Urupong
Fund Performance Average Annual Total Returns (%) for the period ending June 30, 2024
|
Columbia Dividend Opportunity Fund |
3 months |
1 year |
3 years |
5 years |
10 years |
|
Institutional class |
-1.31 |
12.52 |
6.38 |
8.71 |
7.98 |
|
Class A without sales charge |
-1.38 |
12.21 |
6.12 |
8.44 |
7.71 |
|
Class A with a maximum sales charge of 5.75% |
-7.05 |
5.75 |
4.04 |
7.16 |
7.07 |
|
MSCI USA High Dividend Yield Index – Net |
-1.95 |
11.67 |
4.98 |
7.07 |
8.14 |
| Performance data shown represents past performance and is not a guarantee of future results. Investment performance and the principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than performance data shown. Visit columbiathreadneedleus.com for performance data current as of the most recent month-end. Institutional class shares are sold at net asset value and have limited eligibility. Columbia Management Investment Distributors, Inc. offers multiple share classes, not all necessarily available through all firms, and share class qualifications may vary. Contact us for details. |
- Columbia Dividend Opportunity Fund Institutional Class shares returned -1.31% in the second quarter. For the fund's monthly performance, see columbiathreadneedleus.com.
- The fund outperformed its benchmark, the MSCI USA High Dividend Yield Index – Net, by -1.95%.
Market Overview
Major US stock indices posted gains in the second quarter. However, the headline results obscure the fact that most of the positive performance came from a very small group of large-cap technology companies that have grown to represent an increasing share of the total US market. Outside of this area, returns were rather lackluster against a backdrop of persistently high interest rates and growing concerns about the economic outlook. This resulted in a sizeable performance gap between growth and value styles, and translated into a loss for the fund's benchmark.
Quarterly portfolio summary
Major US stock indices posted gains in the second quarter. However, the headline results obscure the fact that most of the positive performance came from a very small group of large-cap technology companies that have grown to represent an increasing share of the total US market. Outside of this area, returns were rather lackluster against a backdrop of persistently high interest rates and growing concerns about the economic outlook. This resulted in a sizeable performance gap between growth and value styles, and translated into a loss for the fund's benchmark.
Top holdings (% of net assets) as of June 30, 2024
|
Exxon Mobil (XOM) |
4.49 |
|
JPMorgan Chase (JPM) |
4.16 |
|
AbbVie (ABBV) |
3.11 |
|
Merck (MRK) |
2.89 |
|
Johnson & Johnson (JNJ) |
2.85 |
|
Chevron (CVX) |
2.73 |
|
Coca-Cola (KO) |
2.39 |
|
Goldman Sachs Group (GS) |
2.22 |
|
Bank of America (BAC) |
2.14 |
|
International Business Machines (IBM) |
2.12 |
|
Principal holdings exclude short-term holdings and cash, if applicable. The fund's holdings are as of the date indicated, are subject to change at any time, and do not constitute recommendations to buy or sell any security. |
Top 5 contributors: impact on profitability (%) as of June 30, 2024
|
Dell Technologies -C (DELL) |
0.22 |
|
Broadcom (AVGO) |
0.21 |
|
Qualcomm (QCOM) |
0.21 |
|
Goldman Sachs Group (GS) |
0.19 |
|
Philip Morris International (PM) |
0.18 |
Top 5 detractors: impact on profitability (%) as of June 30, 2024
|
CVS Health (CVS) |
-0.36 |
|
Johnson & Johnson (JNJ) |
-0.21 |
|
PACCAR (PCAR) |
-0.21 |
|
International Business Machines (IBM) |
-0.20 |
|
Conocophillips (COP) |
-0.19 |
Sector weights (%): fund vs. benchmark as of June 30, 2024
The trends outlined above were reflected in the fund's performance, as evidenced by the fund's slight loss during the quarter. Still, the fund outperformed the index thanks in part to positions in stocks that stand to benefit from the growth of artificial intelligence. In particular, shares of Dell Technologies rose on rising demand for its AI servers. Holdings in Broadcom and Qualcomm also rose on expectations that they will be among the biggest winners in AI growth, helping the stocks far outperform the fund's broader investment universe.
Investors' search for potential winners in the AI space also contributed to the strong performance of utility stocks, which are expected to capitalize on rising power demand from data centers. Vistra (VST), a Texas-based utility, notably outperformed in this regard due to favorable investor sentiment about its mix of nuclear and natural gas power generation. Southern Co. (SO) and NextEra Energy (NEE) also participated in the outperformance of the broader utility sector, helping the fund's performance.
The financial sector was another strong point for the fund, with three of the largest holdings in the sector posting positive returns. Goldman Sachs posted an impressive gain on the back of better-than-expected earnings and was the biggest contributor to relative performance. JP Morgan Chase and Bank of America also performed well thanks to the combination of their strong capital positions and a favourable interest rate environment.
On the other hand, the fund underperformed in materials largely due to a position in lithium miner Albemarle. Electric vehicle sales have slowed considerably, leading to a sharp drop in the price of lithium and sending the stock well below its mid-2023 high. Healthcare was another challenging area in the quarter, with Bristol Myers Squibb (BMY) continuing to trade lower on concerns about the lack of a catalyst for business improvement. Additionally, medical device maker Baxter International (BAX) lagged due to persistently weaker-than-expected profit margins. We sold both from the portfolio. CVS was another key detractor in healthcare, but in this case, we chose to add to the position as we believed the stock’s decline had priced in the company’s pricing challenges too much. Outside of these sectors, a position in Paccar, which came under pressure from concerns about the demand outlook for heavy trucks, was a key detractor.
Perspective
The weak performance of dividend payers, coupled with the wide dispersion of returns across sectors and individual stocks, provided us with an opportunity to rotate the portfolio to capture emerging stocks. For example, we added International Paper (IP) with the view that the company will benefit from both positive industry trends and a new management team focused on more disciplined pricing. Manufacturing giant 3M (MMM), which also has new management, fell after announcing a cut to its dividend. We believe this created a buying opportunity as the payout is now at a more sustainable level that should help the company preserve capital. We also added holdings in Hewlett Packard Enterprise (HPE), which is in a similar business to Dell but with a higher yield and more attractive valuation, as well as Starbucks (SBUX), which we believed had fallen to a very attractive level. We believe these moves indicate the range of opportunities that have emerged after a prolonged period of underperformance for the fund's investment universe.
In this regard, we believe that the mixed returns of dividend stocks during the first half of the year have given rise to an increasingly attractive long-term outlook. The broader market has reached an extreme degree of concentration, as capital has poured into the six largest mega-cap tech stocks and driven their valuations to very high levels. While it is impossible to say exactly when these companies will fall from grace, a change in leadership is inevitable. In our view, dividend stocks (by virtue of the attractive valuations of a broad range of companies in the category) are poised to benefit once investors regain interest in ideas outside of the large-cap tech sector.