Value Investing in an AI-Obsessed Market: How Hotchkis & Wiley Stays True to Its Roots

In today’s market where artificial intelligence dominates investor attention, David Green has carved out a different path with his $767 million Hotchkis & Wiley Value Opportunities Fund. As portfolio manager, Green has transformed the fund into what could be called an “anti-AI trade,” seeking undervalued companies that have been cast aside as investors rush toward technology giants. This contrarian approach, deeply rooted in Hotchkis & Wiley’s 45-year value investment philosophy, has proven resilient even as tech-heavy indexes continue to post impressive returns. While the market narrows its focus on a handful of AI darlings, Green quietly accumulates positions in overlooked companies like Workday, Ericsson, and U-Haul—businesses with strong competitive positions, healthy balance sheets, and valuations that have been beaten down in the current environment. “There’s been a real gravitation toward a small group of high-flying stocks,” Green observes. “That creates opportunities elsewhere.”

The approach Green employs is deeply embedded in the DNA of Hotchkis & Wiley, a Los Angeles-based asset management firm established in 1980 by John Hotchkis and George Wiley. Their founding philosophy—acquiring quality companies at favorable valuations and allowing time to work its magic—continues to guide the firm’s strategy today. Hotchkis, who co-founded L.A. asset management giant Trust Company of the West, and Wiley, a stockbroker who helped establish pension consulting firm Callan Associates, built their firm on the belief that disciplined valuation, thorough research, and intellectual debate could consistently outperform the market. The firm’s journey wasn’t without challenges—Merrill Lynch acquired it for $200 million in 1996 but later sold it back to its managers after mismanagement issues. Throughout these transitions, the firm’s commitment to value investing remained steadfast. Today, nearly half of the firm’s 77 employees work in research, and the hiring process remains highly selective. Green, who joined in 1997 after working at Prudential and Goldman Sachs Asset Management, was part of the partner group that took the company private in 2001. Since then, assets under management have grown impressively from $4 billion to approximately $35 billion today.

Green manages several funds at Hotchkis & Wiley, including Small Cap Value and International Value, but Value Opportunities has been the standout performer. Launched in late 2002, this all-cap, go-anywhere strategy typically holds between 40 and 70 positions and has delivered remarkable results. Since inception, the fund’s Institutional share class has achieved an annualized return of 12.5%, outpacing its benchmark (the Russell 3000 Value Index) by about three percentage points and exceeding the S&P 500’s 9.6% annual return over the same period. The fund’s top ten holdings—which include Workday, SLB Ltd. (formerly Schlumberger), F5, Inc., and Havas NV—represent approximately 45% of its assets. With an average turnover of 76%, the fund demonstrates Green’s tactical approach: adding positions when market sentiment collapses and trimming when valuations exceed fundamentals. Although 2025 has been challenging with the fund up 9.7% year-to-date compared to the S&P 500’s AI-fueled 15.3% return, Green remains unperturbed, believing that narrowly focused markets eventually broaden, putting disciplined value investors in an advantageous position.

Green’s investment process centers on valuation metrics, beginning with enterprise value to sales, but with particular emphasis on enterprise value to operating income (EV/EBIT), coupled with a long-term perspective on growth potential. “A low multiple doesn’t matter if earnings are shrinking,” Green explains. “We want cheap companies where the underlying business is stable or improving.” His largest holding, representing 8% of his portfolio, is Workday—an enterprise software company whose cloud-based platform is used by hundreds of large corporations for HR and financial management. The market has soured on Workday, viewing it as vulnerable to AI disruption, with shares falling 11% in 2025. However, Green sees things differently: “What looks like a competitive threat may actually be additional business.” He argues that while AI may be powerful, replicating Workday’s complex, compliance-heavy, deeply integrated platform is far more difficult than investors realize. With customer churn below 2% and high recurring revenue, Workday functions more like essential infrastructure than a trendy tech stock. Trading at around five times enterprise value to sales—a valuation typically associated with inferior software companies being acquired by private equity—Green believes the current price more than compensates for any potential risks.

Similar investment logic applies to Ericsson, another top holding in Green’s portfolio. The Swedish telecom equipment leader, with approximately $24 billion in annual revenue, trades at just 1.1 times enterprise value to sales, while management targets 15-18% operating margins—implying roughly six times EV/operating income, an attractive valuation for a global leader in a market poised for growth as mobile data consumption accelerates. “All else equal,” says Green, “if you can buy the leading company with the best technology at a good valuation, that’s attractive.” Perhaps Green’s most classic value play is U-Haul, the moving and storage giant based in Reno, Nevada. With $5.6 billion in revenues, U-Haul dominates the DIY moving market with more than 24,000 locations worldwide—exceeding the footprint of both McDonald’s and Starbucks. Despite its market dominance (it’s approximately 10 times larger than its nearest competitor, Penske), U-Haul’s market capitalization is only $9 billion, with shares down nearly 30% in 2025 alone. Green is particularly enthusiastic about U-Haul’s expansion into self-storage, a high-margin business with minimal maintenance requirements. He recognizes value in the company’s ubiquitous visibility: “Whenever somebody drives one of their trucks on the freeway, people drive by and go, ‘Oh, there’s a U-Haul.’ That’s free advertising.”

Looking to the future, Green maintains a measured outlook: “Expect more modest, historically normal returns,” he advises. “There seem to be two different markets: an AI market that is booming, and a broader economy that is a bit weaker.” When it comes to artificial intelligence itself, Green takes a balanced view—neither dismissing its significance nor embracing it wholeheartedly. “AI is definitely real and game-changing,” he acknowledges. “But I haven’t yet seen the return on investment that will be necessary to justify the level of spending we’re seeing.” In the meantime, he’s content to focus on companies overlooked in the AI frenzy, patiently positioning his fund to benefit when market attention eventually broadens beyond the current narrow focus on technology giants. By staying true to Hotchkis & Wiley’s time-tested value philosophy, Green demonstrates that even in a market captivated by cutting-edge technology, there remains substantial opportunity for investors willing to look where others aren’t.