Liontrust Global Dividend Fund

Q3 2020 review

The Liontrust Global Dividend Fund returned 3.1% in the third quarter, compared with 3.2% from the MSCI World Index and 1.3% from the IA Global Equity Income sector*.

 

After a significant bounce in Q2, markets stabilized in Q3 as the effect of stimulus measures across all major markets helped offset the economic damage created by the pandemic. As we enter the next phase of the pandemic, the bifurcation between ‘lockdown winners’ and ‘the rest’ has provided us with the opportunity to build new positions in global leading businesses.  The new investments for the Fund include Disney and Rational.

 

Reeling from the closure of its theme parks in March, Disney cut its dividend in May (scrapping its semi-annual dividend). In line with a deteriorating outlook, the Disney stock price returned to levels not seen since 2014. However, the future economic prospects for the company is not its theme parks but its direct to consumer business like Disney+, Hulu, and ESPN+. With Disney+ hitting 60 million subscribers within the first year (compared to Netflix, who took eight years to reach this number), the company is succeeding. Not to mention that Disney has a fortress balance sheet with $27 billion of cash on hand, and therefore we expect the company to return to dividend growth next year and provide investors with a steady stream of income for years to come.

 

On the other hand, Rational, an owner-operator German machinery business, has spent the last 20 years making cooking, steaming, and baking easier in the kitchen. The company’s combi-oven reduces costs, waste, and time for restaurants and caters. The company enjoys a dominant market position protected by patents with a long runway for growth. Rational is entering a more difficult operating period than most, but we believe the demand for hot food will return to previous levels (it is just that the distribution channel may change) and therefore the dividend cut will be short term in nature.

 

During peak investor optimism for technology stocks in August, we took the opportunity to exit Apple as the stock price exceeded our three-year price target. Even with an impending 5G iPhone supercycle coupled with a strong services business, we exited our position in the Global Leader in-line with our sell discipline and are now happy to sit on the sidelines until the stock price provides another entry point.

 

With the US presidential election, Brexit trade discussions, and the path to a vaccine still unknown, I expect volatility to remain elevated, but remain optimistic for the medium-term outlook for the fund as we get certainty on key events. As we navigate the next 12 months, we will continue to look for opportunities produced by market uncertainty and take profits from areas of the portfolio that benefits from investor optimism.  

 

Discrete years' performance (%)**, to previous quarter-end:

 

Sep-20

Sep-19

Sep-18

Sep-17

Sep-16

Liontrust Global Dividend C Acc GBP

8.1

15.7

12.4

9.4

11.0

MSCI World

5.2

7.8

14.4

14.4

29.9

IA Global Equity Income

-3.9

7.0

7.0

12.3

24.7

Quartile

1

1

1

4

4

 

*Source: FE Analytics as at 30.09.20

 

**Source: FE Analytics as at 30.09.20

 

For a comprehensive list of common financial words and terms, see our glossary here.

  

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, October 21, 2020, 8:59 AM