Jim Cullen knows the urge. Embattled cheap-stock managers sense their careers are under siege, ignore their mandate — and grab a few expensive companies to catch up with a rollicking technology-led rally.
Particularly when a slew of money managers are doing it, just like today.
Out of 141 mutual funds focused on large-cap value, only about one in 20 is a pure bet on this bargain-chasing investing style, per data compiled by Bloomberg Intelligence. A handful of them have even sunk half of their money in companies that don't formally qualify as value at all — often allocating to mega-cap equities that promise big earnings growth ahead.
"The cheating becomes so extreme that you can't tell the difference between a value stock portfolio and a growth portfolio," said the co-founder of New York-based Schafer Cullen Capital Management, which oversees $23 billion.
The 86-year-old fund boss has been in money management for six decades, founding his own firm in 1984 and trading through multiple stretches in which value was pronounced extinct by the Wall Street cognoscenti — again and again.
While selling out offers a quick fix in a pinch, giving into the pressure is a recipe for long-term failure, per Cullen. The problem comes when value recovers and a style-drifting fund finds itself with a shortage of cheap names to ride back up.
"The way to get around that whole danger of volatility is have a discipline," said Cullen, who started his financial career with Merrill Lynch in 1965. His industry renown is arguably less about his raw returns, and more thanks to a steadfast adherence to the investing style through thick and thin.
While beating the Russell 1000 Value Index over the past three decades, his flagship high-dividend value strategy has returned roughly half the S&P 500 and trailed the value benchmark since 2019.
Unlike many peers, clients have largely stuck with him, a show of faith at a time when other managers are getting chased out of a market dominated by a small coterie of tech mega-firms.
