Resilient Strategies for Volatile Markets

Mark Wambolt

Welcome to the Resilient Strategies for a Volatile Markets Call with Eventide. We are so pleased to have you all join us and let's begin. First of all, it's important to state Dolores we can move forward. One slide would be excellent that while this webinar will cover various economic and market data, there's no guarantee that these views will be accurate. And as we all know on the next slide here, past performance does not guarantee future results. We wanted to begin with a quick overview about Eventide. For those of you who are not as familiar with us, we were started in 2008. We offer values-based investments rooted in a biblical worldview. We have 10 different strategies across an array of product vehicles, which we'll cover briefly later. And everything we do at Eventide is informed by our proprietary Business 360 research framework. We manage close to 6 billion in assets as of the end of the last quarter is move to the next slide.

Our distinct investment approach is really rooted in two things, a pursuit of investment excellence where we believe that moral discernment is a required component of that investment excellence. And as you'll see here as we go to the next slide, and I have the opportunity to introduce you to our speaker today, Dolores Bamford, our CO CIO and senior portfolio manager, she's uniquely equipped to speak to these two things very, very well. First of all, she has over 30 years of investment management experience at some of the most respected firms in the industry. Then she stepped away from the investment industry to go to Gordon Conwell Theological Seminary where she earned a dual master's in theology and church history before returning to the investment space when she joined Eventide about six years ago. As we go to the next slide, you'll see that these are the 10 strategies we offer at Eventide and the different vehicles they're offered in.

So this includes mutual funds, ETFs, separate accounts, as well as private markets, and in the four strategies with the brackets over them, those are the areas that Dolores specifically manages. On the next slide, I was just on a call with our CO CIO yesterday where he spoke about the word of the year being uncertainty, at least thus far. And when I think about uncertainty, I think the anecdote uncertainty is resiliency and that's why we believe that today's webinar is poised to be so helpful at this particular time. And with that, I'm happy to hand it over to you, Dolores.

Dolores Bamford

Thanks, Mark. Thank you for the introduction and I'm really honored and delighted to share with you all how we're managing resilient strategies in these volatile times. As you know, we are in sort of an unprecedented time as Mark and Finney have said in terms of volatility and particularly related to tariff announcements that were made in the beginning of April causing significant volatility in the markets and significant downdraft stock prices that we haven't seen since the great financial crisis or in Covid. So we're really living in unprecedented times of uncertainty and market volatility and there still is uncertainty going forward. We hope the worst has passed and that negotiations between the administration and countries are going to come out with better tariffs and solutions. But there's still a lot of uncertainty going forward for businesses and customers. And we think what the most important thing is, is in terms of managing for resilience is investing in resilient companies and pursuing an investment strategy that focuses on quality and resilience and for us at Eventide human flourishing. And so hopefully I'll be able to show you how we're showing this and what the key elements are for us managing resilience strategies.

What I put in our first quarter commentary for our dividend growth strategy really encapsulates what we're focused on right now in managing for resilience. So we remain focused on investing in resilient and well-managed companies that we believe can perform well through the near term macroeconomic and policy related disruptions and also are positioned well for long-term enduring growth. So we hope that you'll remember that through this webinar on how we're managing for resilience. It's for the near term as well as for the long term. What I want to do is focus on four key aspects of managing for resilient investment strategies. And for this webinar I'll be focusing mostly on the eventide dividend growth strategy. I'll be talking about the people involved in managing the strategy, the philosophy, the process and positioning. So it's the four Ps, the critical four Ps for managing resilient investment strategies for dividend growth.

The first and most important P in our investment process and strategy is people. I want to first talk about Andy Singer, who is my trusted co-portfolio manager and partner in managing the dividend growth strategies. We also manage the large core strategies together. Andy also has a very long tenure in the industry over 25 years and has come from great firms like John Hancock, BlackRock, credit Suisse, and also covering many industries, strong expertise across industrials and many other areas that have really been so key for managing the portfolio. And also with a mid-cap core and large-cap focus that really is so complimentary to my style as well. So we're great partners with the same investment style and the same mission.

We also have a great team working with us of experienced dedicated analysts. We have a team of five analysts that have industry focus, great deep industry knowledge that are helping us manage the dividend growth strategy. They have great experience in the investment industry. They have also deep knowledge of their industries that they're covering. They are mission aligned with Eventide and Andy and myself. And we just create a great team of really focusing on the best ideas for the dividend growth strategies. We're also supported by an excellent trading team that helps us execute the strategy and our trades as well as a business 360 team that really helps us focus on companies that are doing good in the world and avoiding companies that are causing harm. And we'll talk more about that later and why that's so important to resilience.

The next stage of the investment process is the investment philosophy, which is critical in terms of staying focused on a simple, clear, consistent and repetitive philosophy that will keep us focused on resilience and strong returns. The overall Eventide investment philosophy is that we believe in high quality companies that are excelling at creating values for others, creating value for others, and traded a discount to intrinsic value offer superior long-term risk adjusted returns. So for us at Eventide, we're focused on excellent companies that are serving others well, that are creating value for their stakeholders or what we call the neighbors of their businesses, and also trading at attractive valuation to achieve strong superior long-term risk adjusted returns. For the dividend growth investment philosophy, we applied that overall Eventide investment philosophy by focusing on high quality dividend growth companies for resiliency and human flourishing. There are five key elements or criteria that we look at and we're focused on to make sure that the companies that we own fit that investment philosophy of quality dividend growth for resiliency and human flourishing.

The first and most important to us is investing with high quality management teams that are purpose-driven to create long-term stakeholder value, that are purpose-driven to drive their companies to serve others well. The second criteria is the companies are well positioned within their industries and focused on strong long-term secular themes and solutions for their industries. They have Business 360 alignment with our values as well as leadership and so that they're focused on providing solutions for their customers in order to meet their needs and to meet their greatest challenges in the industry, which is critically important right now given all the volatility and the unprecedented policy changes going on in the country and in the world. Fourth, which is very important for a dividend growth strategy is that we're seeking companies that have financial strength and financial resiliency, having that strong free cash flow, capital discipline, discipline and improving returns so that we can have a lot of visibility and strong dividend growth going forward.

And finally, with a robust valuation metrics and work that we see attractive long-term value and prospects for strong long-term risk adjusted returns for the companies that we own. So the third part of the investment strategy, the third P is process. I have a lot of slides on this, but I'm going to go very quickly in high level just to make sure you have the key elements of it, but I'm very happy to go into more detail later with anyone on the call. But the process starts very high level in sort of three phases that I want you to think of. First is the idea generation stage which prevents us from owning anything that is harming people or the world and avoiding companies that have harmful products and practices and focusing on companies that we think really fit our investment strategy. So that's the idea generation stage.

The second stage I would call the fundamental analysis stage where we focus on qualitative analysis, that's management assessment, industry positioning, their Business 360® attributes and stakeholder orientation as well as strong financial analysis and valuation analysis. And we do that even in different scenarios, which we'll talk about is so important right now. And then the third and final stage is the portfolio construction stage where we are making sure that we have diversification, lower volatility than the market and that are positioning well for different macro scenarios and having a system where we can monitor the portfolio well and make sure that it's continuously reflecting the highest conviction ideas that we have for this investment philosophy. So those are the three stages I mentioned. The idea generation stage that's really focusing on avoiding companies that are doing harm and focusing on leaders in their industries that could definitely have the attributes that we're looking for for dividend growth and high quality and that are great solutions providers in the industries and think like the way that we also think that it's important for business leaders to think that they are servant leaders in their industry and for their companies and they're seeking to find solutions and adding value to their customers, to clients and all their stakeholders.

So that's a very important stage. And the next stage is the financial and fundamental analysis part of the process, which is really defining, identifying and defining and seeking out great high quality companies that have number one great management teams. And I said to you, that was the most important criteria that we follow. And so for a great management team, for us, some attributes that are really important to us is high integrity, strong character, humility, servant leadership, great execution, managing a great culture, understanding their industry really well and being able to manage their company well that they're serving their clients and their customers’ needs. Well, and we know that if a management team, it starts at the top, leadership starts at the top in terms of being able to deliver solutions and creating values for their customers. And that's critical to understand and evaluate the management team.

So we interview managements and we spend time understanding the records of execution and delivering and being able to manage a company well. And we also want to make sure the company is positioned well within their industry, offering great innovative products that are really serving their industry well and their customers well. And that the industries or the theme that they're focused on is really having enduring growth characteristics. And finally that they're offering compelling value to their stakeholders in particular to their customers in that they're seeking ways to add to their customers and help them as opposed to doing harm to them. So we want their solutions to be contributing to flourishing and not to contribute to suffering, which we think is not consistent with a resilient portfolio.

And Business 360®, as we shared with you before and market share is really a proprietary framework in order for us to evaluate a company's management competitive advantages and seeing how they're focused on human flourishing and analyzing their products and practices, their operations, their strategies, and making sure that it's through the lens of a stakeholder or the neighbors of this business that they're adding value to society and to the world and wellbeing. Another way of looking at it is that if the company is focused on serving its customers, well, their employees, society in general, their suppliers, which is important right now with all the policy changes their communities and environment, they're going to endear trust by their customers and loyalty. And we think that's very, very important because that's going to help improve the resilience of their business model as well as support enduring growth if you enable your customers have trust in you and loyalty in you, that you are building a better foundation for a resilient company and a resilient business model.

But financial analysis is also very important for this strategy and particularly for one that's focusing on financial resiliency and dividend growth. So we do look at characteristics as attractive double digit dividend growth. We're looking at strong upper single digit revenue growth and earnings, double digit earnings growth to be consistent and repeatable. We're looking for strong pricing power and we are also looking for improving operating margins and returns, excellent balance sheets, strong free cashflow and capital discipline, and focusing on management teams that really believe this and this is important for their companies to be sustainable and successful for the future.

We're also spending a lot of time on valuation and particularly because even if we're looking at different scenarios as we are today, either of the recession or a strong economy or with higher interest rates or more inflation, different tariff scenarios that companies will perform differently in these different scenarios, what's important for us to do our valuation work for the long-term but also to understand how they are valued under different scenarios going forward, which is important in the environment that we live in today. The fourth and final aspect of the strategy is positioning a portfolio construction, very important for alpha generation as well as risk management. And so in general what we're looking for is having as much diversification as possible and volatility of the portfolio as low as possible for benchmark, but also making sure that we have alpha generation come from our stock selection or from the companies that we are evaluating and putting in our portfolio.

And we're very macro aware we're not moving the portfolio around significantly due to macro changes, but making sure that the portfolio is resilient in many different macro scenarios. And what that means is that we're finding companies or we're seeking companies that have that resilience in different macro scenarios and that the growth that we see happening can endure and continue whatever happens in their industry, cyclical factors or in the economy. And so the scenario analysis also remains important for portfolio construction and we continue to monitor the portfolio and making sure that it's a high conviction portfolio. So amongst the entire universe, we're looking for something like 50 companies that really represent our investment philosophy and making sure that we have the diversification across sectors and themes that we have that lower volatility and risk management as well as delivering alpha from our stock selection. And then we can tilt based on what we think is maybe a more hostile macro view or something that is a more favorable view based on specific indicators.

And we absolutely stay on top of price targets and position sizing to make sure that reflects our conviction in a name for the portfolio for the risks that we see as well as the opportunities. Self-discipline is also very important as we manage through these times, making sure that companies are continuing to meet our investment thesis, that they meet our Business 360® criteria, that there's upside still to our price targets and that we have the best ideas represented in the portfolio and can make changes and adjustments based on if these conditions exist or don't. And obviously the dividend growth and the stability of that remains important for this portfolio.

So what I want to do though is give you context for right now. How are we positioning for the future and face of continued tariff uncertainty or policy uncertainty? And what I want to make sure you understand is now or in other times we continue to be positioning for resilience. So we're going to be resilience positioning for resilience now and going forward as we have in the last six years managing this strategy together. It will remain a key theme for this strategy and an enduring part of this strategy of positioning for resilience. But the factors are changing in the economy and in the industries that may make us emphasize certain companies or overweight certain industries based on the resilience that we see is developing and different types of growth themes that are developing and with the need of really making sure we have downside risk mitigation a lot in the names that we own.

So we're going to stay focused on resilient growth, strong financials and idiosyncratic risk so that the companies will continue to perform well no matter how hostile the macro backdrop can be. MB in this case, we are absolutely excited about a lot of companies that are exposed to US manufacturing dominance and improvement going forward related to pro US policies or just really strong trends within their industries. We have exposure to technology trends and artificial intelligence enablement and transformation, also accelerating power and energy, demand grid modernization, automation, e-commerce, a lot of positive trends in insurance and housing just as some examples. But with tariff uncertainty, we remain positioned in the portfolio for beneficiaries of US policies and we test for resilience for tariff exposures, inflation interest rates, a weakening economy as well as continued high levels of equity market volatility. Right now, this has caused us to be overweight in industrials and that obviously covers a lot of subsectors, but there are a lot of really strong resilient companies that are really thriving in this environment that are not exposed to tariffs or are mitigating their exposure to tariffs. Utilities with the strong tens that are occurring in manufacturing and technology, natural gas infrastructure is becoming increasingly important and of great demand as well as a lot of mission critical software and solutions providers.

And we're underweight areas where we see weakness in many of the consumer discretionary and staples, place spaces and communication services. There's also a Business 360® concerns in these areas as well as areas that may have high exposure to weakening or threatened international supply chains. So very US exposure type companies and those that have exposed to have high customer leverage or customer credit, those types of things we're avoiding. So what I also want to emphasize to you is the importance of resilience and dividend growth that a dividend growth strategy in itself seeks resilience in returns of the portfolio.

So dividend growth in itself can be an indicator of quality, so it can be an indicator of a disciplined financial strategy or disciplined management that is focused on being committed to returning cash to shareholders in form of a dividend or buyback or having low debt or reducing their debt. It can also be reflective of a really sustained enduring strong business model, which is what we're focused on and on a company that can achieve consistent revenue and earnings growth with strong margins and strong returns. So from a business model perspective, dividend growth can be an indicator of that quality. So that's why it's important to us to focus on that and be in the name of the strategy because it's really important. Another thing I want to share with you is that we think dividend growth is a greater indicator of resilience or can be a greater indicator of resilience than dividend yield on itself.

I think this chart is really interesting and that if you look to the bar charts in the beginning of this chart that has a dividend yield that's very high, it can be at the expense of earnings or earnings growth or dividend growth. So a company that has a very, very high dividend yield or a high dividend payout may be in a position of weakening fundamentals or not being able to reinvest enough for long-term enduring growth, which we think is an important indicator of long-term returns. And then you go on the opposite side, if you have a company that's not paying out their dividends or have a disciplined policy, then you're not going to have that resiliency necessarily in earnings growth or in dividend growth. But there's sort of a happy medium here in the middle where if you are focusing on companies that maybe pay out only 30 to 40% of their cash flow and their strong free cashflow generators, then they can achieve maybe consistent double digit earnings growth and dividend growth. And that to us is the sweet spot for this strategy.

Another chart, which I think is really important about why dividend growth now and why dividend growth strategies help improve resiliency is that we've seen over time and this chart shows it is that in periods where there's more of a range bound in performance of the markets or when there's weakness in the markets that dividend growth strategies appear to outperform, outperform their overall universe or indices that are not screening on dividend growth. That dividend growth in itself is really helpful for downside risk mitagation and for outperformance. So very important chart for clients that are risk adverse and really want consistent returns.

So this next phase I just want to share with you that the dividend growth strategy is really meeting eventides the firm's ultimate goals of making sure that we have integrity to our values that are rooted in a biblical worldview, that we are making positive impact on the world by the capital that we are contributing to specific type of companies and that we're achieving strong returns over time of a history of strong returns. So on the integrity to our values, we want to make sure that you know that with our investment strategy and our Business 360® focus, we are focused on making sure that our values are reflective in our investment philosophy and in our screening and in our investment analysis, qualitative as well as fundamental in our portfolio construction aspects. So that's respecting the life and dignity of all people, preserving justice and peace, the importance of family and community responsible management practices and environmental steward. These are the values of Eventide that we want to make sure constantly get reflected in the companies that we avoiding, the companies that we don't want to own that are harming society or violating these values and those companies that are meeting these values well and representing these values well.

So we do want to make sure that you know that it's not just enlarge, but in midcap that the universe itself, which is thousands of companies or hundreds of companies, has exposure to areas that we do not want to have in our portfolio. We do not want to have exposure to abortion or tobacco gambling, any of these types of products that really violate our values. And we have a Business 360® team that makes sure that evaluates these exposures. And this is not cumulative because there can be overlap, but if there is any indication of these exposure that we have a team that evaluates it and make sure that it's something that we're okay owning that passes or something that it fails and it doesn't meet our values. And so in this case, we could see for the index at this moment about 30% of the entire universe, which is very large fails, but that does not prevent us from focusing on excellent companies and finding 50 to 60 plus companies in our universe that meet our investment philosophy.

So finally on performance, I think what's exciting about this strategy and building a portfolio that's resilient is the resilient returns in significant downside performance in our benchmark or peer group and even the market that we've seen in specific really moments where there was a negative downdraft in the market and how this strategy outperformed the benchmark in the peer group during these very risk off high stress, high uncertainty periods such as in 2018 with the growth scare the covid sell off, how much this strategy outperformed during then as well as in the recent tariff turmoil, how well we outperformed versus our peers and the market indices with this type of strategy focusing on these types of companies with this investment philosophy. So very important to us that we achieve this.

Another slide, which I really love and really managing towards this is that for the dividend growth strategies we are showing or able to, this is based on since exception and since we've been managing the fund, showing performance better than our benchmarks and our peer group. So performance better than our benchmark and peer group with this quality dividend growth approach for resiliency and human flourishing at a lower volatility than the benchmark or peer groups. And this really, to be honest with you, is a lifelong goal for a portfolio manager and for myself is to deliver strong results at lower volatility. And that's what we think our clients want and that's what we're trying to deliver every day no matter what the market conditions are or the economic conditions is achieving that sustainable resilient performance at lower volatility and that dividend dividend growth really helps that.

Finally, just this is our record of outperformance over time since we've been managing the fund. And finally on the impact, just giving you some examples of companies that we have owned and are in our top 10 as of the end of the first quarter. They're just great examples of companies that we really believe are excelling at serving society and their stakeholders well. One is Arthur J. Gallagher, which is an insurance brokerage company which is really excelling at protecting their clients from unexpected risks and losses and doing it well with a great culture, great management team, really problem solving, oriented a can-do type culture and with a business model that we think is also very low risk and a highly volatile insurance industry that does have a lot of risks, but just doing an excellent job. The second train technologies, which is really exposed to helping their customers manage their energy needs.

And my co-portfolio manager, Andy, just shared with me that heating and ventilation and air conditioning can comprise of 40% of commercial building's, energy needs and train technologies helps their customers reduce their energy needs and also help them focus on reducing pollution and improving air quality by really offering them best in class air conditioning and heating systems and with really I would say one of the best management teams we have been able to identify really mission-driven to serve their customers as well as they can and help their customers move and transition through a lot of change that's going on in their industries, really being very smart about their supply change and their suppliers being mostly US oriented and their manufacturing and just having just an excellent record of execution and ethical leadership. And that company has been in the top 10 for us for a very long time.

And then Williams Company is another wonderful company that's in our top 10 as of the end of the first quarter with a very mission-driven CEO and management team that runs a natural gas infrastructure, one of the largest infrastructure natural gas infrastructure companies in the country. And really facilitating significant change that's going on with the customers, moving more to cleaner natural gas fuels than coal or oil, and also helping their customers reduce their ethane emissions and also helping them with more reliable access to fuels and for their customers to manage their business wells and serve their customers well. And just a really humbled company that has just wowed us in their operational excellence as well as their focus on safety. So I just hope that these examples will get you excited about what we own in the dividend growth strategies. So I hope that's helpful to you in showing that we're meeting our goals and that we're really fulfilling our mission, which is so important to me to strive to honor God and serve our clients well by investing in companies that we believe are creating compelling value for the global common good. I'll turn it to you, Mark.

Mark Wambolt

Thank you, Dolores. We greatly appreciate it. So first I'll mention this, we can get a few of the questions. If you have questions, please do submit them. We'll spend a few minutes here on q and a. Secondly, the most common question we've already gotten is will we get the slides? And the answer is that we will send out the slides with the recording of the presentation early next week. We also wanted to mention that our next webinar, Energy and Human Flourishing: A Business 360® Evaluation will be coming up in about a month. So please use the QR code here to register. Our hope with this webinar is that we'll be able to equip you with stories that you can then share with your clients about this just absolutely critical space of energy and how it relates to human flourishing. So Dolores, let's move ahead one slide and we've got some questions that we can start to share with you. We'd love to get your feedback on the first of which is how does the Business 360® framework help you and the team uncover risks or opportunities that other investment managers may miss?

Dolores Bamford

Thanks, Mark. I think the Business 360® framework is incredibly helpful in identifying harmful business practices, harmful exposures that are not consistent with our values, as well as helping us identify really important indicators that we believe are really helpful for an enduring strong franchise. For instance, on the negative side, we found that doing really in-depth research on a company's approach to safety is incredibly important in industrial companies, energy companies, utilities, and as you can see within instances like with Boeing or other BP at one point, that if you are not focused on building the best products and at practices that are focused on when safety is the highest priority, then you are going to leave your customers vulnerable to harm as well as your employees and your communities. So to us, Business 360® helps us focus on those types of business practices that are critical that maybe other types of investment managers are not focused on. Another, on the positive side is a company that has servant leadership management, humble management, driving a really a unique culture of empowerment and innovation can really make a significant change to how they're serving their customers and making the lives so much better of their customers and particularly during very challenging times. And that can enable them to gain market share and grow their revenue and their earnings faster than their peers.

Mark Wambolt

Dolores, can we just pause on that for a second because I know you're so passionate about it, servant leadership, can you just share about why that is so important, both in your own work and the way you think about management teams at companies?

Dolores Bamford

I would love to do that, Mark. I think servant leadership is, in my opinion, one of the most important characteristics for management because they're going to help their company become focused on their customer and their stakeholders and making sure that they treat them well and they're offering products and services that are helping them. And it starts from the top and you need to have servant leadership. So servant leadership is not a subservient type of characteristic. It's a characteristic that's focused on serving others well and leading from that position of helping others well and having that common focus and that uniting mission. So it's helping an organizational become missional and purpose-driven to really help their customers and add value and doing it in an honorable, high integrity and value value-oriented way. And we found that was a great differentiation of companies that are succeeding and they're doing well in our portfolios versus those of a management team that it's all about themselves and enriching themselves as opposed to helping others. And so servant leaders want to make sure they're successful by helping others and helping others be successful as opposed to just enriching themselves or empowering themselves, which can be very, very detrimental and very harmful for the company and for the stakeholders that they touch.

Mark Wambolt

I'm tempted to share a quote that I just read because it's so impactful, but maybe I'll come back to it. We are getting some folks who are asking you to roll back one slide to the QR code because they would love to register. So if you could do that, that'd be very helpful. Another question back to the idea of resilience specifically in a market and a year where uncertainty seems to be the name of a game, are there specific sectors or industries that you believe are most resilient in today's environment and how do you invest in 'em?

Dolores Bamford

So we're looking for resilience in any kind of environment, but today based on the trends that we see and the type of companies we want to focus on and let's, let's be specific with today's environment of tariff resilience or economic weakness, resilience, we're really looking for companies that are insulated or that are managing well through it or they've prepared for it. And so that's just one of the reasons why we are overweight, industrials and utilities and energy infrastructure. A lot of mission critical solutions providers, software and solutions provider, data analytic providers is that they are going to be thriving in this environment with high tariffs or with a lot of turmoil internationally. And I think there's a benefit too, which we didn't pick up in the webinar, of focusing on companies other than the mag seven or the large cap mega cap tech, which are very exposed to international trades, are very exposed to geopolitical issues, are very exposed to China and what might happen there and possibly more punitive reciprocal actions. And we're really focusing on the home team really those that are focused on the US Mid-Continent companies that are really focused on surviving and succeeding in the US and helping their customers here and helping the US honestly transform to more of these America first policies and America growth policies.

Mark Wambolt

Wonderful, thank you. Alright, I'll share this quote real quickly. I love to read and a book that I thought was phenomenal is the book by Jack Bogle, Enough, and in it he recounts this story. So your comments on servant leadership made me think about this. Who are others focused and maybe not focused on just the next dollar. He wrote at a party on Shelter Island hosted by a billionaire hedge fund manager author Kurt Vonnegut turned to his friend Joseph Heller, the author of the famous book Catch 22, and he said, Joe, our host made more money yesterday than you've earned from your famous book over its entire history. And Heller simply replied, yes, but I have something he will never have enough. So powerful. Another question that was asked was, as we face these uncertain and volatile markets, could you compare what makes your investment process particularly well-suited versus a traditional only high dividend focus process?

Dolores Bamford

So if you're only high dividend focus, you could be exposed to companies that are more cyclical, could be potentially a deteriorating franchise because the high dividend in some cases can reflect a weakening fundamentals because people are uncertain about the future. So they're lowering the price and basically what it means is it causes a high dividend yield. And so just looking for high dividend yield or for cheapness is another way of looking at it too, can be very dangerous and can also provide cause a lot of volatility in returns. And so that's why even for our dividend value strategies, we are also applying a dividend high quality dividend growth strategy within even the large cap value space because we feel like it's such an important enduring investment strategy of being able to focus on companies that can achieve dividend growth. It can be a high dividend as well, but it must be from the position of a strong business model that can achieve strong revenue and earnings growth. And so that is a much better foundation and more resilient foundation than just high dividend.

Mark Wambolt

Wonderful. And we'll maybe two more questions unless folks have some more. Number one, what are the biggest risks that you are watching right now that some of our advisors joining us on the call might not be fully integrating into their client conversations?

Dolores Bamford

Well, from a macro perspective, clearly the impact of tariffs and how each company is positioned to weather that, I think it's really exciting to listen to company earnings calls right now and seeing how they've prepared for this, how they're managing them, how are they mitigating the risks, how they're positioning their products, how quickly they can pivot away from exposures. So I think it's a really interesting time to really get a sense of what the risks are to US business from some of these policy changes. But it also can be related to large cap stocks as well. And the concentration in the market for large cap, mega cap tech companies and their exposures and the dependence of these major indices or the s and p on high concentrations. And then so having that alternative such as this strategy maybe to offer diversification from exposure to high concentrations within the equity markets right now to large cap tech. So those are a couple of important risks to consider.

Mark Wambolt

Perfect. Alright, let's end on a high note. So we've talked about a couple of the risks that people might not be paying attention to and let's just wrap things up here with what are the things that you're most excited about right now and maybe particularly that aren't on the radar of a lot of our advisors?

Dolores Bamford

I'm really excited and hopeful for this country that we can adapt well with any change that we see coming from a policy basis or geopolitical that just the resilience of US industry and companies and management teams is really humbling to us right now. And being partners with these special companies through these unprecedented and volatile times is really gives me so much satisfaction and hope in the future for the US and for the capital markets and for the US equity market. It really does. And there's just so much to be proud of to own right now and to partner with really excellent companies and management teams.

Mark Wambolt

I love it. I heard a local story from a relatively large company where over the weekend of the tariffs being announced, he called his chief compliance officer literally five times in a row, said, is this real? Is this real? And when he said, yes it is, he said, okay, well it's back to business. We go and he hit the ground running with this great enthusiasm that it is what it is. And to your point, we will do everything we can to solve it and build the best businesses that serve people well. So we're so grateful for your time, Dolores. Thank you for your efforts in leading the portfolio so well. We're so grateful to all of you advisors for your trust in us. We are incredibly grateful to partner with you and to be on this mission together of pursuing investing that makes the world rejoice. Please let us know of anything we can do to serve you and your clients and we are so grateful. Have a great day. Thank you.

Dolores Bamford

Thanks Mark. Thanks everyone.

References and Definitions:

Alpha is a measure of an investment's performance that indicates its ability to generate returns in excess of its benchmark.