Bristol Gate U.S. Dividend Growth Equity
Mandate commentary
Q4 2024
Highlights
① In 2024, the S&P 500 Index delivered its second consecutive 25%+ annual return, and market concentration was the theme of the strong performance, with the top 10 stocks in the index accounting for more than 60% of the year’s return and almost 40% of the index market capitalization as at year end.
② North American equities finished the year strongly on the back of post-election optimism.
③ A continued easing of monetary policy helped boost performance.
Mandate overview
Over the past year, strategies that focused on investing in dividend growth stocks, like Bristol Gate’s, underperformed the S&P 500 Index. This includes the S&P Dividend Aristocrats Index and strategies that pursued broader diversification, such as the S&P 500 Equal Weight Index.
The combination of dividend growth and equally-weighted strategies underperforming helps contextualize the strategy’s largest relative underperformance compared to the S&P 500 Index since the strategy’s inception in 2009.
While periods of underperformance are challenging, they often create opportunities for patient investors. The portfolio management team thinks the current period of underperformance suggests upcoming tailwinds for equal weight and dividend growth strategies given the historic outperformance of each over time.
Mandate: underperformed the S&P 500 Index
Performance contributors
No exposure to the consumer staples, real estate and energy sectors contributed positively to relative returns in the quarter.
On an absolute basis, Broadcom, McKesson and Visa were among the best performers during the quarter.
Performance detractors
Stock selection in the industrials, consumer discretionary and information technology sectors detracted from returns in the period.
On an absolute basis, Microchip Technology, Applied Materials and Zoetis were among the weakest performers in the period.
Total gross returns:
Total return |
QTD |
YTD |
1YR |
3YR |
5YR |
Since INC. (NOV. 14, 2016) |
BRISTOL GATE U.S. DIVIDEND GROWTH EQUITY |
-2.72% |
12.34% |
12.34% |
4.77% |
10.72% |
13.32% |
Mandate repositioning
As per the portfolio management team’s quarterly rebalancing process, we trimmed our position in Carrier Global. The proceeds were reallocated to Microchip Technology and Applied Materials.
Market overview: the U.S. dollar and equities dominated the quarter
Investor sentiment turned optimistic in the fourth quarter of 2024, as equities rallied to close the year on a high note. Three defining themes shaped the quarter: a historic U.S. presidential election, ongoing central bank rate cuts and a rise in political risks both domestically and abroad. Collectively, these factors drove market movements, creating an optimistic and rewarding environment for investors following the decisive U.S. election.
Global central banks continued to ease their monetary policies, shifting the focus from combating inflation to supporting economic growth and labour market stability. The Bank of Canada (BoC) cut its overnight rate twice by 50 basis points (half a percentage point) each time, for a total reduction of one percentage point during the quarter, bringing the overnight rate to its lowest level in over two years. Similarly, the U.S. Federal Reserve followed its September cut with two consecutive reductions of one-quarter percentage point each.
Market outlook: global economies are set up for growth into 2025
Our outlook for 2025 is optimistic. With inflation no longer a major concern, central banks can continue their supportive policies. Although political risks remain, the global economic environment seems favourable, and corporate earnings are projected to improve. The historically strong performance in the fourth quarter for sectors like consumer discretionary and financials underscored a solid foundation as we enter the new year.
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