1 Performance start date is as of 2 August 1999. Invesco US Value Equity Fund was formerly named Morgan Stanley US Value Equity Fund, and it became the
Invesco US Value Equity Fund on 9 June 2010 as part of Invesco’s acquisition of Van Kampen Investments/Morgan Stanley Retail Asset Management business.
The fund was merged into the Invesco Funds (Luxembourg SICAV with UCITs status) on 30 September 2011.
2 The figures do not reflect the entry charge payable by investors.
Source: Invesco. Mid to mid, gross income re-invested to 31 March 2014unless otherwise stated. Returns greater than one year are annualised. The S&P 500
Index is a market capitalization weighted index covering all major areas of the US economy. The performance of the S&P 500 is an unmanaged index considered
representative of the US stock market. The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell
1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. An investment cannot be made directly in
an index. Performance data quoted represents past performance and cannot guarantee comparable future results; current performance may be lower or higher.
15
Performance and characteristics:
Historical risk/reward comparison
Invesco US Value Equity Fund
5 Years
10 Years
Return (%)
22.66
7.83
Std. Dev. (%)
15.46
16.19
Return (%)
21.75
7.58
Std. Dev. (%)
14.75
15.59
Return (%)
21.16
7.42
Std. Dev. (%)
13.99
14.71
Manager Risk-Return (5 Years)
Invesco US Value Equity Fund (Gross)
30
Return
(% p.a.)
25
Russell 1000® Value Index
20
S&P 500 Index
15
10
10
15
20
25
Annual Standard Deviation (%)
30
Past performance is not a guide to future returns.
Invesco US Value Equity Fund
Russell 1000® Value Index
S&P 500 Index
Data as of 31 March 2014. Class A Acc Shares (Gross).
Sources: Invesco. Returns are gross of fees. Returns greater than one year are annualised. The figures do not reflect the entry charge
payable by investors. The S&P 500 Index is a market capitalization weighted index covering all major areas of the US economy. The
performance of the S&P 500 is an unmanaged index considered representative of the US stock market. The Russell 1000® Value Index is
an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of
the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. An investment cannot be made directly in an index.
16
Performance and characteristics:
Risk-Return Table
Invesco US Value Equity Fund
Benchmark: Russell 1000® Value Index
Invesco US Value Equity Fund Invesco US Value Equity Fund
(Gross) – 5 Years
(Gross) – 10 Years
Return
22.66%
7.83%
R-squared
82.46%
85.34%
Tracking Error
6.51%
6.23%
Alpha
1.89%
0.67%
Beta
0.95
0.96
Sharpe
1.45
0.36
Past performance is not a guide to future returns.
Data as of 31 March 2014. Class A Acc Shares (Gross).
Source: Invesco. Returns are gross of fees. Returns greater than one year are annualised. The figures do not reflect the entry charge payable by
investors. The Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value
Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. An investment cannot be made directly
in an index.
17
Performance and characteristics:
Portfolio characteristics
Invesco US Value Equity Fund
Invesco US Value
Equity Fund
Russell 1000
Value Index
73
662
US$95,915
US$112,169
6.98%
9.07%
Est. Long-Term Growth Rate (Weighted Avg.)
10.78%
9.60%
Return on Equity (Weighted Avg.)
13.57%
12.16%
Return on Assets (Weighted Avg.)
4.60%
4.87%
LT Debt/Capital (Weighted Avg.)
33.33
30.03
Net Margin (Weighted Avg.)
11.66
12.20
Forward Price to Earnings (FY2 Weighted Har. Avg.)
12.15
13.44
Price to Book (Weighted Avg.)
2.40
2.15
Price to Cash Flow (Weighted Avg.)
9.71
10.84
Price to Sales (Weighted Avg.)
1.98
2.37
Number of Securities Held
Weighted Average Market Capitalization (US$ millions)
Hist. 3-Year Earning-Per-Share Growth (Weighted Avg.)
Data as of 31 March 2014. Sources: Invesco, CompuStat, Thomson Financial, Frank Russell. Numbers may not calculate evenly due to
rounding. Estimated Long-Term Growth Rate is not a predictor of fund performance. The Russell 1000® Value Index is an unmanaged
index considered representative of large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank
Russell Co. Russell® is a trademark of the Frank Russell Co. An investment cannot be made directly in an index. Portfolio characteristics
are subject to change without notice.
18
Performance and characteristics:
Top ten holdings
Invesco US Value Equity Fund
Invesco US Value
Equity Fund (%)
Sector
Citigroup Inc.
3.86
Financials
JPMorgan Chase & Co.
3.22
Financials
Weatherford Intl Ltd.
2.65
Energy
Halliburton Co.
2.36
Energy
Wells Fargo & Co.
2.24
Financials
Merck & Co Inc.
2.23
Health Care
Viacom Inc. Cl B
2.21
Consumer Discretionary
Bank of New York Mellon Corp.
2.15
Financials
Suncor Energy
2.00
Energy
General Electric Co.
1.98
Industrials
Total
24.90
Data as of 31 March 2014. Source: Invesco. Holdings are subject to change and are not buy/sell recommendations. The portfolio
holdings are organized according to the Global Industry Classification Standard, which was developed by and is the exclusive property
and service mark of MSCI Inc. and Standard & Poor’s. There is no guarantee that these securities are currently held or will be held by
Invesco funds in the future nor a recommendation to buy/sell/hold the securities and no investment advice. Portfolio characteristics are
subject to change without notice.
19
Performance and characteristics:
Sector exposure
Invesco US Value Equity Fund
Sector
Consumer Discretionary
Consumer Staples
Invesco US Value
Equity Fund
Underweight/Overweight
13.22
6.81
4.83
Energy
15.59
Financials
23.97
Health Care
14.53
Industrials
5.13
Information Technology
9.93
Materials
2.10
Telecommunication Services
1.97
Utilities
2.42
Cash and Equivalents
6.31
6.41
5.83
-1.00
1.06
14.53
29.09
-5.12
1.00
13.53
10.17
-5.04
0.97
-0.84
-0.50
-3.66
Data as of 31 March 2014. Sources: Invesco, Frank Russell Co. Numbers may not calculate evenly due to rounding. The Global Industry
Classification Standard was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. The
Russell 1000® Value Index is an unmanaged index considered representative of large-cap value stocks. The Russell 1000 Value Index is
a trademark/ service mark of the Frank Russell Co. Russell® is a trademark of the Frank Russell Co. An investment cannot be made
directly in an index. Portfolio characteristics are subject to change without notice.
20
Russell 1000
Value Index
8.96
2.94
2.47
6.08
—
Performance and characteristics:
Performance attribution
Invesco US Value Equity Fund vs. Russell 1000 Value Index
31 March 2013 to 31 March 2014
Portfolio
Weight
(%)
Benchmark
Weight
(%)
Portfolio
Return1
(%)
Benchmark
Return
(%)
Selection +
Interaction
Effect (%)
Market
Allocation
Effect (%)
Total
Effect
(%)
15.74
6.96
26.14
25.77
0.08
0.52
0.60
5.52
6.29
24.11
16.02
0.38
0.08
0.46
Energy
15.10
15.00
22.44
12.89
1.38
0.05
1.42
Financials
25.49
28.86
26.70
23.42
0.84
0.00
0.84
Health Care
15.17
12.84
30.45
28.88
0.20
0.16
0.35
5.87
9.83
22.22
27.18
-0.23
-0.23
-0.46
10.50
8.35
34.48
31.50
0.22
0.25
0.47
Materials
2.17
2.99
24.87
21.44
0.05
0.06
0.10
Telecom Services
2.23
2.68
20.49
6.25
0.34
0.08
0.43
Utilities
2.12
6.20
1.69
10.09
-0.17
0.56
0.40
Cash
0.13
—
-12.03
—
—
0.71
0.71
-0.04
—
—
—
—
-0.58
-0.58
100.00
100.00
26.31
21.57
3.07
1.65
4.75
Sectors
Consumer Discretionary
Consumer Staples
Industrials
Information Technology
Unassigned
Totals
Past performance is not a guide to future returns.
1 The figures do not reflect the entry charge payable by investors.
Source: FactSet Research Systems Inc. Class A Acc Shares (Gross).
Sector weights are subject to change. The Global Industry Classification Standard was developed by and is the exclusive property and a
service mark of MSCI Inc. and Standard & Poor’s. The Russell 1000® Value Index is an unmanaged index considered representative of
large-cap value stocks. The Russell 1000 Value Index is a trademark/service mark of the Frank Russell Co. Russell® is a trademark of
the Frank Russell Co. An investment cannot be made directly in an index. Portfolio characteristics are subject to change without notice.
21
Appendix
Invesco US Value Equities investment team
Jim Gilligan, CFA, CPA — Chief Investment Officer
US Value Equities – Portfolio Management
Small Cap Value
Mid Cap Value
Large Cap Value
Relative Value
Diversified Dividend
Canon Coleman, Lead PM
Jonathan Edwards, PM
Jonathan Mueller, PM
Tom Copper, Lead PM
John Mazanec, PM
Kevin Holt, Lead PM
Devin Armstrong, PM
Matthew Seinsheimer, PM
Jason Leder, PM
Jay Warwick, PM
Umang Khetan, Analyst
Thomas Bastian, Lead PM
Mary Jayne Maly, PM
James Roeder, PM
Sergio Marcheli, PM
Brian Jurkash, Sr. Analyst
Meggan Walsh, Lead PM
Robert Botard, PM
Kristy Bradshaw, PM
Jonathan Harrington, PM
Data as of 31 March 2014. Subject to change without notice.
23
Invesco Large Cap Value Team
Team Member
Responsibility
Joined
Industry
Joined
Firm
Education
Kevin Holt, CFA
Lead Portfolio Manager
 Consumer Discretionary  Banks/Diversified
Financials
 Healthcare
1989
19991
 University of Chicago, M.B.A.
 Materials
 Insurance
1997
 Technology
 Asset Managers
 University of Iowa, B.B.A.
 Telecom Service
Devin Armstrong, CFA
Portfolio Manager
20041
 Columbia University, M.B.A.
 University of Illinois, B.S.
 Industrials
Matthew Seinsheimer, CFA
Portfolio Manager
 Utilities
 Consumer Staples
1992
1998
 Automotive
 Southern Methodist University,
B.B.A.
 Energy
Jason Leder, CFA, CPA
Portfolio Manager
 Manager of All-Cap
Value Strategy
Jay Warwick
Portfolio Manager
 Cash Management
Analysis for:
 Financials
 Technology
1989
19951
1994
20021
 Currency
 Analyst/Projects
 Columbia University, M.B.A.
 University of Texas, B.B.A.
 University of Houston, M.B.A.
 Stephen F. Austin State
University, B.B.A.
 Separately Managed Accounts
Umang Khetan
Analyst
 University of Texas, M.B.A.
2005
2012
 University of California,
Los Angeles, B.S.
 Columbia University, M.B.A
1 Represents start date with Van Kampen Investments, which was acquired by Invesco in June 2010.
Data as of 31 March 2014. Subject to change without notice.
CPA® and Certified Public Accountant® are trademarks owned by the American Institute of Certified Public Accountants. This is not a CPA firm.
24
Invesco Large Cap Value Team – continued
Kevin C. Holt, CFA
Lead Portfolio Manager
Devin E. Armstrong, CFA
Portfolio Manager
Matthew Seinsheimer, CFA
Portfolio Manager
Jay N. Warwick
Portfolio Manager
Kevin Holt joined Invesco in 2010. He
was previously portfolio manager for
the US Value strategy at Van Kampen,
which he joined in 1999. Before joining
Van Kampen, he served as a senior
research analyst at Strong Capital
Management and as a portfolio
manager/research analyst at Citibank
Global Asset Management. He began
his career as a senior financial analyst
for Harris Trust and Savings Bank.
Devin Armstrong joined Invesco in
2010. He previously joined Morgan
Stanley in 2004, where he served as
member of the US Research team
before becoming a portfolio manager.
Before joining Morgan Stanley, he was
a research associate at William Blair &
Company and a senior analyst at
Ibbotson Associates.
Matthew Seinsheimer began his
investment career in 1992 as a
fixed-income trader at Neuberger
Berman. In 1995, he joined American
Indemnity Co., where he served as a
portfolio manager on both
fixed-income and equity portfolios.
Mr. Seinsheimer joined Invesco in
1998.
Jay Warwick joined Invesco in 2010.
He previously joined Van Kampen in
2002, where he served as a portfolio
specialist for the Multi Cap Value team.
Prior to that, he worked at AIM
Management Group.
Mr. Armstrong earned a Bachelor of
Science degree in psychology and
finance from the University of Illinois
and a Master of Business
Administration degree in finance from
Columbia University. He is a CFA
charterholder.
A native of Galveston, Texas, Mr.
Seinsheimer earned a Bachelor of
Business Administration degree from
Southern Methodist University and a
Master of Business Administration
degree from The University of Texas at
Austin. He is a CFA charterholder.
Mr. Holt earned a bachelor’s degree
from the University of Iowa and a
Master of Business Administration
degree from the University of Chicago
Graduate School of Business. He is a
CFA charterholder and a member of
the CFA Institute and the Houston
Society of Financial Analysts.
25
Mr. Warwick earned a Bachelor of
Business Administration degree from
Stephen F. Austin State University and
a Master of Business Administration
degree from the University of Houston.
Invesco Large Cap Value Team – continued
Umang Khetan
Analyst
Jason S. Leder, CFA
Portfolio Manager
Prior to joining Invesco in 2012, Mr.
Khetan worked at Newstone Capital
Partners, where he focused on
analyzing, underwriting and managing
mezzanine debt and private equity
investments. He entered the financial
industry in 2005 as an investment
banking analyst for UBS Investment
Bank focused on mergers and
acquisitions, leveraged buyouts and
other corporate finance transactions.
Jason Leder joined Invesco in 2010.
He previously joined Van Kampen in
1995, where he served as a portfolio
manager for the US Value strategy. He
was also a securities analyst at
Salomon Brothers and held similar
positions at Fidelity Management and
Research, Gabelli and Co. and Austin,
Calvert and Flavin.
Mr. Khetan earned an MBA from
Columbia Business School. He also
earned a BS with a triple major in
economics, chemistry and history from
the University of California, Los
Angeles.
26
Mr. Leder earned a bachelor’s degree
from the University of Texas and a
Master of Business Administration
degree from Columbia University. He is
a CFA charterholder and a member of
the CFA Institute and the Houston
Society of Financial Analysts.
Investment process: Distilling the universe
Price to book ratios
Largest 100 Relative-to-Other Large-Cap Stocks1
Ratio of Price-to-Book Ratios
1950 through Early-December 2013
x
2.4
2.2
2.0
1.8
1.6
Average
1.4
1.2
1.0
0.8
27
30
33
36
39
42
45
48
51
54
57
60
63
66
69
Year
1 Capitalization-weighted data.
Sources: Corporate Reports, Empirical Research Partners Analysis.
27
72
75
78
81
84
87
90
93
96
99
02
05
08
11
Investment process: Distilling the universe
Comparison of ROE’s
25.0
Largest 100 and All Other Large-Cap Stocks1
Comparison of ROEs
1953 Through Early-December 2013
%
20.0
15.0
10.0
5.0
0.0
53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Largest 100
All Other
1 Data smoothed on a trailing six-month basis.
Sources: Corporate Reports, Empirical Research Partners Analysis.
28
Investment process: Distilling the universe
Financials valuation
1.0
Financial Stocks1
Relative Price-to-Book Ratios
1965 through November 2013
x
0.9
0.8
0.7
0.6
0.5
0.4
65
67
69
71
73
75
77
79
81
83
85
87
89
91
Recessions
1 Drawn from the largest 1,500 stocks; capitalization-weighted data.
Source: Corporate Reports, Empirical Research Partners Analysis.
29
93
95
97
99
01
03
05
07
09
11
13
Investment process: Distilling the universe
Energy valuation
Large-Capitalization Energy Stocks1
Relative Price-to-Book Ratios
1927 through Early-December 2013
x
1.7
1.5
1.3
1.1
Current Level
0.9
0.7
0.5
27
31
35
39
43
47
51
55
59
63
67
Year
1 Capitalization-weighted data.
Source: Empirical Research Partners Analysis.
30
71
75
79
83
87
91
95
99
03
07
11
Investment process: Distilling the universe
Media valuation
6
Media1
Relative Free Cash Flow Yield
1962 through Early-December 2013
%
4
2
Average
0
Current
(2)
(4)
(6)
62
65
68
71
74
77
80
83
86
89
Year
Year
1 Largest 1,500 stocks; capitalization-weighted data smoothed on a trailing six-month basis.
Source: Corporate Reports, Empirical Research Partners Analysis.
31
92
95
98
01
04
07
10
13
Investment process: Distilling the universe
Pharmaceuticals valuation
1.8
x
S&P 500 Pharmaceutical Constituents1
Relative Forward-P/E Ratio
1976 through November 2013
1.6
1.4
Average
1.2
1.0
0.8
0.6
Year
1 Capitalization-weighted data.
Source: Standard & Poor's, Empirical Research Partners Analysis.
32
Investment process: Distilling the universe
Technology valuation
4
Technology Stocks1
Relative Free Cash Flow-to-Enterprise Value
Measured Relative to the Market
1985 through Early-December 2013
%
3
Oct.
1986
Sept.
2002
Aug.
1992
Mar.
1988
2
Dec.
2008
July
2006
Dec.
1997
1
Current
0
Average
(1)
(2)
85
87
89
91
93
95
97
99
01
Year
1 Largest 1,500 stocks; capitalization-weighted data smoothed on a trailing six-month basis.
Sources: Corporate Reports, Empirical Research Partners Analysis.
33
03
05
07
09
11
13
Investment process: Distilling the universe
Utilities, consumer staples, telecom and health care
valuation
1.4
x
Large Capitalization Stable Yielders1
in the Highest Quintile of Dividend Yield
Relative P/E Ratios2
1952 Through Early-December 2013
1.2
1.0
0.8
0.6
0.4
0.2
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Recession
1 Drawn from utilities, consumer staples, telecom and health care.
2 Capitalization-weighted trailing data smoothed on a trailing three-month basis.
Source: Empirical Research Partners Analysis.
34
Investment process: Distilling the universe
Large cap stocks dividend yield
1.4
x
Large-Capitalization Stocks
Highest Quintile of Dividend Yield
Relative Trailing-P/E Ratios1
1951 Through Early-December 2013
1.2
1.0
Average
0.8
0.6
0.4
0.2
51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Recessions
1 Capitalization-weighted data.
Source: Corporate Reports, National Bureau of Economic Research, Empirical Research Partners Analysis.
35
Investment process: Distilling the universe
Large cap stocks dividend growth and yield
2.2
2.0
1.8
Large Capitalization Stocks
Highest Quintiles of Dividend Growth and Yield
Ratio of Trailing-P/E Ratios1
1952 Through November 2013
x
Dividend Growth
is More
Highly-Valued
1.6
Average
1.4
1.2
1.0
Dividend Yield
is More
Highly-Valued
0.8
0.6
52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Recessions
1 Capitalization-weighted data.
Source: Corporate Reports, Empirical Research Partners Analysis.
36
Investment process: Distilling the universe
Dividend payout ratios
160
%
S&P 500
Dividend Payout Ratios
1871 Through October 2013
140
120
100
80
60
40
20
1871 75 80 85 89 94 99 1903 08 13 17 22 27 31 36 41 45 50 55 59 64 69 73 78 83 87 92 97 2001 06 11
Recessions
Source: Robert Shiller, Standard and Poor’s, Corporate Reports, Empirical Research Partners Analysis.
37
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CE651/20052014
38