Brentview News & Insights

The S&P 500 index returned -4.9% in the third quarter of 2022. Volatility was the theme within the quarter as the benchmark rose 14% intra-quarter before reversing towards fresh two-year lows. With this latest quarter ending at a loss, the trend marks the third straight quarterly loss for the index, not seen since the 2008-2009 Great Financial Crisis. The Brentview Dividend Growth composite fared slightly better, posting a return of -4.8%, gross of fees. Relative to the index, Dividend Growth saw some strength from stock selection. From a portfolio positioning standpoint, stock selection within the Consumer Discretionary and Information Technology sectors contributed to our quarterly results.

The second quarter of 2022 marked the worst return since the first quarter of 2020, when the pandemic first occurred in the United States. Like the 2020 timeframe, our strategy held up better than the index as Dividend Growth outperformed the S&P 500 index, our primary index, during the 2nd quarter. On a gross and preliminary basis, the strategy returned -10.5% versus the index which returned -16.1%. Relative to the index, stock selection was paramount as we outperformed in ten of the eleven industry sectors. Energy was the only sector where stock selection detracted from our quarterly results. From a portfolio positioning standpoint, our overweight in Consumer Staples and underweight in the Consumer Discretionary also contributed.

Good morning, To highlight the resilience of the dividend growth category, please find attached our most recent commentary titled "Dividend Growth in an inflationary age." One of the common themes that comes up in conversations right now is how dividend growth strategies tolerate an inflationary environment? Investors have certainly been showing a preference for companies with cashflow in 2022. As these investors evaluate their current investment allocations, inflation has become a key consideration and potential risk to mitigate. As interest rates have risen in 2022 and inflationary pressures have grown, investors have cooled on high-flying aggressive growth stocks. Combining this backdrop with recent equity market volatility, investors have brought dividend equities back into focus. The investing landscape is always changing but investing in periods of inflation will involve more diligence and selection than in years past. As a category, dividend growth has demonstrated resilience, and the utility to a portfolio allocation could be growing in value.

The 1st quarter of 2022 turned into a dramatic pivot point for understanding a company’s underlying business risk. Every day, equity investors around the world gauge and evaluate opportunities based on revenues, cashflows, and earnings. In January, investors were bracing for a less accommodative Federal Reserve. Most if not all, did not expect the late February Ukraine invasion. Seemingly overnight, multinational companies from all corners of the globe had to assess their exposure to the region, the extent of their specific business risk, and the potential steps that each company planned on taking considering the Russian invasion.

Every day, equity investors around the world gauge and evaluate opportunities based on revenues, cashflows, and earnings. However, over the last few weeks, these measures have become secondary to the vast amount of quickly changing news and disturbing images of lives disrupted. While we cannot imagine what this experience might be like, our thoughts are with those impacted. As a result of this significant event, we also need to consider how it might impact our clients and portfolio holdings.

For the fourth quarter of 2021, the Brentview Dividend Growth strategy outperformed our primary index, the S&P 500, by 125 basis points. The Brentview Dividend Growth strategy returned 12.28%, gross of fees, while the S&P 500 gained 11.03%. Key drivers for our strategy were found within the Health Care and Consumer Discretionary industry sectors. When reviewing the entire portfolio, only two of the eleven industry sectors, Information Technology and Real Estate, were detractors against our quarterly results.

In this newly created role, and in support of continued growth, John Ginley has joined the Brentview team as Director, Business Development. John most recently led the sales efforts within the U.S. Intermediary Distribution group at BMO Global Asset Management serving financial advisors affiliated with independent broker dealer and RIAs. Prior to joining BMO, John held similar sales management roles at Advisors Asset Management (AAM) and Nuveen Investments.

It is not uncommon to have guidelines within an investment portfolio. In fact, to generate repeatable results an investor should have some parameters in place to assure that an investment approach is reliable, repeatable, and consistent. However, sometimes screening methodologies are introduced to quickly eliminate companies from a broader list towards a shorter investable universe.

The S&P 500 had a fast start to the third quarter of 2021 only to be slowed by negative returns in the final month. September’s -4.7% return marked the first monthly drop since January. Despite a poor September, the S&P 500 managed a 0.6% return for the third quarter, compared to Brentview Dividend Growth’s return of -1.2%. Market volatility had been relatively contained for several months and in a steady decline since the beginning of the pandemic in early 2020 as seen in Chart 1.

Dividend investing is a conservative way to approach equities. One common trap that many investors fall into is solely focusing on dividend yield alone. The chart below shows the relative performance since 2015 of S&P 500 constituents.