Saxo Morningstar High Dividend USD Q2 2021 commentary

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Instruments tradedStocks
Asset classesGlobal equities (excluding emerging markets)
Investment styleHigh quality stocks offering attractive dividends  
Dividend Yield3.82%
Quarterly return6.1% (net of fees)
Annualised volatility (since inception)

Market overview

Stocks and bond markets posted broad gains in the second quarter, and volatility ebbed, as investors navigated the cross-currents of a global economy emerging from the coronavirus pandemic. Stocks in particular were driven by the dynamics of a recovering economy: the reality of higher inflation, a mixed picture on employment, and continued support from central banks. This shift came as the Federal Reserve indicated in June that it may raise rates somewhat sooner than expected, albeit not likely until 2023. 

A wide divergence in sector performance during the first quarter narrowed in the second, with all but the utilities sector posting gains. By the end of the second quarter, one of the most dominant trends from late 2020 and the first quarter began to fade: the outperformance of cash-flow producing value stocks over popular growth stocks. 

Still, with central banks (and especially the Federal Reserve) still injecting enormous stimulus, markets weren’t spooked. Some factors stayed constant from earlier developments: resurgent economic activity boosting the price of oil, and in turn, energy stocks. In fact, oil prices rose 20% in the quarter and 94% over the past year. 

In this context, emerging markets showed resilience to a regulatory clampdown in China towards mega-tech companies, with the broad emerging-markets basket matching developed markets for the quarter.  

In the bond market, following a rough first three months of 2021, where prices were hit by fears of rising inflation, investors returned in the second quarter. Updates from central banks influenced bond market participants, with a return of investor interest resulting in a reversal of some of their lost ground—with the U.S. faring better than European equivalents. In riskier fixed-income markets, high-yield bonds continue to outpace core and corporate counterparts. 

The currency market also saw increased volatility, with the U.S. dollar perking up in June after sharply declining for most of the quarter. To the contrary, the Japanese yen, British pound, Euro and Australian dollar all saw relative strength but weakened as the quarter ended. The Fed’s hinting at higher rates and a more aggressive stance on inflation was a telling development here. 


Portfolio performance (net of fees)

Inception (Jul 2018)24.9% (cumulative return)

Top 10 portfolio holdings (as of 30/06/2021)
36.5% of total portfolio

NameWeight (%)
Canadian Imperial Bank of Commerce4.86
Bank of Montreal3.89
Roche Holding AG3.81
Maxim Integrated Products Inc3.51
Magellan Midstream Partners LP3.49
Microsoft Corp3.48
Philip Morris International Inc3.44
Enterprise Products Partners LP3.43
International Business Machines Corp3.33
National Bank of Canada3.28

Top Performers (Below performance figures are total return Q2 USD):

  • Canadian Imperial Bank of Commerce. Share price went up 17.6% and according to Morningstar proprietary analysis, the stock trades at a premium to fair value. 

    Canadian Imperial Bank of Commerce is Canada's fifth-largest bank, operating three business segments: retail and business banking, wealth management, and capital markets. It serves approximately 11 million personal banking and business customers, primarily in Canada.

  • Bank of Montreal. Share price went up 16.1% and according to Morningstar proprietary analysis, the stock trades at a premium to fair value.

    Bank of Montreal is a diversified financial-services provider based in North America, operating four business segments: Canadian personal and commercial banking, U.S. P&C banking, wealth management, and capital markets. The bank's operations are primarily in Canada, with a material portion also in the U.S.

  • Roche Holding AG. Share price went up 15.8% and according to Morningstar proprietary analysis, the stock trades at a discount to fair value. 

    Roche is a Swiss biopharmaceutical and diagnostic company. The firm's best-selling pharmaceutical products include a variety of oncology therapies from acquired partner Genentech, and its diagnostics group was bolstered by the acquisition of Ventana in 2008. Oncology products account for 60% of pharmaceutical sales, and centralized and point-of-care diagnostics for more than half of diagnostic-related sales.

  • Maxim Integrated Products Inc. Share price went up 15.3% and according to Morningstar proprietary analysis, the stock trades at a premium to fair value.

    Maxim Integrated makes high-performance analog and mixed-signal integrated circuits. The company offers a wide range of products serving a host of analog-intensive applications, including power management, audio conversion, and sensors. Maxim Integrated supplies its diverse product portfolio to a broad base of customers in the communications, computing, industrial, automotive, and consumer-related end markets.

  • Magellan Midstream Partners LP. Share price went up 15.2% and according to Morningstar proprietary analysis, the stock trades at a discount to fair value. 

    Magellan Midstream Partners is a master limited partnership that operates pipelines and storage terminals in the Central and Eastern United States. Its assets transport, store, and distribute refined petroleum products and crude and earn a fee-based stream of cash flows. Assets include the country's longest petroleum pipeline network, terminal storage, and several crude oil pipelines. Refined products make about 65% of operating margin, with the remainder mainly crude-oil pipelines.

Worst Performers:

  • Intel Corp. Share price went down 11.7% and according to Morningstar proprietary analysis, the stock trades at fair value.

    Intel is the world's largest chipmaker. It designs and manufactures microprocessors for the global personal computer and data centre market though the firm has recently faced manufacturing delays. While Intel's server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has stagnated. These include areas such as the Internet of Things, artificial intelligence, and automotive. Intel has been active on the merger and acquisitions front, acquiring Altera, Mobileye, and Habana Labs in order to bolster these efforts in non-PC arenas.

  • Compass Minerals International Inc. Share price went down 4.4% and according to Morningstar proprietary analysis, the stock trades at a discount to fair value.

    Compass Minerals produces two primary products: salt and specialty fertilizers. The company's main assets include rock salt mines in Ontario, Louisiana, and the United Kingdom and salt brine operations at the Great Salt Lake in Utah. Compass' salt products are used for dicing and also by industrial and consumer end markets. The firm's largest specialty fertilizer product is sulfate of potash, which is used by growers of high-value crops that are sensitive to standard potash.

  • AT&T Inc. Share price went down 3.2% and according to Morningstar proprietary analysis, the stock trades at a discount to fair value.

    Wireless is AT&T’s largest business, contributing about 40% of revenue. The firm is the third-largest U.S. wireless carrier, connecting 64 million post-paid and 17 million prepaid phone customers. WarnerMedia contributes a bit less than 20% of revenue with media assets that include HBO, the Turner cable networks, and the Warner Brothers studios. Fixed-line business communications services, provided to a wide range of entities, provide about 15% of revenue. The consumer broadband segment (about 7% of revenue) primarily provides broadband service to 15 million households. 

    The firm recently sold a stake in its traditional television business, which serves 17 million customers and generates about 17% of sales. This business will be removed from AT&T's financials going forward.

  • Amcor PLC. Share price went down 2.1% and according to Morningstar proprietary analysis, the stock trades at a discount to fair value.

    Amcor is a global plastics packaging behemoth, with global sales of USD 12.5 billion in fiscal 2020 following the acquisition of Bemis in June 2019. Amcor’s operations span 43 countries globally and include significant emerging market exposure equating to circa 20% of sales. Amcor’s capabilities span flexible and rigid plastic packaging, which sell into defensive food, beverage, healthcare, household, and personal-care end markets.

  • Basf SE. Share price went down 1.9% and according to Morningstar proprietary analysis, the stock trades at a premium to fair value.

    Based in Germany, BASF is the world’s largest chemical company, with products spanning the full spectrum of commodities to specialities. In addition, the company is a strong player in agricultural crop protection. Given its sheer size, BASF has a top-three market position in 70% of its businesses.


Over the past 12 months, stocks are meaningfully higher, with some key markets hitting a new record high on the last day of the quarter. To really hammer home the post-pandemic rally, take U.S. stocks for example, which are up 97% from the 2020 low set on March 20, 2020. This is obviously good news for those with a higher risk tolerance that have enjoyed the high returns, but it has also seen the risk appetite and return expectations of many investors rise to worrying levels. Some investor surveys even suggest participants now expect 15%+ returns every year for the next five years, which is extraordinary by historical norms. Like gravity, investors should be reminded that long-term asset prices are inevitably a reflection of the fundamentals beneath it. 


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