Brentview News & Insights

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 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.

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.

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.

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.

Stocks continued their record run in the second quarter of 2021. The S&P 500 1st half return of 15.3% in 2021 turned in the third best six month return stream. As seen in Exhibit 1, 1st half 2019 was the strongest period with an 18.5% return, followed by 1st half 1998 with 17.7%. All said, the S&P 500 completed its fifth straight quarter of gains, a feat not seen since the 1953-1954 period. Non payers ended the quarter on a very strong note, especially during the last month.

Investors had a lot of cheer about as equity markets reached all-time highs and the covid-19 vaccine began to reach the US population during the first quarter of 2021. Driven by a favorable backdrop, the Brentview Dividend Growth strategy outperformed the S&P 500, our primary index in the first quarter. On a gross basis the Dividend Growth strategy returned 6.54% vs. the S&P 500 return of 6.17%.

Heading into 2020 it was not uncommon to see metaphors for the forthcoming year as “the year of perfect vision.” However, as the year progressed it became apparent that visibility was anything but clear. For the fourth quarter Dividend Growth slightly underperformed the S&P 500, despite our strategy maintaining a lower beta position. On a gross of fee basis Dividend Growth was up 11.41% for the period versus 12.13% for the S&P 500. For the full year, Brentview returned 12.91% versus 18.39% for the S&P 500.

The third quarter of 2020 was a strong quarter with the S&P 500 up 8.5%. While the quarter began with a bang, it seemed to end with a whimper as the month of September sold off by 3.9%. Despite the September weakness, the Nasdaq Composite was still able to post an 11% appreciation for the third quarter.