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: 9/30/2017
Annualized Returns (%)
Periods Ended: 9/30/2017
1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years
Global Large-Cap Rising Dividend (gross) 2.75 2.31 13.39 13.31 8.61 - -
Global Large-Cap Rising Dividend (net) 2.69 2.14 12.84 12.58 7.91 -
Russell Developed Large Cap 2.30 4.88 16.03 18.28 7.83 - -
Global Large-Cap Rising Dividend
Monthly Returns(%) as of 9/30/2017 Gross Net
1 Month 2.75 2.69
3 Months 2.31 2.14
YTD 13.39 12.84
Annualized Returns(%) as of 9/30/2017 Gross Net
1 Year 13.31 12.58
3 Years 8.61 7.91
5 Years - -
10 Years -
Russell Developed Large Cap
Monthly Returns(%) as of9/30/2017 Gross Net
1 Month 2.30 -
3 Months 4.88 -
YTD 16.03 -
Annualized Returns(%) as of 9/30/2017 Gross Net
1 Year 18.28 -
3 Years 7.83 -
5 Years - -
10 Years -

Calendar Year Performance (%)

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
Global Large-Cap Rising Dividend (Gross) 9.71 0.36 5.49 9.72* - - - - - -
Global Large-Cap Rising Dividend (Net) 9.01 -0.29 4.81 9.25* - - - - - -
Russell Developed Large Cap 7.70 -0.87 5.78 14.96* - - - - - -
Global Large-Cap Rising Dividend
Year Gross Net
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 - -
2007 - -
Russell Developed Large Cap
Year Gross Net
2016 7.70 -
2015 -0.87 -
2014 5.78 -
2013 14.96* -
2012 - -
2011 - -
2010 - -
2009 - -
2008 - -
2007 - -

*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 6/30/2017

 

Market Overview

U.S. equity markets experienced a strong start to the year, driven by expectations of accelerated economic growth, while other global markets played catch-up in the second quarter. In the United States, excitement around the pro-business policies of the new administration took a back seat following the failure to pass the American Health Care Act of 2017 and the announced investigation into ties between President Trump’s campaign and Russian officials. These issues drove market fears that the new administration would be unable to implement policy changes. At the same time, European markets began to see greater policy certainty through the arrival of long-anticipated election results in France and the United Kingdom. Japanese markets were a standout with the Nikkei 225 Stock Average rising approximately 5% in the quarter. This was partly driven by the European elections and also by a string of strong corporate earnings results corroborating an improving growth outlook in the country.

Contributors to Return

The sectors that contributed most to the portfolio’s performance relative to its benchmark were industrials, health care, and consumer staples. The portfolio’s specific individual top performers for the quarter were led by CSX Corp., a provider of rail-based transportation services in the United States and Canada. The company generated strong network and customer performance metrics during the quarter and management raised its outlook on productivity objectives. Global fast food retailer McDonald’s Corp. posted solid financial results in the quarter, which highlighted gains in key markets and underscored its strong global footprint. Nestle S.A., a global consumer goods company, announced better-than-expected financial results under the leadership of a new CEO. These results were driven by improved growth and the continued recovery in Asia and Europe. Global health and nutrition manufacturer Bayer AG announced strong quarterly results that were generated by each of its business segments. Global pharmaceutical company Novartis AG was another top contributor. The company posted financial results that surpassed prevailing market expectations and also received approval for a new product filing in an otherwise overlooked therapeutic space.

Detractors from Return

Detractors from performance relative to the benchmark this quarter were led by weakness within the consumer discretionary and financials sectors. The portfolio’s largest detractor in the quarter was Mattel Inc., a manufacturer and marketer of a broad variety of toy products. After two consecutive quarters of weak results attributable to too much inventory, new management updated forward earnings expectations and reduced its dividend payout to fund growth initiatives. Lowe’s Cos. Inc., a retailer of home improvement goods and services, underperformed in the quarter as unfavorable weather developments weighed on its outdoor and seasonal categories. Motor vehicle and parts manufacturer Toyota Motor Corp. was also a detractor from performance. Financial results missed analysts’ expectations and the company lowered guidance for sales and profit margins for the year. Additionally, stronger end markets in Asia were more than offset by headwinds in the U.S. auto market. Exploration and production company Occidental Petroleum Corp. was another headwind to performance during the quarter. The outlook for oil prices remained uncertain as the recent recovery of supply output from Africa and the unrelenting growth of U.S. shale both undermined OPEC-orchestrated output reductions. BT Group plc, a British telecommunications provider, weighed on performance as increased pension liabilities created by a change in accounting methodology and a decrease to its dividend growth outlook pressured shares.

Outlook and Positioning

Looking ahead, we are excited about the opportunities market and sector volatility may produce. As this political, economic, and market uncertainty continue, we will remain focused on finding stocks that we believe have the potential to grow their dividend, are fundamentally sound, and are currently mispriced by the markets.



Stock Performance (3 months ended 6/30/2017)
Top 5 Stocks Average Weight Contribution to Return
CSX Corporation 4.22% 0.70
McDonald's Corporation 3.43 0.60
Nestle S.A. Sponsored ADR 3.45 0.53
Bayer AG 3.76 0.51
Novartis AG Sponsored ADR 3.32 0.39
Bottom 5 Stocks Average Weight Contribution to Return
Mattel, Inc. 2.15% -0.38
Lowe's Companies, Inc. 3.45 -.016
Toyota Motor Corp. 2.95 -0.11
Occidental Petroleum Corporation 2.97 -0.11
BT Group plc 2.34 -0.09
Top 5 Stocks
CSX Corporation
Average Weight 4.22%
Contribution to Return 0.70
McDonald's Corporation
Average Weight 3.43
Contribution to Return 0.60
Nestle S.A. Sponsored ADR
Average Weight 3.45
Contribution to Return 0.53
Bayer AG
Average Weight 3.76
Contribution to Return 0.51
Novartis AG Sponsored ADR
Average Weight 3.32
Contribution to Return 0.39
Bottom 5 Stocks
Mattel, Inc.
Average Weight 2.15%
Contribution to Return -0.38
Lowe's Companies, Inc.
Average Weight 3.45
Contribution to Return -.016
Toyota Motor Corp.
Average Weight 2.95
Contribution to Return -0.11
Occidental Petroleum Corporation
Average Weight 2.97
Contribution to Return -0.11
BT Group plc
Average Weight 2.34
Contribution to Return -0.09

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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Preserving Capital While Growing Income Over Time

Read Portfolio Manager Alex Ruehle's interview with The Wall Street Transcript on the benefits of Global Dividend Investing.

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