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The Value Tide is Showing Up in Better Relative Earnings than Growth Stocks

  • Last week, the ALPS Sector Dividend Dogs ETF (SDOG), a deep value portfolio of high-yielding large-cap stocks, outperformed the S&P 500 Index by over 100 basis points (bps) as the mega-cap “tech wreck” gained momentum following several earnings misses and lowered fiscal year guidance. SDOG’s relative underweight to the Information Technology sector and overweight to the cyclical Energy & Materials sectors has furthered its outperformance over the S&P 500 on the two-year, one-year and year-to-date (YTD) periods.

  • Last week, however, SDOG’s defensive sectors mostly led performance with its Health Care sector as the best performer. Biopharmaceutical company, Gilead Sciences Inc. (GILD, 2.48% weight*), gained nearly 17% last week on the back of a 3Q earnings beat with the company nearly doubling its cancer drugs sales and seeing a reacceleration in its HIV franchise. Biotech manufacturer, Amgen Inc. (AMGN, 2.26% weight*), also rose 8.68% last week in SDOG’s Health Care sector, following positive analyst commentary regarding potentially better-than-expected sales for its key drugs. Amgen has also been boosted by recent buzz around their acquisition of ChemoCentryx Inc. (CCXI, not in SDOG).

  • Playing off positive earnings news, SDOG Financial sector name and retirement service provider, Principal Financial Group (PFG, 2.29% weight*), rallied over 11% last week after posting better than estimated 3Q earnings on strong life insurance sales and cost synergies from its purchase of Wells Fargo’s retirement business. Adding to Financial sector gains last week, Truist Financial Corp (TFC, 1.88% weight*), returned 8.53% on positive analyst commentary around its 3Q earnings release where Truist saw net interest income rise mid double digits.

  • Consumer Staples names, The Kraft Heinz Co. (KHC, 2.18% weight*), traded 10.59% higher last week after reporting better-than-expected 3Q earnings on product price increases of greater than 15%, while Philip Morris Inc (PM, 1.91% weight*) also rallied nearly 7% last week after its proposed takeover of Swedish Match (SWMA SS, not in SDOG) will now only require a 90% shareholder acceptance rate with Swedish Match’s Board recommending the merger. Finally, SDOG Industrials name, 3M Co. (MMM, 2.10% weight*), returned 8.38% last week after reporting 3Q net income that doubled year-over-year on lower expenses, despite sales being negatively impacted by a stronger dollar.

“We remain cautious on cyclical tech industries such as semiconductors, hardware and digital media. Instead, we recommend tilting exposure to more defensive sectors, including healthcare and consumer staples, which are less vulnerable to slowing growth. Against the current backdrop of stubbornly high inflation, we also favor value sectors, which traditionally outperform growth under such conditions.”

– Mark Haefele, UBS CIO, October 27, 2022

SDOG’s Deep Value Stocks Show Their Smile Without FANGs
  • Year-to-date, we have witnessed a destructive tech selloff, with FAANGMAT names (Facebook/Meta, Apple, Amazon, Nvidia, Google, Microsoft, Alphabet, and Tesla) losing over $4 trillion in market value YTD. Deep value, cyclical stocks have continued to perform well amid a high inflationary environment, with many of these names benefiting from higher pricing power and easier year-over-year comparisons that have resulted in strong earnings and sales growth.

  • FAANGMAT names currently make up 22.30% of the S&P 500 Index holdings* (SDOG does not own any FAANGMAT stocks), and have contributed to over 50% of the -1,710bps loss YTD for the S&P 500. Major Information Technology names such as Amazon, Microsoft and Meta have all reduced their fiscal year guidance recently, with many other growth stocks also showing signs of macro weakness.

20221031-chart

  • Since the start of the year, mega cap tech has struggled in the high inflationary and high interest rate environment, resulting in the five most prominent technology stocks, Microsoft, Alphabet, Meta, Amazon, and Apple amassing over $3 trillion in losses this year.

  • SDOG’s large cap exposure to high yielding, deep value stocks continues to be in favor with investors during the recent inflationary period that has resulted in cyclical sectors with pricing power to maintain their leadership.

* Weight in SDOG as of 10/28/2022

Performance Summary
  1 Week YTD 1 Y 3 Y
ALPS Sector Dividend Dogs ETF (SDOG) 5.11% -3.00% -1.26% 27.51%
S-Network Sector Dividend Dogs Index - TR 5.13% -2.78% -0.94% 28.92%
S&P 500 Index - TR 3.97% -17.10% -13.25% 34.74%


Source: Bloomberg L.P., as of 10/28/2022

Performance data quoted represents past performance. Past performance is no guarantee of future results so that shares, when redeemed, may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. For current month-end performance call 1-866-759-5679 or visit www.alpsfunds.com. Performance includes reinvested distributions and capital gains.

For standardized performance please click here.

Top 10 Holdings
Gilead Sciences Inc 2.48%   Valero Energy Corp 2.27%
Lockheed Martin Corp 2.35%   Amgen Inc 2.26%
Exxon Mobil Corp 2.34%   Cardinal Health Inc 2.25%
Principal Financial Group Inc 2.29%   Bristol-Myers Squibb Co 2.23%
Cummins Inc 2.29%   Huntington Ingalls Industries Inc 2.23%


As of 10/28/2022, subject to change

Important Disclosures & Definitions

An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus containing this and other information, call 1-866-759-5679 or visit www.alpsfunds.com. Read the prospectus carefully before investing.

Shares are not individually redeemable. Investors buy and sell shares on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 5,000, 25,000 or 50,000 shares.

Performance data quoted represents past performance. Past performance is no guarantee of future results; current performance may be higher or lower than performance quoted.

All investments are subject to risks, including the loss of money and the possible loss of the entire principal amount invested. Additional information regarding the risks of this investment is available in the prospectus.

The Fund is subject to the additional risks associated with concentrating its investments in companies in the market sector.


Diversification does not eliminate the risk of experiencing investment losses.


The Fund employs a “passive management” - or indexing - investment approach and seeks investment results that correspond (before fees and expenses) generally to the performance of its underlying index. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell or buy a security unless that security is removed from or added to the underlying index, respectively.

Basis Point (bps): a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.

S&P 500 Index: widely regarded as the best single gauge of large-cap US equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization.

S-Network Sector Dividend Dogs Index (SDOGX): a rules-based index intended to give investors a means of tracking the overall performance of the highest dividend paying stocks in the S&P 500 on a sector-by-sector basis.

One may not invest directly in an index.

ALPS Advisors, Inc. is affiliated with ALPS Portfolio Solutions Distributor, Inc.

ALPS Portfolio Solutions Distributor, Inc. is the distributor for the Fund.

Not FDIC Insured • No Bank Guarantee • May Lose Value

DOG001246 01/30/2023

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