Saxo

Saxo Morningstar High Dividend EUR Q4 2021 commentary

SaxoSelect Commentaries
Instruments tradedStocks
Asset classesGlobal equities (excluding emerging markets)
Investment styleHigh quality stocks offering attractive dividends
Dividend Yield3.82%
Quarterly return8.36% (net of fees)
Annualised volatility (since inception)
18%

Market overview

2021 At a Glance

  • Long-term returns have been very healthy overall, especially for those with exposure to developed-market equities.
  • In 2021, a few bright spots included the resurgence of energy and financial companies. Defensive sectors such as utilities and consumer staples struggled, but produced positive absolute returns in aggregate.  
  • Emerging markets were challenged, with Chinese technology companies falling quite heavily. Emerging-market debt has also struggled, given rising inflation and interest-rate hikes in many emerging economies.
  • Defensive assets experienced among their worst returns in a decade, with rising inflation, hurting government bonds particularly. Cash acted as a drag on total portfolio outcomes, given the rise in growth assets.  

Important Perspective

Overall, 2021 will be remembered as a great year for growth investors, but a difficult year for defensive investors. Developed-market stocks delivered exceptional performance while bonds and emerging-market assets delivered muted (and, in some cases, negative) returns. 

In the first half of the year, economic reopening and coronavirus vaccinations drove a rally in value-oriented stocks. Many companies that had been impacted by the pandemic, such as travel companies, began to bounce back, and industrial and materials stocks had strong showings in the first half of the year. Developed-markets financials, energy, and consumer discretionary stocks all increased as confidence in the economic recovery grew, but emerging-markets stocks didn’t keep up in those sectors.

The second half of the year was a different story, as inflationary pressures, the prospect of tightening monetary conditions, and the resurgent pandemic acted as a break to the first half year rally,  especially in emerging markets. Developed-market equities continued to rise but saw greater volatility as the year came to a close. 

Only time will tell what investors remember most about 2021. Perhaps it’ll be the stock market, with some key markets delivering 20%+ gains, but many will likely remember 2021 as the year that inflation returned. Both of these outcomes were considered unlikely by market participants last year, showing the importance of diversified and robust portfolio positioning. 
   

Portfolio performance (net of fees) 

Oct4.3%
Nov-1.8%
Dec5.9%
Inception (July 2018)
37.41%

Top 10 portfolio holdings (as of 31/12/2021)

NameWeight (%)
ING Group NV3.85
Hubbell Inc3.83
National Bank of Canada3.78
Canadian Imperial Bank of Commerce3.74
Microsoft Corp3.69
British American Tobacco PLC3.08
Sanofi SA3.07
PPL Corp3.01
Magellan Midstream Partners LP2.95
BAE Systems PLC2.55

Top Performers

  • Pfizer Inc: Pfizer is one of the world's largest pharmaceutical firms, with annual sales close to $50 billion (excluding COVID-19 vaccine sales). While it historically sold many types of healthcare products and chemicals, now, prescription drugs and vaccines account for the majority of sales. Top sellers include pneumococcal vaccine Prevnar 13, cancer drug Ibrance, cardiovascular treatment Eliquis, and immunology drug Xeljanz. Pfizer sells these products globally, with international sales representing close to 50% of its total sales. Within international sales, emerging markets are a major contributor.

  • Microsoft Corp: Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).

  • Cisco Systems Inc: Cisco Systems, Inc. is the world's largest hardware and software supplier within the networking solutions sector. The infrastructure platforms group includes hardware and software products for switching, routing, data center, and wireless applications. Its applications portfolio contains collaboration, analytics, and Internet of Things products. The security segment contains Cisco's firewall and software-defined security products. Services are Cisco's technical support and advanced services offerings. The company’s wide array of hardware is complemented with solutions for software-defined networking, analytics, and intent-based networking. In collaboration with Cisco's initiative on growing software and services, its revenue model is focused on increasing subscriptions and recurring sales.

  • The Toronto-Dominion Bank: Toronto-Dominion is one of Canada's two largest banks and operates three business segments: Canadian retail banking, U.S. retail banking, and wholesale banking. The bank’s U.S. operations span from Maine to Florida, with a strong presence in the Northeast. It also has a 42% ownership stake in TD Ameritrade, a discount brokerage.

  • Genuine Parts Co: Genuine Parts sells automotive parts (about two thirds of net sales) and industrial components. The company sells vehicle parts to commercial and retail customers through roughly 9,800 stores worldwide, most of which are independently owned. Its industrial unit, primarily operating under the Motion Industries banner in the United States, supplies bearings, power transmission, industrial automation, hydraulic, and pneumatic components to maintenance, repair, and OEM clients.

Worst Performers:

  • ING Group NV: The merger of the Dutch postal bank and NN Insurance in 1991 created ING. Through a series of further acquisitions ING build up a global footprint. The 2008 financial crisis forced ING to seek government support--a precondition of which was that ING should separate its banking and insurance activities, which saw ING revert to being solely a bank. ING has market- leading banking operations in the Netherlands and Belgium, and a range of digital banks across Europe and Australia. Its global wholesale banking operation is primarily focused on lending.

  • Intel Corp: Intel is the world's largest chipmaker. It designs and manufactures microprocessors for the global personal computer and data center markets. Intel pioneered the x86 architecture for microprocessors. It was the prime proponent of Moore's law for advances in semiconductor manufacturing, 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.

  • AT&T Inc: Wireless is AT&T's largest business, contributing about 40% of revenue. The firm is the third- largest U.S. wireless carrier, connecting 66 million postpaid and 17 million prepaid phone customers. Warner Media contributes a bit less than 20% of revenue with media assets that include HBO, the Turner cable networks, and the Warner Brothers studios. AT&T plans to spin Warner off and merge it with Discovery to create a new stand-alone media firm. The firm recently sold a 30% stake in its traditional television business, which serves 15 million customers and generates about 17% of sales. This business will be removed from AT&T's financials going forward. Fixed-line telecom services provided to businesses and consumers account for about 20% of revenue, serving about 15 million broadband customers.

  • Basf SE: Based in Germany, BASF is the world’s largest chemical company, with products spanning the full spectrum of commodities to specialties. 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.

  • Compass Minerals International Inc: 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 de-icing and also by industrial and consumer end markets. The firm also sells sulphate of potash, which is used by growers of high-value crops that are sensitive to standard potash. Compass is expanding its portfolio and plans to enter the fire retardant market, with its magnesium chloride-based product used to combat forest fires. The company also plans to enter the lithium market. Compass will produce magnesium chloride and lithium as by-products from its sulphate of potash operation.
     

Outlook

Omicron, inflation, and higher interest rates top the list of investor concerns, while stretched valuations would hint at a narrowed opportunity set. Whatever the economic and market conditions, in every situation, the right approach is to view the future probabilistically and think long term.

Accepting some volatility is a pre-requisite for good returns in any market, but today’s market arguably requires greater care than usual. This necessitates to target the best assets for wealth creation and preservation, with careful sizing and smart diversification.

Disclaimer

Any information found in this document, including performance information and statistics are subject to change. You can find the latest updated pricing information on the description page for each available portfolio. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses, and all capital is at risk. In particular investments in leveraged products, such as but not limited to foreign exchange, derivatives and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisors in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure of risks nor a comprehensive description of such risks. Any expression of opinion may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent).

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.