Original broadcast details

Date: Thursday, January 16, 2025

Executive Summary

S&P 500 returns in 2024 continued to be propelled by a few mega-cap growth stocks.
For 2023 and 2024 combined, an incredible 78% of the S&P 500 constituents underperformed, causing the S&P 500 EW to underperform by 12.4 percentage points in 2023, and 12 percentage points in 2024.

Lyrical CS outperformed the S&P 500 EW and S&P 500 Value again in 2024. While we also outperformed the S&P 500 in 2023, we were unable to keep pace with the S&P 500 in 2024.
Our CS composite was up 13.4%, modestly outperforming both the S&P 500 Equal Weight and the S&P 500 Value in 2024. Over the last two years, Lyrical significantly outperformed the S&P 500 EW by 15.8 percentage points, and the S&P 500 Value by 7.3 percentage points.

S&P 500 outperformance has been driven by multiple expansion, not EPS growth.
The S&P 500 and S&P 500 EW had similar P/Es for years, even as the S&P 500 EW grew EPS faster. Now the S&P 500 P/E is 32% higher than the S&P 500 EW’s, despite the same EPS growth for the last 7 1/2 years. If the S&P 500 P/E converges to that of the S&P 500 EW, it would drive significant underperformance over time, and historically, that is what has happened. Historically, after the best periods of S&P 500 outperformance, the next 5 years have produced significant underperformance.

International markets also benefited from outsized gains in the largest stocks.
Our International and Global portfolios were down 2.1% and up 6.1%, respectively, in 2024, underperforming their cap-weighted benchmarks. For International, our underperformance was driven by our underweight position in the largest stocks and by not owning banks, which performed well in 2024.

For GIVES, our value approach to impact investing outperformed the style benchmark.
Many richly priced impact-themed stocks have suffered serious declines, which we avoided given our valuation discipline. In 2024, GIVES was up 5.7%, outperforming the MSCI ACWI Sustainable Impact Index by 1,510 bps.

We believe we are positioned well for the future.
We believe our Lyrical CS composite P/E is attractive at 12.1x. Meanwhile, the S&P 500’s P/E is 21.8x, 36% above its average since our inception, and 85% above that of Lyrical-CS. Furthermore, Lyrical-CS’s current portfolio EPS growth history is more than two percentage points faster than S&P 500’s.

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Past performance is not necessarily indicative of future results. 

Please see the more complete performance information, and the footnotes and disclaimers set forth in the replay. As well, please see www.lyricalam.com/notes for a discussion of material risks of an investment. 

Summary Performance Data:

ALL DATA IS AS OF December 31, 2024. THIS DOCUMENT IS CONFIDENTIAL AND INTENDED SOLELY FOR THE RECIPIENT. IT MAY NOT BE REPRODUCED OR REDISTRIBUTED WITHOUT THE PRIOR WRITTEN CONSENT OF LYRICAL ASSET MANAGEMENT (LAM).

THIS IS NOT AN OFFERING OR THE SOLICITATION OF AN OFFER TO INVEST IN THE STRATEGY PRESENTED. ANY SUCH OFFERING CAN ONLY BE MADE FOLLOWING A ONE-ON-ONE PRESENTATION, AND ONLY TO QUALIFIED INVESTORS IN THOSE JURISDICTIONS WHERE PERMITTED BY LAW.

THERE IS NO GUARANTEE THAT THE INVESTMENT OBJECTIVES OF OUR STRATEGIES WILL BE ACHIEVED. RISKS OF AN INVESTMENT INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS OF INVESTING IN EQUITY SECURITIES GENERALLY, AND IN A VALUE INVESTING APPROACH, MORE SPECIFICALLY. MOREOVER, PAST PERFORMANCE SHOULD NOT BE CONSTRUED AS AN INDICATOR OF FUTURE PERFORMANCE. THE FOREGOING INFORMATION HAS NOT BEEN PROVIDED IN A FIDUCIARY CAPACITY, AND IT IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED AS, IMPARTIAL INVESTMENT ADVICE.

INDEXES ARE PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY, ARE UNMANAGED, REFLECT REINVESTMENT OF INCOME AND DIVIDENDS AND DO NOT REFLECT THE IMPACT OF ADVISORY FEES. INVESTORS CANNOT INVEST DIRECTLY IN AN INDEX. COMPARISONS TO INDEXES HAVE LIMITATIONS BECAUSE INDEXES HAVE VOLATILITY AND OTHER MATERIAL CHARACTERISTICS THAT DIFFER FROM THOSE OF LYRICAL’S STRATEGIES.

THE S&P 500 INDEX IS A MARKET CAPITALIZATION WEIGHTED INDEX COMPRISED OF 500 WIDELY-HELD COMMON STOCKS. THE S&P 500 VALUE INDEX MEASURES THE PERFORMANCE OF THE LARGE CAP VALUE SEGMENT OF THE U.S. EQUITY UNIVERSE. IT INCLUDES THOSE S &P 500 COMPANIES WITH LOWER PRICE TO BOOK RATIOS AND LOWER EXPECTED GROWTH VALUES.

THE S&P 500 EQUAL WEIGHT INDEX (EWI) IS THE EQUAL-WEIGHT VERSION OF THE WIDELY-USED S&P 500. THE INDEX INCLUDES THE SAME CONSTITUENTS AS THE CAPITALIZATION WEIGHTED S&P 500, BUT EACH COMPANY IN THE S&P 500 EWI IS ALLOCATED A FIXED WEIGHT - OR 0.2% OF THE INDEX TOTAL AT EACH QUARTERLY REBALANCE.

THE MSCI EAFE INDEX IS DESIGNED TO REPRESENT THE PERFORMANCE OF LARGE AND MID-CAP SECURITIES ACROSS 21 DEVELOPED MARKETS, INCLUDING COUNTRIES IN EUROPE, AUSTRALASIA AND THE FAR EAST, EXCLUDING THE U.S. AND CANADA. THE INDEX IS AVAILABLE FOR A NUMBER OF REGIONS, MARKET SEGMENTS AND SIZES AND COVERS APPROXIMATELY 85% OF THE FREE FLOAT-ADJUSTED MARKET CAPITALIZATION IN EACH OF THE 21 COUNTRIES.

THE MSCI WORLD INDEX CAPTURES LARGE AND MID-CAP REPRESENTATION ACROSS 23 DEVELOPED MARKETS (DM) COUNTRIES*. WITH 1,430 CONSTITUENTS, THE INDEX COVERS APPROXIMATELY 85% OF THE FREE FLOAT-ADJUSTED MARKET CAPITALIZATION IN EACH COUNTRY.

THE MSCI ACWI SUSTAINABLE IMPACT INDEX IS DESIGNED TO IDENTIFY LISTED COMPANIES WHOSE CORE BUSINESS ADDRESSES AT LEAST ONE OF THE WORLD’S SOCIAL AND ENVIRONMENTAL CHALLENGES, AS INCLUDE: NUTRITIOUS PRODUCTS, TREATMENT OF MAJOR DISEASES, SANITARY PRODUCTS, EDUCATION,

INCLUDE: NUTRITIOUS PRODUCTS, TREATMENT OF MAJOR DISEASES, SANITARY PRODUCTS, EDUCATION, AFFORDABLE HOUSING, LOANS TO SMALL AND MEDIUM SIZE ENTERPRISES, ALTERNATIVE ENERGY, ENERGY EFFICIENCY, GREEN BUILDING, SUSTAINABLE WATER, AND POLLUTION PREVENTION. TO BE ELIGIBLE FOR INCLUSION IN THE INDEX, COMPANIES MUST GENERATE AT LEAST 50% OF THEIR SALES FROM ONE OR MORE OF THE SUSTAINABLE IMPACT CATEGORIES AND MAINTAIN MINIMUM ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) STANDARDS. THE PARENT INDEX IS MSCI ACWI. CONSTITUENT SELECTION IS BASED ON DATA FROM MSCI ESG RESEARCH.