Bristol Gate U.S. Dividend Growth Equity
Mandate commentary
Q2 2026
Highlights
① The mandate returned 12.47%, underperforming the S&P 500 Index by 2.73 percentage points, despite strong contributions from semiconductor-related holdings.
② Earnings strength helped markets absorb uncertainty.
③ Valuations and rates make selectivity more important.
Mandate overview
AI remained the dominant market theme during the quarter, with leadership expanding across memory, compute demand, semiconductor capital equipment and the physical infrastructure supporting growing workloads. The mandate benefited from holdings exposed to AI infrastructure and semiconductor capital equipment, including Applied Materials, KLA Corporation and Amphenol. However, relative performance was constrained by the absence of several significant benchmark contributors, including Micron Technology, Advanced Micro Devices and Intel.
The mandate continued to outpace the index in terms of dividend growth. Its equally weighted, 22-security structure and periodic rebalancing limited any individual holding to approximately 5.5% of the portfolio, helping maintain balanced exposures and manage concentration risk.
Mandate: Bristol Gate U.S. Dividend Growth Equity portfolio stock review
Performance contributors
Applied Materials was one of the mandate’s two largest contributors during the quarter. The company reported strong results, which led to higher earnings estimates and increased confidence in the semiconductor capital equipment cycle.
KLA Corporation was also one of the mandate’s two largest contributors. Strong reported results supported increased earnings estimates and greater confidence in the semiconductor capital equipment cycle.
Performance detractors
Intuit was the mandate’s largest detractor, with its share price declining significantly after its quarterly report disappointed investors. The results compounded concerns that parts of the company’s business could be disrupted by AI.
McKesson detracted after its share price weakened, following a quarterly report that raised concerns regarding growth from GLP-1s. The holding lagged during a quarter in which market returns were strongly driven by AI, semiconductors and other higher-beta areas.
Total gross returns:
Total return (USD) | QTD | YTD | 1YR | 3YR | 5YR | Since INC. (NOV. 14, 2016) |
BRISTOL GATE U.S. DIVIDEND GROWTH EQUITY | 12.47
| 7.19
| 11.82
| 13.48
| 8.90
| 13.27
|
Mandate repositioning
The mandate initiated positions in Costco, Howmet Aerospace, KLA Corporation, W.R. Berkley and EMCOR Group. Each company scored at the higher end of the manager’s proprietary dividend-growth model and was viewed as possessing structural tailwinds and capital-allocation flexibility.
The mandate exited Accenture and Intuit, due to concerns regarding potential generative-AI disruption, reduced visibility into earnings durability and deteriorating projected dividend-growth trajectories. It also exited Thermo Fisher Scientific, Moody’s and Sherwin-Williams after the manager’s analysis indicated that their near- to medium-term dividend-growth profiles had moderated below its required threshold.
The mandate remains focused on identifying businesses capable of sustaining high dividend growth, supported by earnings durability, balance-sheet strength and dividend coverage.
Market overview: earnings strength helped markets absorb uncertainty
The second quarter of 2026 reinforced the resilience of financial markets. Investors faced conflict in the Middle East, commodity-price volatility, shifting interest-rate expectations and renewed inflation concerns, yet global equities continued to advance as corporate earnings and economic activity remained stronger than expected. The S&P 500 gained 14.9% in U.S.-dollar terms for the quarter, while the S&P/TSX Composite Index advanced 6.4%, supported by healthier earnings expectations and improving market breadth.
Canadian equities were led by a strong rebound in financials, as better-than-expected bank earnings, resilient credit quality and improved capital markets activity lifted sentiment. U.S. equities were supported by earnings strength rather than a simple risk-on rally, with Information Technology leading as AI infrastructure spending continued to anchor sentiment. International equities also contributed meaningfully, with emerging markets Korea and Taiwan benefitting from demand across the global technology supply chain.
Market outlook: valuations and rates make selectivity more important
Markets enter the second half of 2026 with fundamentals remaining broadly supportive, although elevated equity valuations leave less room for error. Earnings growth is likely to remain the key driver of returns, while inflation trends, central bank policy and interest-rate expectations will continue to shape market sentiment.
Across asset classes, diversification remains important. Canadian, international and emerging market equities offer exposure to distinct sources of growth, while higher yields in fixed income continue to provide a cushion against volatility. Selectivity remains key as investors balance opportunities against valuation and policy risks.
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