Top stock picks from manager of Morningstar 5-star rated-fund-CGDV
There are several attractive opportunities right now in dividend stocks, according to Capital Group’s Christopher Buchbinder. As the lead portfolio manager of the Capital Group Dividend Value ETF (CGDV), Buchbinder looks for companies that are rated investment grade by the credit agencies, and that have a long history of paying income. “We believe that gives the fund an inherent defensiveness and, as a result, you’ve seen it in the ETF results,” said Buchbinder, who is one of five portfolio managers on the fund. It has done better than the S & P 500 in down markets since launching in February 2022, although it won’t necessarily do better in up markets, he added. The ETF is rated five stars by Morningstar, which also named it as one of the best dividend funds for 2026 . It has a three-year trailing return of 24.3%, landing in the first percentile among its peers. Its one-year trailing return is in the eighth percentile. CGDV 1Y mountain Capital Group Dividend Value ETF one-year performance CGDV’s largest allocation, 26.8%, is in information technology stocks, followed by industrials at 15.6% and health care at 9.4%, as of Jan. 31. AI beneficiaries The large exposure to technology is what sets the ETF apart from its value-oriented, ETF peers, which tend to have more financial stocks, Buchbinder noted. That’s because the team believes artificial intelligence is a sustainable investment cycle. “Over the next five to 10 years, AI will change all of our lives very dramatically,” he said. Within tech, the ETF has more of an emphasis on semiconductor companies in the memory storage area. The team began to substantially increase its holdings last year as it realized memory was going to be in persistently short supply as the AI buildout continued. One name in the portfolio is Applied Materials , which is 3.94% of the fund’s net assets. “We could see that there was an opportunity as the memory manufacturers would need to ramp up their investments to support the AI build out,” Buchbinder said. “You’re beginning to see signs of that. It hasn’t fully played out. We think this is a multi-year cycle that we’ll see develop.” AMAT 1Y mountain Applied Materials one-year performance One area that doesn’t make up a large portion of the ETF is energy, at 6.4% of the portfolio . However, it is where Buchbinder saw some “interesting dynamics” that led him to build up the position since last spring. “The industry was under-earning relative to a normal profitability level. There was some pressure on oil prices and concern that oil prices would go lower,” he explained. “At the same, time all of this AI data center demand was changing some of the supply/demand dynamics in the industry, and we think will continue to change it.” One of the opportunities spotted was in Halliburton , he said. The oil services stock makes up 2.25% of the portfolio. “There’s an upcycle just driven by that oil field services cycle over the next several years,” Buchbinder said. HAL 1Y mountain Halliburton one-year performance Plus, importantly, Halliburton is collaborating with VoltaGrid to manufacture power systems for artificial intelligence data centers, he noted. “We think that’s a long-term opportunity for a dividend-paying, cyclical, out-of-favor stock to benefit from the AI-driven demand,” he said. Health-care opportunity Buchbinder also began building up the fund’s exposure to health care, particularly in the GLP-1 area. Eli Lilly is the ETF’s largest health-care holding, making up 3.86% of the fund. “We were able to establish a position in something that we think is a long-term, multi-year trend that will ultimately dramatically change the face of health care in the United States,” he said. “The positive impacts on health of GLP-1s are so compelling beyond just simply weight loss that we think there’s going to be a long-term adoption cycle, and Eli Lilly is very clearly the market leader there.” LLY 1Y mountain Eli Lilly one-year performance He is unconcerned about issues like the recent squabble between Novo Nordisk and Hims & Hers , which had briefly offered a cheaper copy of Novo’s new Wegovy obesity pill. On Monday, Novo Nordisk said it is suing Hims & Hers to permanently ban the online telehealth provider from selling compounded copies of the pill. “Ultimately, we do have a patent system that’s designed to allow innovators to earn returns from the intellectual property that they’ve developed,” he said. Eli Lilly’s oral GLP-1 is awaiting approval from the Food and Drug Administration. Benefits for industrials The third-largest sector holding is industrials. Buchbinder sees opportunities in commercial aerospace, which saw substantial under investment during the pandemic. RTX , formerly Raytheon Technologies, and GE Aerospace are two of the ETF’s largest holdings in the industry, at 4.83% and 2.42% of net assets, respectively. “There are only a limited number of companies that are capable of making aircraft engines in the world,” Buchbinder pointed out. “We think there’s a long-term, multi-year super cycle in this industry.” He also likes traditional industrials, which have struggled in recent years. Holdings include Carrier Global, Union Pacific and Illinois Tool Works , which all have idiosyncratic, company-specific dynamics that are appealing, he said. “We think they will benefit if we begin to get a little bit more of a revitalization in the overall industrial cycle in the U.S., and we’re seeing early signs of that,” he said. 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