The Barbell strategy for a balanced investment approach
The central approach used for the dividend fund is the Barbell strategy, whereby established large caps are blended with small and mid caps (currently 46%) in such a way as to obtain a balanced, attractive risk/return profile for investors.
The two types of investment that create an attractive balance in the MainFirst Global Dividend Stars are: on the one hand, defensive, solid, relatively non-cyclical companies with a high market capitalisation, such as consumer goods manufacturers and insurance companies that bring stability to the portfolio. On the other hand, this is balanced by smaller companies which offer opportunities to generate high returns and dividends. The latter tend to be family-run international niche market leaders (INML), characteristically with a leading market position, great growth potential, strong balance sheets and profitability as well as high quality of the management.
Dividends 2.0 for constant, attractive returns
At the same time, the stock picking process is focused on high quality dividends, so the returns are as attractive and sustainable as possible. These can be found in companies using robust business models. The selection process, which spans different regions and sectors, includes a detailed, bottom-up analysis of the companies. As well as the quality of dividends, emphasis is placed on criteria such as balance sheet strength, structural profitability, substance and growth potential.
Strong companies for good performance
Companies that meet these criteria include – on the defensive front – Tiffany and Occidental, and – on the INML front – Sixt, Sika and Washtec.
Tiffany is a world-famous American jeweller established over 180 years ago. Time and again over the years, the company’s innovative ideas have been a talking point and it has successfully overcome challenges and steadily evolved. Since Alessandro Bogliolo was appointed CEO in October 2017, the sales figures have soared. The first quarter of 2018 saw net sales leap 15%, due not least to the company’s success in China and Japan. Overall, quarterly profits rose 53% year-on-year, thanks also to the positive effects of President Trump’s tax reform.
One international niche market leader is Sixt. For years, the mobility firm’s strong growth has been in the headlines time and again. In 2017, group net profit was EUR 204 million, which corresponds to growth of 31% over the previous year. Another international niche market leader is the company Washtec, which provides integrated and service solutions in the carwash industry. The company’s turnover grew by 14% in 2017.
Another good example of an INML is Sika, which is headquartered in Switzerland but operates worldwide as a specialist in the manufacture of various chemical products for industrial bonding, sealing and reinforcing. In 2017, the company grew by 9% and consolidated profit grew by more than 14%. Sika’s main priority is growth through R&D to achieve an annual growth of 6% to 8% between now and 2020.
This strategy has enabled the fund managers of the MainFirst Global Dividend Stars, Thomas Meier and Christos Sitounsis, to achieve a total performance of 21.8% since its inception almost three years ago. This represents an outperformance of 7.5% versus the MSCI World High Dividend Yield Net Return (as at: 05/31/2018, ISIN LU1238901596). The twice-yearly dividend distributions have been 3.5% on average since its inception.