Cambiar Investors LLC—Cambiar Large Cap Value Equity
Q1 2008 Market Commentary

In what has been a dismal start to 2008, the equity markets incurred one of their worst quarterly declines since 2002. Marked by a continued deleveraging of the credit bubble that began to unravel in the second half of 2007, equities experienced a broad and indiscriminate decline that was felt across all market capitalizations and investment styles. Other factors, such as record petroleum prices and ongoing weakness in the housing and consumer markets, provided additional momentum to the sell-off.

While unable to escape the downdraft in the markets, the Cambiar Institutional Tax-Exempt Equity Composite managed to relatively outperform both the Russell 1000 Value and S&P 500 indices for the quarter. Although the Cambiar investment philosophy is based on a fundamental process that is primarily focused at the company level, our interpretation of the current macro environment (and subsequent sector allocations) strongly contributed to the portfolio’s outperformance in the first quarter.

An overweight allocation, as well as strong stock selection, within the Energy sector was the largest contributor to performance during the quarter. The fact that oil prices are hitting record levels (above $100/bbl) in the face of a downturn within the U.S. economy, illustrates that there is a more global phenomenon occurring within this sector. Cambiar’s Energy positions are diversified across various energy sub-sectors (e.g. larger integrated oil companies, exploration & production, and energy services), and we remain bullish on the earnings outlook for our holdings.
Despite ongoing concerns regarding the overall the strength of the consumer, Cambiar’s exposure within the Consumer Discretionary and Consumer Staples sectors were additional positive contributors to performance. Our holdings within these sectors are tilted towards companies that should continue to meet earnings expectations regardless of the current economic climate. Valuation sensitivity at the point of purchase has provided strong downside protection in this environment.

The portfolio continues to maintain a significant underweight to Financials, primarily due to the anticipation of additional write-downs and declining profits for many of these companies. At some point, the risk/reward profile for Financials will be too compelling to ignore – however, at this point, we anticipate there to be more downward revisions to earnings and unknown risks for many companies in this space.

Although Financials dominated the headlines in the first quarter, Technology was the poorest-performing sector in the first quarter. While Cambiar’s higher Tech exposure detracted from performance over the short-term, we continue to believe that Technology will be one of few areas of the market capable of generating solid earnings growth.

Cambiar remains of the opinion that the U.S. markets have entered a shallow recession that will likely be followed by a sluggish growth trajectory for the economy over the next 12-24 months. Despite extraordinary measures undertaken by the Fed, the conditions that triggered the current market downturn are not going to evaporate in 1-2 months. That said, the current market conditions have presented the Cambiar investment team with a number of unique opportunities whose long-term prospects remain intact. As always, Cambiar’s interests remain closely aligned with those of our clients, as has been the case for the past 35 years.



The performance information depicted above represents Cambiar’s Institutional Tax-Exempt Equity Composite. Returns are presented net of fees and expenses. All performance figures, including the indices include reinvestment of all dividends and income. The Russell 1000 Value Index is a market capitalization weighted index which contains securities from the Russell 1000 Index with a less than average growth orientation. The S&P 500 Index is shown to reflect general market conditions. The S&P 500 is a market capitalization-weighted index of 500 publicly traded stocks. Both the S&P 500 and the Russell 1000 Value Index are broadly based indices which reflect the overall market performance and comparisons may not reflect Cambiar’s performance as compared to the performance of other investment advisors. Cambiar’s past results do not necessarily indicate Cambiar’s future performance and, as is the case with all investment advisors who concentrate on equity investments, Cambiar’s future performance may result in a loss. Please refer to Appendix A of this presentation for a detailed explanation of performance.