Corporate OverviewAs of: 6/30/2019
7250 Woodmont Avenue
Suite 310
Bethesda, MD 20814
Company Profile
HCM-19-85
2
About Hillman Capital Management, Inc.
Hillman Capital Management, Inc. (“HCM”) was founded by Mark A. Hillman in the Spring of 1998. The
Firm offers portfolio management services to an international client base of foundations, endowments,
corporations, pension plans, and private investors. In addition to its separate accounts, the Firm is the
Investment Adviser to the Hillman Capital Management Funds, a family of registered mutual funds
available to the general public.
Mr. Hillman provides wealth management services where appropriate. He works closely with
investors to determine appropriate asset allocation guidelines, investment criteria and benchmarks.
Leveraging the knowledge he has gained over many decades in the investment business, Mark
constructs portfolios designed to meet the guidelines and criteria established for each client. Each
quarter, HCM provides reporting that compares actual allocations to guidelines and performance to
benchmarks appropriate to the clients’ guidelines and criteria.
For equity investors, HCM employs a unique portfolio management style through which it endeavors to
outperform the capital markets over various economic cycles and generate positive returns for its clients.
In selecting equities for client portfolios, HCM invests only in enterprises that they believe have a
competitive advantage in their industries or niche markets. While other firms may follow trends, HCM
follows a discipline that calls for investment in industry leaders when the investment team believes that
their stocks are undervalued using established quantitative measures.HCM-19-85
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About Hillman Capital Management, Inc.
HCM-19-85
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Mark Hillman has continuously managed client accounts as a Registered Investment Adviser Since 1991
● Focused Advantage Equity Strategy
● Offered directly to Institutions and Individuals and through intermediaries (Sub-Advisory and Wrap Fee)
● Continuously managed since 1995
● Advantage Equity Strategy
● Offered directly to Institutions and Individuals and through intermediaries (Sub-Advisory and Wrap Fee)
● Continuously managed since 1996
● Total Return, Balanced and Wealth Management services offered since 1991
● Hillman Capital Management Funds continuously offered since 2001
Hillman Capital Management Inc. is 69% employee owned and 31% owned by friends and family
The History of HCM
Mark Hillman
launches the
Advantage
and Focused
Advantage
Strategies
HCM is spun
off from
Menocal
Capital
Management
HCM launches
its family of
mutual funds
HCM relocates
from Annapolis,
MD to
Bethesda, MD
HCM is selected for
the Wells Fargo
(Wachovia) Masters
Investment
Consulting platform*
HCM selected by a
large state Teachers’
Retirement System*
1998 2000 2004 2005 2006 2007
Mark Hillman is
featured in the
FORTUNE Magazine
article “The Bargain
Hunter”
2008 2009
HCM is selected to
manage institutional
accounts for several
municipal clients*
HCM is selected as
a sub-advisor for a
European based
mutual fund*
HCM-19-85
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2010
Hillman Capital
Management Mutual
Funds ten year
anniversary
2015
HCM moves to new
offices on “Bethesda
Row”
HCM hired
by Sir John
Templeton*
*THE CLIENTS NOTED ABOVE WERE CHOSEN TO NOTE CERTAIN EVENTS IN HCM’S HISTORY, NOT ON
PERFORMANCE. IT IS NOT KNOWN WHETHER THE CLIENTS LISTED APPROVE OF HCM OR OF THE ADVISORY
SERVICES PROVIDED BY HCM. HCM DOES NOT CURRENTLY MANAGE THESE NOTED ACCOUNTS.
Investment Team
Mark A. Hillman, CEO and Chief Investment Officer, founded HCM in 1998, bringing into the firm assets of predecessor companies he established in the early 1990s. His
first investment advisory company, Custom Asset Management, merged with Menocal Capital Management in 1993 and he became Chief Investment Officer of the
combined firms. Prior to founding his first firm, he was a financial consultant with Shearson Lehman Hutton. A graduate of Tufts University, he has done graduate
coursework at Harvard University Extension School. An expert sailboat racer, he has competed successfully in National and World Championships over four decades.
As the architect of the firm’s proprietary investment process and Chief Investment Officer at HCM, Mark Hillman continues to lead the investment process. Since 1994, his
investment results have spoken for themselves and have been recognized by investors and media alike. He has appeared in Fortune Magazine, The New York Times,
MSN Money, USA Today, Bloomberg News, Dow Jones Marketwatch, The Baltimore Sun, The San Francisco Chronicle, Bloomberg Television, Kiplinger’s and
Forbes.com.
Trevor Lee, MBA, Analyst, focuses on assessing the competitive dynamics and valuation of companies. Trevor joined Hillman Capital Management in 2008 and is a
member of HCM’s Investment Committee. Trevor evaluates companies from the unique perspective of his solid background in marke ting and product development for
Fortune 500 companies, including Procter and Gamble, Kraft, and Sara Lee. A graduate of Tufts University, Trevor earned his MBA at The Wharton School of the
University of Pennsylvania.
Operations and Compliance Team
Peter W. Beebe, President, has served in leadership roles for institutional investment firms and platforms, including Affiliated Managers Group (AMG) and Jones Lang
LaSalle (JLL). Pete has over two decades of experience in the investment management industry, primarily working with boutique investment management firms. He has
developed and executed strategic plans that have entailed all aspects of the business lifecycle including launching, scaling, and restructuring various enterprises. Pete
serves as a member of the HCM Investment Committee. Mr. Beebe earned an MBA from Stetson University and a B.S. in Finance with a minor in Spanish.
Jeffrey T. Long, Director of Systems and Operations, began consulting HCM in 2002 and joined the team in 2005. Jeff has more than a decade of hands on experience
managing trading and operations at HCM and more than three decades of experience as a software development consultant. In addition to extensive expertise in software
development for financial management organizations, he has worked on many different hardware platforms for various clients such as FedEx, Jaguar Land Rover, AT
Kearney, Cadbury Schweppes, Microsoft, Lucent, Mobil and Lever Brothers. Mr. Long holds a Bachelor’s Degree in Computer Science and Management Information
Systems from James Madison University.
C. Frank Watson III, Chief Compliance Officer, has served as the Chief Compliance Officer for Hillman Capital Management, Inc. since 2005. He previously held officer
positions for multiple investment companies and currently serves as Treasurer and Principal Financial Officer for the Hillman Capital Management Investment Trust. Apart
from Hillman Capital Management, Mr. Watson founded Fairview Investment Services in 2005 which provides compliance support services to over 75 registered
investment advisers with assets under management totaling 100 billion. Mr. Watson oversees Fairview’s multiple lines of business, which, in addition to compliance
administration, include private fund administration and regulatory reporting for investment companies. Mr. Watson earned a B.S. in Economics from the University of North
Carolina, Chapel Hill.HCM-19-85
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A Commitment to “Best Practices”
• Hillman Capital Management, Inc. claims compliance with GIPS® standards and is verified by an
independent 3rd party auditor, The Spaulding Group. Please see full GIPS® disclosure on pages
21 and 22 of this presentation.
• Daily portfolio reconciliation and drift reporting keep the Investment Team informed about the
dispersion of portfolios in the HCM models.
• Consistent implementation of the Trade Rotation Policy to ensure all HCM client interests are met
in a fair and balanced manner.
HCM-19-85
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Equity Investment Philosophy
and Process
HCM-19-85
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HCM-19-85
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1. We believe that companies with sustainable competitive advantage will
outperform the broad market over time.
2. We believe that market volatility can be exploited to purchase companies at a
discount to their intrinsic value.
3. We believe that consistent adherence to a discipline based on fundamental
valuation techniques will produce results.
Investment Philosophy
The Screening Process
RANKING
• The Qualified Universe of Investment Candidates is
ranked according to valuation.
•Securities calculated to be overvalued are ineligible
for inclusion in client portfolios.
QUANTITATIVE MEASURES*
1. Discounted Cash Flow Model
2. Price to Book Model
3. Price to Sales Model
*May include, but not limited to.
STOCK UNIVERSEQUALITATIVE CONCERNS
1. Is the company an industry leader or does it dominate a certain
niche market?
2. Has management been prudent and proactive over various
economic cycles?
3. Does the company have pricing power with customers?
4. Does the company have purchasing power with suppliers?
5. Do barriers to entry exist for prospective competitors?
6. Does the company have a strong brand/franchise with
brand loyalty?
7. Does the company deliver excellent products or services?
8. Does the company provide outstanding customer service?
9. Does the company have enough financial flexibility to weather
short term problems, an economic downturn or increased
competitive pressures?
QUALITATIVE SCREEN
• HCM analysts evaluate companies by addressing nine
qualitative concerns to identify candidates with
sustainable competitive advantage.
• The HCM investment committee reviews analyst
findings and companies deemed to have sustainable
competitive advantage are added to our Qualified
Universe of Investment Candidates.
• All public U.S. Equities with a market capitalization
greater than three billion dollars.
QUANTITATIVE SCREEN
• The four quantitative measures are applied to each
company in the Qualified Universe of Investment
Candidates.
HCM-19-85
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Advantage Equity Portfolios
PORTFOLIO CONSTRUCTION
The 45 securities in our Advantage Equity model are purchased
in equal proportion, with each stock representing approximately
2.2% of total portfolio value, subject to the following limitation s:
No sector may represent more than 25% and no industry may
represent more than 10% of the total portfolio at the time of
purchase.
SELL DISCIPLINE
• Sell all shares if a portfolio holding fails the qualitative screen.
• Sell all shares if the price of a security exceeds fair value.
• Re-balance each holding to its target weight:
Buy if position < 1.5% of total market value.
Sell if position > 2.9% of total market value.
Focused Advantage Equity Portfolios
PORTFOLIO CONSTRUCTION
The 20 securities in our Focused Advantage Equity model are
purchased in equal proportion, with each stock representing
approximately 5.0% of total portfolio value, subject to the
following limitation: No industry may represent more than 25% of
the total portfolio at the time of purchase.
Two Ways of Leveraging our Investment Approach
SELL DISCIPLINE
• Sell all shares if a portfolio holding fails the qualitative screen.
• Sell all shares if the price of a security exceeds fair value.
• Re-balance each holding to its target weight:
Buy if position < 2.5% of total market value.
Sell if position > 10.0% of total market value.
HCM-19-85
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Key Factors in Risk Management
Fundamental - The creation of HCM’s Qualified Universe of Investment Candidates
• A competitive analysis is conducted to identify industry leaders with financial flexibility and competitive advantage in their market place. We believe that investing exclusively in companies that meet our qualitative criteria can help to mitigate risk.
Diversification - To prevent overexposure to an industry we use two approaches.
• Portfolio Construction – Equal weighted position targets, in conjunction with industry weighting limits are used.
• Qualitative Process – We believe that our pursuit of “best of breed” companies reduces the number of qualified investment candidates in any one industry.
Sell Discipline - Our ongoing investment process helps us to manage security specific risk in our portfolios.
• Company’s that we believe no longer maintain a sustainable competitive advantage or sufficientfinancial flexibility are removed from the portfolio and qualified universe.
• We have an ongoing portfolio review process with specific triggers for rebalancing to maintain portfolio balance.
HCM-19-85
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Performance and Characteristics
Advantage Equity
and
Focused Advantage Equity
Portfolios
HCM-19-85
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A Proven Approach - Advantage Equity
The graph to the right depicts
the growth of $1,000,000
invested in the Advantage
Equity Composite (Net of Fees)
at the start of January 1996
versus the same $1,000,000
invested in the Russell 1000
Value Index and the S&P 500
with dividend reinvestment.
At Hillman Capital Management, Inc., we have engineered a discipline through which we seek to invest in strong companies when we believe their
stocks are undervalued. The strength of this discipline is derived from our independent research focusing on companies believed to have a
sustainable competitive advantage and investing in these companies only when they are trading at a discount to our calculated intrinsic value.
Continued adherence to our principles have supported our results.
HCM-19-85
14
0 M
2 M
4 M
6 M
8 M
10 M
12 M
14 M
16 M
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Advantage Equity Composite (Net)
Russell 1000 (Value) Index
S&P 500 with Dividend Reinvestment
SEE PAGE 21 FOR DISCLOSURE STATEMENTS.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Includes dividends.
HCM-19-85
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SEE PAGE 21 FOR DISCLOSURE STATEMENTS.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
ANNUALIZED PERFORMANCE THROUGH JUNE 30, 2019
Advantage Equity CompositeYEARLY PERFORMANCE –ADVANTAGE EQUITY COMPOSITE
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Advantage Equity Composite (Net)
Russell 1000 (Value) Index
S&P 500 with Dividend Reinvestment
2019 YTD One Year Three Years Five Years Ten Years
Inception
(01/01/1996)
Advantage Equity (Gross) 19.81% 13.52% 16.74% 12.58% 15.78% 12.96%
Advantage Equity (Net) 19.21% 12.38% 15.59% 11.54% 14.93% 12.14%
Russell 1000 (Value) Index 16.23% 8.45% 10.19% 7.46% 13.19% 8.83%
Standard & Poor's 500 Total Return* 18.54% 10.42% 14.20% 10.72% 14.70% 8.93%
Advantage Equity Composite Characteristics
THE PORTFOLIO CHARACTERISTICS SLIDE IS SHOWN AS SUPPLEMENTAL INFORMATION ONLY HCM-19-85
16
SECTOR WEIGHTINGS MARKET CAP WEIGHTINGS TOP 10 HOLDINGS
1. MCDONALD’S
2. LAM RESEARCH
3. FACEBOOK
4. MICROSOFT
5. COMCAST
6. ANHEUSER-BUSCH
7. EBAY
8. GENERAL MILLS
9. CATERPILLAR
10. GOLDMAN SACHS
Small (< $2 billion)
Mid ($2-7 billion)
Large (> $7 billion)
CONSUMER DISCRETIONARY 11.7%
CONSUMER STAPLES 13.5%
ENERGY 4.1%
FINANCIALS 13.1%
HEALTH CARE 15.2%
INDUSTRIALS 13.3%
INFORMATION TECH 11.3%
MATERIALS 4.1%
COMMUNICATION 13.7%
UTILITIES 0.0%
REAL ESTATE 0.0%
STATISTICS AS OF JUNE 30, 2019
Weighted
Average
Market Cap
Portfolio
Beta
Dividend
Yield
Price/
Book
Price/
Cash Flow
Price/
Earnings
Trailing
Price/
Earnings
Forward
Pre-Tax
ROA
Debt to
Capital
Projected
LT Earnings
Growth
Advantage Equity Composite 173,574 mm 1.03 2.57% 3.49 11.89 11.19 10.64 8.89% 0.33 8.31%
HCM-19-85
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A Proven Approach – Focused Advantage Equity
The graph to the right depicts
the growth of $1,000,000
invested in the Focused
Advantage Equity Composite
(Net of Fees) at the start of
January 1995 versus the same
$1,000,000 invested in the
Russell 1000 Value Index and
the S&P 500 with dividend
reinvestment.
SEE PAGE 22 FOR DISCLOSURE STATEMENTS. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
At Hillman Capital Management, Inc., we have engineered a discipline through which we seek to invest in strong companies when we believe their
stocks are undervalued. The strength of this discipline is derived from our independent research focusing on companies believed to have a
sustainable competitive advantage and investing in these companies only when they are trading at a discount to our calculated intrinsic value.
Continued adherence to our principles have supported our results.
0 MM
5 MM
10 MM
15 MM
20 MM
25 MM
30 MM
35 MM
40 MM
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Focused Advantage Equity Composite (Net)
Russell 1000 (Value) Index
S&P 500 with Dividend Reinvestment
SEE PAGE 22 FOR DISCLOSURE STATEMENTS
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
*Includes dividends.
HCM-19-85
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ANNUALIZED PERFORMANCE THROUGH JUNE 30, 2019
Focused Advantage Equity CompositeYEARLY PERFORMANCE – FOCUSED ADVANTAGE EQUITY COMPOSITE
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Focused Equity Composite (Net)
Russell 1000 (Value) Index
S&P 500 with Dividend Reinvestment
2019 YTD One Year Three Years Five Years Ten Years Inception (01/01/1995)
Focused Advantage Equity (Gross) 20.85% 7.54% 14.29% 10.19% 14.32% 16.87%
Focused Advantage Equity (Net) 20.42% 6.86% 13.44% 9.32% 13.61% 15.98%
Russell 1000 (Value) Index 16.23% 8.45% 10.19% 7.46% 13.19% 9.90%
Standard & Poor's 500 Total Return* 18.54% 10.42% 14.20% 10.72% 14.70% 9.97%
Focused Advantage Equity Composite
Characteristics
Weighted
Average
Market Cap
Portfolio
Beta
Dividend
Yield
Price/
Book
Price/
Cash Flow
Price/
Earnings
Trailing
Price/
Earnings
Forward
Pre-Tax
ROA
Debt to
Capital
Projected
LT Earnings
Growth
Focused Advantage
Equity Composite231,406 mm 1.02 2.65% 3.17 11.91 12.83 10.05 8.40% 0.55 9.20%
STATISTICS AS OF JUNE 30, 2019
THE PORTFOLIO CHARACTERISTICS SLIDE IS SHOWN AS SUPPLEMENTAL INFORMATION ONLY HCM-19-85
19
SECTOR WEIGHTINGS MARKET CAP WEIGHTINGS TOP 10 HOLDINGS
1. MICROSOFT
2. MCDONALD’S
3. BANK OF AMERICA
4. GENERAL MILLS
5. AMAZON.COM
6. AT&T
7. WALT DISNEY
8. WESTERN UNION
9. BIOGEN
10. GENERAL ELECTRIC
Small (< $2 billion)
Mid ($2-7 billion)
Large (> $7 billion)
CONSUMER DISCRETIONARY 12.1%
CONSUMER STAPLES 14.9%
ENERGY 8.7%
FINANCIALS 19.7%
HEALTH CARE 12.5%
INDUSTRIALS 9.6%
INFORMATION TECH 6.9%
MATERIALS 4.5%
COMMUNICATION 10.9%
UTILITIES 0.0%
REAL ESTATE 0.0%
Disclosure Statements
HCM-19-85
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Disclosure StatementsPast performance is not indicative of future results. This material is not financial advice or an offer to sell any product.
The portfolio characteristics shown relate to the Hillman Advantage Equity Composite. Not every client's account will
have these exact characteristics. The actual characteristics with respect to any particular client account will vary based on
a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the
account, if any; and (iii) market exigencies at the time of investment. Hillman Capital Management, Inc. reserves the right
to modify its current investment strategies and techniques based on changing market dynamics or client needs. The
information provided in this report should not be considered a recommendation to purchase or sell any particular security.
There is no assurance that any securities discussed herein will remain in an account's portfolio at the time you receive this
report or that securities sold have not been repurchased. The securities discussed may not represent an account's entire
portfolio and in the aggregate may represent only a small percentage of an account's portfolio holdings. It should not be
assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the
investment recommendations or decisions we make in the future will be profitable or will equal the investment
performance of the securities discussed herein.
Hillman Capital Management, Inc. is a registered investment advisor. More information about the advisor including its
investment strategies and objectives can be obtained by visiting www.hillmancapital.com. Registration does not imply a
certain level of skill or training. The firm maintains a complete list of composite descriptions, which is available upon
request. Visit our website for a fully compliant performance presentation.
The investment objective of the Advantage Equity Composite (the “Composite”) is long-term capital appreciation utilizing
a strategy comprised of 45 securities. The Composite was created April 1, 1998. Performance presented prior to April 1,
1998 occurred while the Portfolio Manager was affiliated with a prior firm and the Portfolio Manager was the only
individual responsible for selecting securities to buy and sell. The annual composite dispersion is an asset-weighted
standard deviation calculated for the accounts in the composite for the entire year. The three-year annualized standard
deviation measures the variability of the composite and the benchmark over the preceding 36-month period. Leverage is
not used in this composite. Non-fee-paying accounts are not included in this composite. The U.S. dollar is the currency
used to express performance. The Russell 1000 Value Index measures the performance of the large-cap value segment of
the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower
expected growth values. It is not possible to invest in this index. The volatility of the Composite may be greater or less
than its respective benchmark. Prior to January 23, 2019, the benchmark of the Composite was the S&P 500. The firm
believes the Russell 1000 Value Index is a more appropriate and accurate index against which to compare the Composite’s
performance than the S&P 500 because the composition of the Russell 1000 Value Index more closely aligns with the
Composite’s principal investment strategies.
Hillman Capital Management, Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and
has prepared and presented this report in compliance the GIPS standards. Hillman Capital Management, Inc. has been
independently verified for the periods April 1, 1998 through December 31, 2017. A copy of the verification report is
available upon request. Verification assesses whether (1) the firm has complied with all the composite construction
requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to
calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any
specific composite presentation.
Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. All returns
reflect the deduction of trading expenses and the deduction of custodian expenses. Gross returns will be reduced by
investment advisory fees. For example, a 3% annual fee deducted quarterly (.75%) from an account with a ten year
annualized growth rate of 14% will produce a net result of 10.8%. Actual performance results will vary from this example.
Net of fee performance was calculated using actual management fees.
The fee schedule for Hillman’s investment advisory services is 1.00% for the first $5 million, 0.85% for the next $15
million, 0.75% for the next $50 million, and 0.50% thereafter. Actual investment advisory fees incurred by clients may
vary. A complete description of Hillman’s fee schedule can be found under Form ADV Part 2 at www.hillmancapital.com.
Additional information regarding policies for valuing portfolios, calculating performance and preparing compliant
presentations is available upon request. HCM-19-85
ADVANTAGE EQUITY COMPOSITE
N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.
Total Firm Composite Assets Annual Performance Results
Year Assets USD Number of Composite Composite Composite
Russell
1000 Benchmark Composite
End (M) (M) Accounts Gross Net 3-yr St Dev Value 3-yr St Dev Dispersion
2018 85,758 1,447
Five or
fewer -1.86% -2.83% 11.59% -8.27% 10.82% NA
2017 87,678 1,548
Five or
fewer 20.99% 19.79% 10.85% 13.66% 10.20% NA
2016 76,431 1,347
Five or
fewer 18.03% 16.97% 11.29% 17.34% 10.77% NA
2015 76,852 1,183
Five or
fewer -0.24% -0.99% 10.37% -3.83% 10.68% NA
2014 77,240 0.843
Five or
fewer 14.52% 13.59% 9.60% 13.45% 9.20% NA
2013 77,477 0.816
Five or
fewer 37.91% 36.54% 12.26% 32.53% 12.70% NA
2012 63,536 0.842
Five or
fewer 14.42% 13.81% 15.22% 17.51% 15.51% NA
2011 155,861 66,446 9 1.04% 0.75% 20.05% 0.39% 20.69% 0.68%
2010 452,309 84,464 11 10.68% 10.30% 24.05% 15.51% 23.18% 0.75%
2009 506,468 69,144 10 43.66% 43.14% 22.12% 19.69% 21.10% 1.42%
2008 313,481 32,061 7 -38.04% -38.26% 16.35% -36.85% 15.36% 0.50%
Disclosure Statements
N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product.
The portfolio characteristics shown relate to the Hillman Focused Advantage Equity Composite. Not every client's
account will have these exact characteristics. The actual characteristics with respect to any particular client account
will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment
restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Hillman Capital
Management, Inc. reserves the right to modify its current investment strategies and techniques based on changing
market dynamics or client needs. The information provided in this report should not be considered a recommendation to
purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an
account's portfolio at the time you receive this report or that securities sold have not been repurchased. The securities
discussed may not represent an account's entire portfolio and in the aggregate may represent only a small percentage of
an account's portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors
discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the
future will be profitable or will equal the investment performance of the securities discussed herein.
Hillman Capital Management, Inc. is a registered investment advisor. More information about the advisor including its
investment strategies and objectives can be obtained by visiting www.hillmancapital.com. Registration does not imply
a certain level of skill or training. The firm maintains a complete list of composite descriptions, which is available upon
request.
The investment objective of the Focused Advantage Equity Composite (the “Composite”) is long-term capital
appreciation, utilizing a concentrated strategy focusing on 20 securities. The Composite was created April 1, 1998.
Performance presented prior to April 1, 1998 occurred while the Portfolio Manager was affiliated with a prior firm and
the Portfolio Manager was the only individual responsible for selecting the securities to buy and sell. The annual
composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite for the entire
year. The three-year annualized standard deviation measures the variability of the composite and the benchmark over
the preceding 36-month period. Leverage is not used in this composite. Non-fee-paying accounts are not included in
this composite. The U.S. dollar is the currency used to express performance. The Russell 1000 Value Index measures
the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index
companies with lower price-to-book ratios and lower expected growth values. It is not possible to invest in this index.
The volatility of the Composite may be greater or less than its respective benchmark. Prior to January 23, 2019, the
benchmark of the Composite was the S&P 500. The firm believes the Russell 1000 Value Index is a more appropriate
and accurate index against which to compare the Composite’s performance than the S&P 500 because the composition
of the Russell 1000 Value Index more closely aligns with the Composite’s principal investment strategies.
Hillman Capital Management, Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and
has prepared and presented this report in compliance the GIPS standards. Hillman Capital Management, Inc. has been
independently verified for the periods April 1, 1998 through December 31, 2017. A copy of the verification report is
available upon request. Verification assesses whether (1) the firm has complied with all the composite construction
requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to
calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of
any specific composite presentation.
Returns are presented gross and net of investment advisory fees and include the reinvestment of all income. All returns
reflect the deduction of trading expenses and the deduction of custodian expenses. Gross returns will be reduced by
investment advisory fees. For example, a 3% annual fee deducted quarterly (.75%) from an account with a ten year
annualized growth rate of 14% will produce a net result of 10.8%. Actual performance results will vary from this
example. Net of fee performance was calculated using actual management fees.
The fee schedule for Hillman’s investment advisory services is 1.00% for the first $5 million, 0.85% for the next $15
million, 0.75% for the next $50 million, and 0.50% thereafter. Actual investment advisory fees incurred by clients may
vary. A complete description of Hillman’s fee schedule can be found under Form ADV Part 2 at
www.hillmancapital.com. Additional information regarding policies for calculating and reporting returns is available
upon request. HCM-19-85
FOCUSED ADVANTAGE EQUITY COMPOSITE
Total Firm Composite Assets Annual Performance Results
Year Assets USD Number of Composite Composite Composite Russell 1000 Benchmark Composite
End (M) (M) Accounts Gross Net 3-yr St Dev Value 3-yr St Dev Dispersion
2018 85,758 11,643
Five or
fewer -6.97% -7.55% 12.33% -8.27% 10.82% NA
2017 87,678 12,587
Five or
fewer 16.93% 15.91% 12.53% 13.66% 10.20% NA
2016 76,431 12,111
Five or
fewer 13.36% 12.42% 12.55% 17.34% 10.77% NA
2015 76,852 10,751
Five or
fewer 2.50% 1.58% 12.20% -3.83% 10.68% NA
2014 77,240 10,329
Five or
fewer 11.75% 11.21% 11.55% 13.45% 9.20% NA
2013 77,477 9,282
Five or
fewer 42.14% 41.23% 15.09% 32.53% 12.70% NA
2012 63,536 14,330
Five or
fewer 14.06% 13.72% 17.63% 17.51% 15.51% NA
2011 155,861 24,039 6 -5.15% -5.59% 21.43% 0.39% 20.69% 0.25%
2010 452,309 279,361 10 14.81% 14.23% 24.66% 15.51% 23.18% 0.88%
2009 506,468 274,985 11 43.11% 42.45% 22.76% 19.69% 21.10% 2.21%
2008 313,481 122,118 15 -43.39% -43.75% 16.92% -36.85% 15.36% 1.20%
Data Definitions:
Jensen’s Alpha – This measure is a risk-adjusted performance measure that represents the average return on a
portfolio or investment above or below that predicted by the capital asset pricing model (CAPM) given the
portfolio’s or investment’s beta and the average market return.
Information Ratio – The information ratio is an efficiency measure calculated by dividing the Excess Rate of
Return by the Standard Deviation of the Excess Rate of Return stream (Tracking Error). Please refer to the
definition of Excess Rate of Return or Tracking Error for further details. The information ratio is most useful for
measuring the performance of an active manager against an appropriate benchmark and can be used as a guide
to choosing active manager within a universe of similar asset/style managers.
Excess Return – The Excess Rate of Return is calculated by taking the difference between the quarterly return of
a portfolio minus the quarterly return of a benchmark. The quarterly excess is then linked and annualized to get
the number.
Standard Deviation – A measure of dispersion about an average in applied statistics. It is a good measure of the
historical variability of the return earned by an investment manager. The assumption is the greater variability in
the rate of return connotes greater risk undertaken in achieving the return. For example, one would prefer a
portfolio that earns 5% each period to one that alternates between a return a zero in one period and 10% the next.
A general rule is that, for any given rate of return, the lower the standard deviation, the better; similarly, for any
given standard deviation, the manager who provides the highest rate of return is best. The denominator for this
calculation is N.
Sharpe Ratio – A return/risk measure developed by William Sharpe. It is a measurement of efficiency utilizing
the relationship between annualized risk-adjusted return and standard deviation. High Sharpe Ratio measures
good performance (efficiency). Therefore, a Sharpe Ratio of 1 is better than a ratio of .05. The standard
deviation in this Sharpe Ratio formula is divided by N-1.
Data Definitions:
Treynor Ratio – Similar to the Sharpe Ratio, Treynor Ratio is a measurement of efficiency utilizing the
relationship between annualized risk-adjusted return and risk. Unlike Sharpe Ratio, Treynor Ratio utilizes
“market” risk (beta) instead of total risk (standard deviation). Good performance efficiency is measured by a high
ratio. The Treynor Ratio attempts to measure how well an investment has compensated its investors given its
level of risk. The Treynor Ratio relies on beta, which measures an investment’s sensitivity to market movements,
to gauge risk. The premise underlying the Treynor Ratio is that systematic risk—the kind of risk that is inherent to
the entire market (represented by beta)—should be penalized because it cannot be diversified away.
Tracking Error – A measurement that indicates the standard deviation of the difference between a selected
market index and a manager’s quarterly returns. For example, a manager selects an index as a benchmark for
comparison against his/her portfolio. Each quarter generates new returns for both the manager and the selected
index. The returns for the manager are then compared to the indexes to determine the amount of excess return,
which produces a tracking error. A low tracking error indicates that the manager is tracking the selected index
closely or has roughly the same returns as the index. The standard deviation for this calculation uses N.
Risk-Free Rate – The risk-free rate of return is the theoretical rate of return of an investment with zero risk. The
risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a
specified period of time.
CONTACT US
Hillman Capital Management, Inc.
7250 Woodmont Avenue
Suite 310
Bethesda, MD 20814
Phone: (240) 744-4500
www.hillmancapital.com