Brentview News & Insights

Executive Summary Dividend growth on track. Through the third quarter, 29 of our 35 holdings (83%) announced dividend increases, averaging 10.8%. Positioned around this year's disruptions. We are overweight energy, industrials and utilities, where we see the clearest fundamentals. Energy is expected to post the strongest earnings growth of any sector, yet it trades at the cheapest valuation in the S&P 500 (13x forward earnings). Industrials have long order backlogs and pricing power from the AI build-out, grid investment and reshoring. Utilities are benefiting from rising electricity demand from data centers. We also exited a telecom holding before Starlink's direct-to-cell threat to the industry came to light. In staples and discretionary, we are judging dividend durability company by company as GLP-1 drugs push some consumer names to cut their payouts. 2026 has been a narrow market. The quarter's lag reflected a tech-led rally in higher-beta stocks, along with stock selection and our sector positioning. Half of our year-to-date underperformance comes from not owning three technology stocks. In the past, a breakdown like this between high-beta and low-volatility stocks tended to come before a reversal. Earnings are strong and guidance is improving, so we think high-quality dividend growers with pricing power are well placed for the full rate cycle.

The Brentview Dividend Growth strategy returned 8.3% (gross) in the second quarter versus 15.2% for the S&P 500, our primary index. Markets absorbed the most severe energy shock since the 1970s, then delivered the strongest quarterly rallies since 2020 led by memory and chip stocks. As seen in Chart 1, the Philadelphia Semiconductor Index (SOXX), has appreciated 112.9% for 2026, mainly driven by the 95.3% jump during the second quarter, its best quarterly performance since the index was created in 1994. With Alphabet as the sole exception, the Magnificent Seven has trailed the S&P 500 index 10.2% year-to-date return, as investors have rewarded both semiconductor and memory manufactures, while punishing software businesses seen as vulnerable to AI disruption.

The S&P 500 declined 4.3% in the first quarter of 2026, while Brentview's U.S. Dividend Growth strategy delivered a slight positive return of +0.05% (Gross of fees), outperforming the benchmark by more than 400 basis points. The quarter also marked a significant milestone: the strategy's 20th year of operation. Since its inception on March 31, 2006, the strategy has navigated a wide range of market environments and has outperformed the S&P 500 Index, both gross and net of fees.

The Brentview Dividend Growth strategy outperformed the S&P 500 for the calendar year 2025 on a preliminary gross basis, returning 19.1% versus the index’s 17.9%. As seen in Chart 1, it was a challenging year for most active large-cap fund managers where roughly 73% underperformed the S&P 500. Our journey towards outperforming the index did not occur in a straight line.

Equity markets rose in the third quarter, driven by resilient U.S. growth and sustained enthusiasm for technology and AI themes. The S&P 500 reached new highs as large-cap Information Technology and Communication Services stocks led performance. While tariffs were the point of focus for investors during the 1st two quarters, attention shifted over to the Federal Reserve’s policy path. This shift contributed to volatility in bond yields, with the 10-year Treasury fluctuating between 4.0% and 4.5%, reflecting persistent uncertainty around inflation.

The second quarter started out with a big decline in April as investors became skittish about the Trump administration’s tariff policies. Ultimately, the markets rallied in May and June as the implementation of tariffs got postponed. As a result, risk taking took prominence with the Magnificent 7 returning 21%, almost double the S&P 500’s 10.6% quarterly return.

For the 1st quarter of 2025, the Brentview Dividend Growth portfolio returned slightly positive returns relative to the S&P 500’s 4.28% decline. Our lower beta portfolio outperformed the index due to the S&P 500’s weight concentration in the Magnificent 7 stocks (about 1/3 of the index). This once highflying cohort had its worst performance since 2022 as seen in Chart 1. The Magnificent 7 (Amazon, Google Tesla, Apple, Microsoft, Meta, Nvidia) fell over 12% as uncertainty around the Trump administration's economic agenda roiled U.S. equity markets.

The S&P 500 stock market returned almost 25% in 2024, which was a back-to-back 20% plus annual market return; an event not seen since the late 1990s. The information technology sector, especially companies related to generative AI and 5G infrastructure, exploded in 2024. The information technology sector soared 36.6% for the year, communication services performed even better, rising 40.2%, as seen in Table 1. The bottom sector performers were Materials, Health Care, and Real Estate.

In the third quarter of 2024, the S&P 500 finally broadened beyond the Magnificent Seven (Apple, Microsoft, Amazon, Google, Tesla, Meta, and Nvidia). We have been anticipating this wider participation for nearly three quarters. More than 60% of the S&P 500 components beat the index for the period compared to only 25% in the first half of 2024. Also, eight of the eleven industry sectors outperformed the index. The equal-weighted S&P 500 index was up 9.1% versus 5.5% for the market-cap-weighted S&P 500.

In the second quarter of 2024, the S&P 500 appreciated by 4.2%. For the same period, the Nasdaq rose by 8.3%. The industries leading the second quarter were semiconductor stocks, particularly in the artificial intelligence segment. Ultimately only three of the eleven economic sectors exceeded the overall S&P 500 for the quarter. As seen below in Table 1 the Information technology sector rose by 13.8% followed by the Communication Services sector 9.4% advancement and followed by Utilities, which increased by 4.4%.