Global Dividend & Income
Model
The Generation Global Dividend & Income Model is generally for clients whose principal objective is long-term capital appreciation.
The Model follows a value approach, investing predominantly in higher quality, dividend-paying global equities and real estate investment trusts (REITs) that have the potential to produce consistent income and capital appreciation. The Model invests primarily in securities of large capitalization companies (market caps over $5 billion at the time of purchase), but may invest in companies with market caps of $2 to $5 billion.
We also screen a broad universe of income securities to search for opportunities based on risk/return parameters. Our research team then qualitatively analyzes candidate securities. Issuer fundamentals, including cash flow and asset valuation, are stress-tested for interest coverage, asset coverage and the ability to honour maturities, in order to mitigate the risk of permanent loss.
| # | ISSUER |
|---|---|
| 01 | PATRIA INVESTMENTS LIMITED CL |
| 02 | DEUTSCHE POST AG |
| 03 | CARREFOUR SA |
| 04 | GRUPO AERO DEL SURESTE S/ADR |
| 05 | VEOLIA ENVIRONNEMENT SA |
| 06 | CENOVUS ENERGY INC |
| 07 | TOTALENERGIES SE |
| 08 | KESKO OYJ |
| 09 | MEDTRONIC PLC |
| 10 | BIG YELLOW GROUP |
Opportunities from a broad universe
FOUR PILLARS
A four-pillar approach
01Value Philosophy
Our most important pillar is our fundamental research and value investment philosophy. We analyze a company’s operations, finances and valuation to assess its risk and reward potential. A value strategy offers two advantages. First, a stock purchased below our estimate of intrinsic or fair market value offers the potential for outperformance as the stock ascends to fair value. Second, we believe that stocks trading below their fair value offer a “margin of safety”; that is, downside risk is mitigated because these stocks are detached from their fair value.
02Trade Optimization
Our proprietary security trading model, TRAC™, is used to gauge changing sentiment for individual stocks, sectors or overall markets. TRAC™ helps to optimize the timing of our stock purchases and sales. We aim to buy stocks when they fall to TRAC™ floors and to sell them when they hit ceilings or fall through floors.
03·04Market Risk & Economic Risk Management
Our two macro pillars are designed to manage risk. We monitor global economies and markets to alert us to potential economic downturns or severe market declines. Our Economic Composite evaluates economic activity by combining various economic variables into one composite to capture business cycle peaks. The Relative Indicator of Momentum model (TRIM™) is an algorithm that combines momentum and volatility to determine the primary trend of the market. When the economy hits a business cycle peak according to our Economic Composite or stock markets fall below their TRIM™ line, we may raise cash, alter portfolio holdings, and hedge our portfolios by short selling markets/sectors.
STOCK SELECTION
Stock selection process
The Global Insight Model employs a proprietary and systematic process to uncover large cap global equities which our analysis indicates are undervalued.
The most undervalued securities in our global large cap universe form the focus group for our analytical team to concentrate its research efforts for investment targets.
Our proprietary TRAC™ system is used in an effort to optimize buy and sell decisions for targets and portfolio holdings.
To find ideas we utilize our proprietary ranking methodology that ranks companies on combined valuation, business quality, financial strength, and momentum metrics.
Valuation
Stocks are ranked on valuation ratios such as P/E, EV/EBITDA, P/CF, and our own proprietary valuation ratios.
Quality
Stocks ranked on performance metrics such as return on equity, return on invested capital, etc.
Financial Strength
Stocks ranked on debt-to-equity, interest coverage, Piotroski F Score, etc.
Momentum
Stocks ranked on relative performance over the last 12 months.
EVALUATION
How we evaluate a business
Competitive advantages are critical weapons that keep a company ahead of the competition. Examples of competitive advantages are cost leadership (more for less), differentiation (more for more), scale, network effects, ownership of brands or intellectual property, favorable regulation that creates toll-booth dynamics, operational effectiveness, technological expertise, and financial flexibility. Without these competitive advantages, achieving a high and sustainable return on invested capital is nearly impossible.
We look for strong leadership teams that are aligned with the interests of long-term shareholders. Priorities should be extending competitive advantages, achieving best-in-class operational excellence, and establishing strong capital allocation policies.
We prefer companies run by owner-operators that have cultivated an entrepreneurial mindset across all levels of the organizational structure. Lean and flat structures enable companies to evolve with the operating environment and capture emerging sources of value with new products and services.
We value businesses in consideration of their macro environment, leadership, competitive advantages, and risk factors. The future is hard to predict; we strive for conservativism in our assumptions.
Purchasing companies below our estimate of intrinsic or fair market value offers the potential for outperformance as the stock ascends to fair value. We believe stocks trading below their fair value offer a “margin of safety”; that is, downside risk is mitigated because these stocks are detached from their fair value.
History is replete with examples of companies that stood still as the world changed around them. Competitive advantages that serve a company well today will erode over time if management fails to recognize changing consumer preferences or disruptive new technology that could upend the economics of their industry.
We look for management teams that look to the future. Such companies are not afraid to jettison business lines or make large investments to capitalize on opportunities—even at the expense of short term earnings.
We evaluate headwinds and tailwinds to identify threats or opportunities that may impede or accelerate growth over the short and long-run. Transitory headwinds such as input costs, irrational competition, wage pressures, etc., may create an opportunity should investors be overly pessimistic about their duration or intensity.
We prefer companies poised to benefit from secular growth drivers such as demographics, technological trends, or geopolitical forces rather than companies in cyclical sectors.
We unravel the prevailing narrative surrounding the company to understand the reasons why the investment opportunity exists. What information or understanding do we have that gives us an edge?
We prefer businesses with clear catalysts that will close the gap between price and our fair value estimate.
INCOME APPROACH
A value approach to income
Investment opportunities are generated from a diverse group of businesses across North America which meet our criteria through investment and risk analysis. We invest in corporate bonds/debentures with potentially high returns (yield to maturity) relative to our assessment of the financial risk; in our view, these securities may be mispriced by the market with an opportunity for a capital gain. We screen a broad universe of securities to search and rank opportunities based on risk/return parameters and our research team then qualitatively analyzes specific securities. Issuer fundamentals, including cash flow and asset valuation, are stress-tested for interest coverage, asset coverage and the ability to honour maturities, in order to mitigate the risk of permanent loss.