Global Large-Cap Rising Dividend

Quantitative Equity

Investment Strategy

Denver Investments’ Global Large-Cap Rising Dividend strategy is based on the belief that the market rewards companies over time for their free cash flow rather than their reported earnings. The strategy utilizes a bottom-up approach grounded in independent fundamental research. Analysts seek to invest in high-quality, dividend-paying companies with the potential to grow their dividend streams over time. The team constructs a portfolio of 25-30 stocks designed to generate alpha primarily through security selection.

Portfolio Management

We build this portfolio with the goal of helping investors preserve their capital while also growing income over time. – Alex A. Ruehle, CFA

Derek R. Anguilm, CFA

Derek R. Anguilm, CFA

Partner, Co-Director of Value Research, Portfolio Manager

Troy Dayton, CFA

Troy Dayton, CFA

Partner, Co-Director of Value Research, Portfolio Manager

Mark M. Adelmann, CFA, CPA

Mark M. Adelmann, CFA, CPA

Partner, Portfolio Manager, Analyst

Lisa Z. Ramirez, CFA

Lisa Z. Ramirez, CFA

Partner, Portfolio Manager, Analyst

Paul A. Kuppinger, CFA

Paul A. Kuppinger, CFA

Vice President, Portfolio Manager, Quantitative Analyst

Alex A. Ruehle, CFA

Alex A. Ruehle, CFA

Partner, Portfolio Manager, Analyst

Portfolio Construction Guidelines:

  • Approximately 25-30 stocks
  • Stocks with minimum market cap of $5 billion
  • Initial position sizes equally weighted
  • Sector sensitive: +/- 15% of the absolute sector weight of the benchmark
  • Fully invested: typically less than 5% cash
Benchmark:

Russell Developed Large Cap Index

Investment Minimum:

$1,000,000

See composite descriptions and index descriptions. The guidelines listed are representative of the product but are not considered restrictions. Specific client guidelines may differ.

Investment Team

Derek R. Anguilm, CFA
Derek R. Anguilm, CFA

Partner, Co-Director of Value Research, Portfolio Manager

2000 to Present: Denver Investments
1999: Everen Securities, Research Assistant
Education:

BS – Metropolitan State College of Denver
Member of CFA Institute and CFA Society Colorado

Troy Dayton, CFA
Troy Dayton, CFA

Partner, Co-Director of Value Research, Portfolio Manager

2002 to Present: Denver Investments
2001 to 2002: Jurika and Voyles, Equity Research Analyst
1998 to 2001: Dresdner RCM Global Investors, Equity Research Associate
1996 to 1998: Jurika and Voyles, Equity Research Associate
1996: Citibank, Trading Support Officer
Education:

BSBA – Colorado State University
Member of CFA Institute and CFA Society Colorado

Mark M. Adelmann, CFA, CPA
Mark M. Adelmann, CFA, CPA

Partner, Portfolio Manager, Analyst

1995 to Present: Denver Investments
1979 to 1995: Deloitte & Touche, Senior Manager
Education:

BS – Oral Roberts University
Member of CFA Institute and CFA Society Colorado
Member of the American Institute of CPAs and the Colorado Society of CPAs

Lisa Z. Ramirez, CFA
Lisa Z. Ramirez, CFA

Partner, Portfolio Manager, Analyst

1989 to Present: Denver Investments
Education:

BS – University of Colorado; MBA – Regis University
Member of CFA Institute and CFA Society Colorado

Paul A. Kuppinger, CFA
Paul A. Kuppinger, CFA

Vice President, Portfolio Manager, Quantitative Analyst

2006 to Present: Denver Investments
2003 to 2006: Rocky Mountain Wealth Advisors, Principal
2002 to 2003: Curian Capital, Vice President of Research
1998 to 2002: Prima Capital, Director of Research
1997 to 1998: KPMG, Research Analyst
1993 to 1995: Westcap Investors, Trader
1990 to 1993: Wilshire Associates, Supervisor of Performance Measurement
Education:

BA – The Colorado College; MBA – University of Colorado
Member of CFA Institute and CFA Society Colorado

Alex A. Ruehle, CFA
Alex A. Ruehle, CFA

Partner, Portfolio Manager, Analyst

2008 to Present: Denver Investments
2006 to 2007: First Western Financial Services, Inc., Intern
Education:

BS and MBA – University of Denver
Member of CFA Institute and CFA Society Colorado

Jennifer B. Oldland
Jennifer B. Oldland

Vice President, Analyst

2006 to Present: Denver Investments
Education:

BS – Colorado State University

Guangyan (Yan) Qin, CFA
Guangyan (Yan) Qin, CFA

Vice President, Analyst

2008 to Present: Denver Investments
2007: Investment Protection Services, Wealth Management Intern
2007: First Data Corporation, Treasury Analyst Intern
2005: China Construction Bank, Intern
Education:

BS – University of International Business and Economics, Beijing, China
MS – University of Denver
Member of CFA Institute and CFA Society Colorado

Robbie A. Steiner, CFA
Robbie A. Steiner, CFA

Vice President, Analyst

2014 to Present: Denver Investments
2012 to 2013: BMO Capital Markets, Investment Banking Associate
2008 to 2010: Transamerica Investments, Mutual Fund Wholesaler
Education:

BBA – University of Georgia, MBA – Emory University
Member of CFA Institute and CFA Society Colorado

Georgene L.A. Pedrie
Georgene L.A. Pedrie

Vice President, Senior Equity Trader

2002 to Present: Denver Investments
1987 to 2002: NDB Capital Market, Sales Trader
Education:

BA and MA – University of Northern Colorado

Performance (%)

  Monthly Returns (%)
Periods Ended: 12/31/2017
Annualized Returns (%)
Periods Ended: 12/31/2017
1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years
Global Large-Cap Rising Dividend (gross) 1.25 6.48 20.73 20.73 9.95 - -
Global Large-Cap Rising Dividend (net) 1.20 6.31 19.96 19.96 9.25 -
Russell Developed Large Cap 1.39 5.59 22.51 22.51 9.36 - -
Global Large-Cap Rising Dividend
Monthly Returns(%) as of 12/31/2017 Gross Net
1 Month 1.25 1.20
3 Months 6.48 6.31
YTD 20.73 19.96
Annualized Returns(%) as of 12/31/2017 Gross Net
1 Year 20.73 19.96
3 Years 9.95 9.25
5 Years - -
10 Years -
Russell Developed Large Cap
Monthly Returns(%) as of12/31/2017 Gross Net
1 Month 1.39 -
3 Months 5.59 -
YTD 22.51 -
Annualized Returns(%) as of 12/31/2017 Gross Net
1 Year 22.51 -
3 Years 9.36 -
5 Years - -
10 Years -

Calendar Year Performance (%)

2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
Global Large-Cap Rising Dividend (Gross) 20.73 9.71 0.36 5.49 9.72* - - - - -
Global Large-Cap Rising Dividend (Net) 19.96 9.01 -0.29 4.81 9.25* - - - - -
Russell Developed Large Cap 22.51 7.70 -0.87 5.78 14.96* - - - - -
Global Large-Cap Rising Dividend
Year Gross Net
2017 20.73 19.96
2016 9.71 9.01
2015 0.36 -0.29
2014 5.49 4.81
2013 9.72* 9.25*
2012 - -
2011 - -
2010 - -
2009 - -
2008 - -
Russell Developed Large Cap
Year Gross Net
2017 22.51 -
2016 7.70 -
2015 -0.87 -
2014 5.78 -
2013 14.96* -
2012 - -
2011 - -
2010 - -
2009 - -
2008 - -

*Data is based on the firm’s composite for this strategy. Composite inception date is 5/1/2013. 2013 calendar year and YTD returns for the product and benchmark are for the period 5/1/2013 through 12/31/2013. Past performance does not guarantee future results and future performance may be lower or higher than the performance presented, including the possibility of loss of principal. Composite returns for one year or greater are annualized.

Returns are computed and stated in U.S. dollars. Performance is calculated net of withholding taxes on foreign dividends and interest, if any, and reflect the reinvestment of dividends and other earnings.

Gross of fee returns are calculated gross of management and custodial fees and net of transaction costs. Net of fee returns are calculated net of management fees and transaction costs and gross of custodian fees. As of 1/1/15, net of fee returns were calculated by deducting the maximum applicable advisory fee in effect, pro-rated on a monthly basis. From 1/1/08 to 12/31/14, net of fee returns were calculated by deducting the maximum applicable advisory fee in effect, pro-rated on a quarterly basis. Prior to this date, net of fees returns were calculated using actual annual client fees, pro-rated on a quarterly basis.

The Russell Developed Large Cap index offers investors access to the large-cap segment of the developed equity universe. The Russell Developed Large Cap index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment of this market and is completely reconstituted annually to accurately reflect the changes in the market over time. See Terms of Use for additional disclosure.

Index returns are provided to represent the investment environment existing during the time periods shown. For comparison purposes, the index is fully invested, which includes the reinvestment of dividends and capital gains. The returns for the index do not include any transaction costs, management fees or other costs. Composition of each individual portfolio may differ from securities in the corresponding benchmark index. The index is used as a performance benchmark only, as Denver Investments does not attempt to replicate an index. See composite descriptions.

Denver Investment Advisors LLC (dba Denver Investments) is an independent investment advisor registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Denver Investments provides fundamental investment management services to various institutional and private investors and mutual funds.

Denver Investments claims compliance with the Global Investment Performance Standards (GIPS®).

See performance disclosure for a presentation that complies with the requirements of the GIPS standards. Please contact us to request a complete list and description of all firm composites.

Manager Commentary as of 12/31/2017

 

Market Overview

Markets climbed higher in the fourth quarter based on the passage of the tax bill and hopes that lower corporate and individual tax rates would accelerate economic growth. Value stocks underperformed growth stocks and small- and mid-cap stocks underperformed large-cap stocks, as was the case throughout the year, as valuation remained out of favor and the momentum-driven market continued. Investors focused on stocks that had the highest sales growth and best fundamental execution, regardless of valuation levels. In this environment, it was not surprising that dividend-paying and less volatile stocks underperformed.

Contributors to Return

The information technology, consumer staples, and consumer discretionary sectors contributed the most to the portfolio’s return relative to its benchmark in the fourth quarter. From an individual stock perspective, portfolio holding Wal-Mart Stores Inc. was the top performer. This global retailer reported another impressive quarter in an improving retail environment. Wal-Mart appears to be regaining its dominance in physical retail and is also exerting new prowess in digital commerce. We believe the company’s increased focus on food and e-commerce, along with its investments in price comparison analysis and the customer experience, point to a winning formula. Home improvement retailer Lowe’s Cos. Inc. was another top performer within the consumer discretionary sector. The company reported strong sales and earnings, followed by an analyst meeting that painted a positive picture for growth into 2018 and beyond. Housing and consumer confidence have continued to provide tailwinds for the home improvement industry and Lowe’s has been capitalizing, both domestically and internationally. Portfolio holding QUALCOMM Inc., a provider of mobile devices and products, outperformed in the quarter. A favorable earnings report, related to strength in its chipsets segment, offset the continued overhang from customer licensing issues that remain unresolved. Additionally, QUALCOMM received, and subsequently denied, unsolicited bids from Broadcom Ltd., which helped support the stock. Royal DSM NV, a manufacturer of nutritional and pharmaceutical ingredients, as well as industrial chemicals, also contributed positively to performance. Continued benefits from restructuring in its nutrition segment and strength in its performance materials segment led to an upside earnings surprise.

Detractors from Return

The portfolio’s weakest sectors relative to its benchmark were financials, health care, and industrials. From an individual stock perspective, health care, nutrition, and materials manufacturer Bayer AG was the portfolio’s largest detractor. Its quarterly financial results were slightly lower than expectations as softer performance within its pharmaceutical and consumer businesses weighed down results. Additionally, management disclosed that the closing of its acquisition of Monsanto Co. would take longer than previously anticipated. Human resource services company Adecco Group AG was another detractor for the period. The company reported quarterly revenues, operating income, and earnings that were in line with expectations; however, given the backdrop of solid global economic growth, these results disappointed investors. BT Group PLC, a British telecommunications provider, also detracted from the portfolio’s performance. Increased pension liabilities created by a change in accounting methodology and a decrease in its dividend growth outlook pressured the company’s share price earlier in the year. A neutral earnings report released in the fourth quarter failed to stem investor concerns as these short-term headwinds remained unresolved.

Outlook and Positioning

With the passing of tax reform, markets finally have a reason to believe that economic growth will accelerate. Such growth is necessary to support historically high equity valuation levels and fuel further stock price appreciation. The question remains whether tax reform will drive capital expenditures and consumer spending high enough to offset wage pressure and other inflation drivers. This could allow the Fed to normalize policy rates and accelerate the shrinkage of its balance sheet, thereby putting a damper on the economy’s growth rate. An accelerating economy is typically more beneficial to economically-sensitive, domestic-focused, and smaller-cap stocks, and tax reform should positively impact higher tax sectors, such as financials, consumer discretionary, and capital goods. We believe our strategy is well-positioned in this type of environment and we are working hard to improve our stock selection and bounce back, as we have in the past, from a tough year of performance.



Stock Performance (3 months ended 12/31/2017)
Top 5 Stocks Average Weight Contribution to Return
Wal-Mart Stores, Inc. 3.91% 0.95
QUALCOMM Incorporated 2.75 0.62
Royal DSM NV 3.85 0.62
Lowe's Companies, Inc. 3.70 0.60
Sage Group plc 3.70 0.55
Bottom 5 Stocks Average Weight Contribution to Return
Bayer AG 3.70% -0.34
Canadian Utilities Limited Class A 3.06 -0.09
Novartis AG Sponsored ADR 3.37 -0.08
Adecco Group AG 3.18 -0.07
BT Group plc 2.00 -0.06
Top 5 Stocks
Wal-Mart Stores, Inc.
Average Weight 3.91%
Contribution to Return 0.95
QUALCOMM Incorporated
Average Weight 2.75
Contribution to Return 0.62
Royal DSM NV
Average Weight 3.85
Contribution to Return 0.62
Lowe's Companies, Inc.
Average Weight 3.70
Contribution to Return 0.60
Sage Group plc
Average Weight 3.70
Contribution to Return 0.55
Bottom 5 Stocks
Bayer AG
Average Weight 3.70%
Contribution to Return -0.34
Canadian Utilities Limited Class A
Average Weight 3.06
Contribution to Return -0.09
Novartis AG Sponsored ADR
Average Weight 3.37
Contribution to Return -0.08
Adecco Group AG
Average Weight 3.18
Contribution to Return -0.07
BT Group plc
Average Weight 2.00
Contribution to Return -0.06

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will vary, and initial investments may be worth more or less than their original investment. To obtain current performance as of the most recent month-end and for important performance disclosures, please view the fact sheet.

The securities identified on this chart were determined after consistently calculating the weight of each holding in the representative account multiplied by the rate of return for that holding during the period. The securities identified do not represent all of the securities purchased, sold or recommended for advisory clients. You may obtain a complete list showing the contribution of each holding in the representative account to the overall account performance during the period presented by emailing us or calling 303.312.5000.

The Manager Commentaries contain certain forward-looking statements about the factors that may affect future performance. These statements are based on portfolio management’s predictions and expectations concerning certain future events and their expected impact on the strategy, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the strategy. Portfolio management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

See performance disclosure for a presentation that complies with the requirements of the GIPS standards. Please contact us to request a complete list and description of all firm composites.

All indices are unmanaged and investors cannot invest directly in an index. View index descriptions.

Opportunities for Income and Total Return

The investment team shares its thoughts on the benefits of Global Dividend Investing.

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