Buoyed by Possible Earnings, SDOG Outperforms S&P 500

SDOG is a deep-value portfolio of high-yielding large-cap stocks. The fund’s earnings growth, in aggregate, is expected to fare better than the S&P 500 (tracked by the SPDR S&P 500 ETF Trust (SPY A-)) due to its overweight to cyclical sectors that are benefitting from the current inflationary backdrop, as well as stronger expected earnings from its deep value holdings within more defensive sectors, ALPS wrote in an October 17 insight

Year to date, there has been a significant shift in performance and flows favoring value and cyclical stocks over growth and quality stocks. Deep value, cyclical companies generally perform well before an official recession as the earning’s factors that drive those companies tend to also be the macro factors that lead to an eventual economic slowdown, according to ALPS.

According to Bloomberg Intelligence, Energy sector earnings in the S&P 500 are expected to grow 123.3% year-over-year, far outpacing Information Technology’s expected earnings loss of (-6.7%) and affirming the volatility across growth-tilted sectors, ALPS wrote. 

The energy sector’s 10.6% weight in SDOG is more than double its weight in the S&P 500, according to ALPS.

SDOG’s Energy sector names, Exxon Mobil (XOM, 2.28% weight in SDOG as of October 14) and Valero Energy (VLO, 2.24% weight in SDOG as of October 14), are two of the top three largest contributors to positive earnings revisions within the S&P 500, contributing a combined +10.8% to the S&P 500’s overall positive earnings revisions, while growth dependent FAANG names have detracted -19.2%, as of October 14, ALPS wrote.

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