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Strivo, a Swedish investment services provider, is expanding its offering of theme-based Tracker Certificates with a unique product that capitalizes on the ongoing reversal of the valuation gap between value and growth stocks.
The Tracker Certificate “Globala Högutdelare” is based on a multi-factor model that aims to identify the most attractive dividend stocks globally. The model uses a large number of quality parameters in combination with dividend forecasts.
The model selects global value stocks with good liquidity with a sector distribution of 20% Finance & Energy and 80% other sectors. Emerging markets may make up a maximum of 30% of the portfolio. The selection process seeks to identify companies with stable margins, strong cash flows, low price volatility, positive trend in dividend estimates and high dividend yield.
“Investments in value stocks have been unpopular because of mediocre returns over the past decade,” said Olof Gustafsson, Head of Structuring & Product development at Strivo. “The market has been very focused on growth companies, and value investing has been seen as something outdated that would never come back. Because growth and momentum strategies have worked so well, every dip in the market has been interpreted as a buying opportunity in these stocks.”
“The relative difference in returns between value stocks and growth stocks in recent years, which ended abruptly in the first half of 2022, is reminiscent of the IT bubble of the late 1990s. Growth stocks then traded at extreme valuations and subsequently underperformed value stocks for the next eight years. Possibly this is just the beginning of a similar rotation,” Gustafsson continued.
The selection process for the tracker is particularly interesting given the last year’s macroeconomic development. After a long period of low-price growth, investors need to take inflation into account again. During the last great wave of inflation in the 1970s, dividends accounted for almost two-thirds of the total returns for stocks, and it is not unlikely that dividends will once again increase in importance.
The key to success is to avoid divided cuts, as well as disappointments, which is why we use proven techniques, such as predictability and momentum in estimates, to manage this risk.
Olof Gustafsson,
Head of Structuring & Product development, Strivo
Strivo’s Tracker Certificates are exchange-traded investment products that follow the price of an underlying asset (one or more stocks, for example). The products have no built-in leverage and thus track the price movement of the underlying asset with a 1:1 ratio.
Strivo offers tracker certificates within several investment themes, including e-sports, hydrogen and cyber security. The trackers are listed on Nasdaq and can be traded on the secondary market.
The offering period for Tracker Certificate “Globala Högutdelare” ends on Nov. 11 and will be listed on Nasdaq First North MTF, with its first trading day on Nov. 22, 2022.
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Image and article originally from www.nasdaq.com. Read the original article here.