15
US DIVERSITY PROVIDES
BOTTOM-UP OPPORTUNITIES
The US market has performed very
strongly and aggregate market
level valuations are starting to look
expensive – but its size and diversity
is still providing opportunities,
particularly within sectors such as
consumer staples and ‘old tech’. In
both cases the US is home to market-
leading companies which simply
cannot be found anywhere else in the
world.
‘Old tech’ companies are often
the highly rated growth stocks of
yesteryear. Many of them have
‘grown-up’ to dominate their fields,
but prospective growth rates have
fallen and as such valuations have
contracted. These stocks would
not have appeared on the radar of
an income investor 10 years ago,
however they now offer the kind of
characteristics that an income investor
holds dear – cash rich, high return
businesses which have commenced
dividend payments and sit on very
attractive valuations.
The Fidelity Global Dividend Fund
The wide remit on the fund provides
me with the ability to invest in global
companies with the very best prospect
for dividend growth. Another benefit
of a global approach is that it can help
build up a diversified and sustainable
income stream and avoid the stock
concentration and sector skew issues
sometimes found in funds that focus
on a narrower regional universe.
A CLEAR FOCUS ON HIGH
QUALITY YIELD, NOT JUST HIGH
YIELD
In managing this fund, I have a clear
focus on investing in companies which
provide high quality yield – rather than
merely a high yield – as history shows
that the highest yielding stocks are
often more susceptible to cutting or
even cancelling dividend payments to
shareholders altogether.
By considering the sustainability of
a company’s dividend and its ability
to grow both earnings and dividends
in the future, I am looking to build a
margin of safety into my portfolios and
deliver investors stable returns, with
lower volatility than the wider market.
Reference to specific securities in
this article should not be construed
as a recommendation to buy or sell
these securities and is included for the
purposes of illustration only.
Investors should note that the views
expressed may no longer be current
and may have already been acted upon
by Fidelity.
