Global Large-Cap Rising Dividend

Value 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:

$10,000,000

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

Tara Stacy
Tara Stacy

Equity Trader

2009 to Present: Denver Investments
1999 to 2009: LGC Management, Accountant
Education:

BA – University of Colorado Denver; CFA Institute Claritas certificate

Performance (%)

  Monthly Returns (%)
Periods Ended: 2/28/2017
Annualized Returns (%)
Periods Ended: 12/31/2016
1 Month 3 Months YTD 1 Year 3 Years 5 Years 10 Years
Global Large-Cap Rising Dividend (gross) 6.24 10.24 7.57 9.71 5.12 - -
Global Large-Cap Rising Dividend (net) 6.18 10.06 7.46 9.01 4.44 - -
Russell Developed Large Cap 2.78 7.76 5.26 7.70 3.93 - -
Global Large-Cap Rising Dividend
Monthly Returns(%) as of 2/28/2017 Gross Net
1 Month 6.24 6.18
3 Months 10.24 10.06
YTD 7.57 7.46
Annualized Returns(%) as of 2/28/2017 Gross Net
1 Year 19.77 19.00
3 Years 7.25 6.55
5 Years - -
10 Years -
Russell Developed Large Cap
Monthly Returns(%) as of2/28/2017 Gross Net
1 Month 2.78 -
3 Months 7.76 -
YTD 5.26 -
Annualized Returns(%) as of 2/28/2017 Gross Net
1 Year 21.37 -
3 Years 5.24 -
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 12/31/2016

 

Market Overview

In the fourth quarter, we witnessed a divergence of markets, particularly after the surprising results of the U.S. presidential election and the Republican’s sweep of the House and Senate. Following the election, the U.S. dollar strengthened and U.S. markets moved higher in response to the anticipated pro-business policies of the new administration. Simultaneously, international equity markets struggled as investors became concerned that the protectionist policies of the new administration, coupled with the impact of a strong U.S. dollar on international economies, both developed and emerging, would result in slower economic growth abroad.

Portfolio Commentary

For the quarter, the Denver Investments’ Global Large-Cap Rising Dividend portfolio underperformed the 1.94% return of its benchmark, the Russell Developed Large-Cap Index. The portfolio faced headwinds in the quarter as more volatile and less fundamentally sound stocks outperformed more defensive stocks with strong fundamentals, such as consumer staples and utilities. 

Contributors to Return

The health care, real estate, and industrials sectors were the portfolio’s top contributors, relative to its benchmark, for the quarter. Financial sector holding U.S. Bancorp outperformed the market as bank stocks generally rallied on expectations of higher rates and a steeper yield curve. U.S. Bancorp has consistently earned high returns on capital by maintaining a sound lending book and generating an above average portion of its revenues and earnings from its non-lending businesses. With that said, it clearly benefited from rising rates, and these developments could allow the company to increase its earnings and dividends faster than previously believed. CSX Corp., a rail-based transportation service provider, outperformed during the quarter as continued efficiency gains and stable pricing helped to offset coal volume weakness. The stock was further supported in the back half of the quarter as fourth quarter earnings estimates were revised upward, notably due to coal volume stabilization and moderating volume declines across other rail traffic segments. CSX management has continued to repurchase stock and we believe the company still has ample cash flow to fund a growing dividend. Xilinx, a programmable logic device developer, outperformed during the quarter aided by a strong earnings report in October, in which reported sales were better than expected in most segments, and earnings estimates were significantly higher than expectations. Later in the quarter, we learned that Xilinx products would be used in servers at Amazon's datacenters, which helps open a new market opportunity for products with a fast-growing cloud computing customer.

Detractors from Return

The sectors that were the greatest detractors from the portfolio’s return relative to its benchmark in the quarter were financials, consumer staples, and materials. Sage Group PLC, a provider of business management solutions, reported strong subscription growth supported by solid European adoption, and continued profit margin improvement. However, heightened competition and subdued forward fiscal year estimates weighed on the stock during the quarter. We believe much of Sage Group's revenues are derived from recurring sources and that cost reduction initiatives should drive the stock longer term. Cobham PLC, an aerospace and defense technology provider, was an underperformer for the quarter. The company made a negative preannouncement related to expectations for its satellite and communications and wireless business unit while U.S. Federal Aviation Administration compliance slowed cash payments. Cobham’s stock, however, traded favorably following the election as industrials and defense stocks rallied in anticipation of increased spending under the new administration. Royal DSM NV (official stock name Koninklijke DSM NV) a manufacturer of nutritional, pharmaceutical and industrial products, underperformed during the quarter following precipitous declines in vitamin E pricing. DSM, however, reported another quarter of solid results, largely attributed to its materials business. We believe DSM’s recent declines due to vitamin E pricing will be a short-term detractor as the company’s volumes and profitability have continued to trend up due to operational initiatives and strong execution. 

Outlook and Positioning

As we analyze what has taken place in the political world, we find ourselves with more questions than answers regarding economic outlooks and potential impacts on financial markets. The stock market has quickly priced in higher interest rates and faster economic growth for some sectors and individual stocks. At the same time, it has discounted others that might be hurt by a strong U.S. dollar, have international exposure, are dependent on exports, or are domiciled outside the United States. However, we know from history and experience that policy changes take time and don’t always have the expected effect. We also know that, over time, stock prices have historically followed cash flow, not headlines or tweets. As such, we are working diligently to find stocks that have been unduly punished but that we believe still have attractive opportunities to grow cash flow and improve returns. In addition, we have taken advantage of individual stock appreciation that we felt was too far ahead of fundamentals. We also note that investor uncertainty has accelerated, and uncertainty generally feeds volatility, which we believe can create opportunities for value-oriented long-term investors.



Stock Performance (3 months ended 12/31/2016)
Top 5 Stocks Average Weight Contribution to Return
U.S. Bancorp 3.65% 0.69%
CSX Corporation 3.79 0.68
Xilinx, Inc. 3.15 0.40
Total SA Sponsored ADR Class B 3.06 0.24
Whitbread PLC 1.56 0.23
Bottom 5 Stocks Average Weight Contribution to Return
Sage Group plc 2.78% -0.51%
Cobham plc 0.65 -0.42
Royal DSM NV 3.15 -0.40
British American Tobacco p.l.c. Sponsored ADR 2.82 -0.38
Kimberly-Clark Corporation 3.12 -0.31
Top 5 Stocks
U.S. Bancorp
Average Weight 3.65%
Contribution to Return 0.69%
CSX Corporation
Average Weight 3.79
Contribution to Return 0.68
Xilinx, Inc.
Average Weight 3.15
Contribution to Return 0.40
Total SA Sponsored ADR Class B
Average Weight 3.06
Contribution to Return 0.24
Whitbread PLC
Average Weight 1.56
Contribution to Return 0.23
Bottom 5 Stocks
Sage Group plc
Average Weight 2.78%
Contribution to Return -0.51%
Cobham plc
Average Weight 0.65
Contribution to Return -0.42
Royal DSM NV
Average Weight 3.15
Contribution to Return -0.40
British American Tobacco p.l.c. Sponsored ADR
Average Weight 2.82
Contribution to Return -0.38
Kimberly-Clark Corporation
Average Weight 3.12
Contribution to Return -0.31

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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