Bristol Gate Capital Partners Inc. is an independent, employee-owned investment manager that uses data science in combination with fundamental analysis to manage concentrated high-dividend growth portfolios.

In this ETF Issuer article, we will look at the existing ETF offerings of Bristol Gate Capital Partners Inc., highlighting their unique investment process and the benefits investors can garner from their solutions.

Bristol Gate Capital Partners Inc. history and purpose

Bristol Gate Capital Partners Inc. was founded in 2006 by Richard Hamm and Peter Simmie and is owned by the senior management of the company. The firm uses predictive machine learning in combination with fundamental analysis to identify high-quality companies that have the capacity and willingness to significantly increase their dividends in the year ahead.

Bristol Gate Capital Partners currently manages $2.8 billion in Asset Under Management/Assets Under Administration, as of January 2024, across a U.S. equity strategy and a Canadian equity strategy, with ETFs following each strategy.

The firm’s stated purpose is to deliver more income to their client portfolios than they received the previous year. To actualize this purpose, the firm builds portfolios by predicting the best dividend growers for the coming 12 months. Over time, these portfolios will aim to outperform the market with less downside risk.

Bristol Gate Capital Partners Inc.’s investment process

Bristol Gate Capital Partners Inc. employs a four-pillar process to build portfolios of the highest predicted dividend growers. The process leverages a combination of data science with fundamental analysis to help improve efficiencies, return profiles, and minimize human bias. Detailed below is what each pillar entails:

First Pillar:

The initial step begins with evaluating companies to be considered for the portfolio. Bristol Gate Capital Partners Inc.’s machine learning model must predict that a company will be amongst the highest predicted dividend growers in the next 12 months.

Second Pillar:

The second step is evaluating the business quality of the identified firms through a proprietary framework called Productive Capital Analysis™. Productive Capital Analysis is the trademarked fundamental analysis process followed by Bristol Gate. It assesses whether the model’s predicted dividend growth is attainable and sustainable through a thoughtful examination of a company’s source and use of cash.

Among other things, market structure, competitive dynamics, growth opportunities, pricing power, margins and the company’s record of successful capital allocation are evaluated. This rigorous analysis provides comfort in the risks underwritten and whether the company can deliver the predicted level of dividend growth.

Third Pillar:

Bristol Gate Capital Partners Inc. aims to pay a reasonable price for quality and dividend growth, thus the firm seeks to determine the fair value for each company under consideration for inclusion within the portfolio.

Fourth Pillar:

In the final stages of constructing the portfolio, correlation and principal component analysis together are used to evaluate whether the portfolio is adequately diversified with an appropriate amount of risk exposure.

Bristol Gate Capital Partners Inc.’s ETF offerings

Presently, Bristol Gate Capital Partners Inc.has two ETF offerings, each with a distinct geographic focus. The objective of each ETF is detailed below:

Bristol Gate Concentrated U.S. Equity (Ticker: BGU/BGU.U) seeks to generate long-term growth of income and capital by investing primarily in a concentrated portfolio of publicly traded equity securities of U.S. companies that pay a dividend. The ETF invests in dividend-paying equity securities selected primarily from the S&P500® Total Return Index, with the number of portfolio holdings usually ranging between 20 and 30 different securities.

The ETF typically invests in securities of companies in six or more industry sectors. Approximately every three months, subject to market conditions and manager discretion with respect to specific timing, the portfolio is rebalanced so that all of the securities in the portfolio are approximately equally weighted at that time.

As of April 22nd, the AUM for BGU was $253.55 million, while BGU.U was $107.51 million.

Bristol Gate Concentrated Canadian Equity ETF (Ticker: BGC) seeks to generate long-term growth of income and capital by investing primarily in a concentrated portfolio of publicly-traded equity securities of Canadian companies that pay a dividend. The ETF invests in dividend-paying equity securities selected primarily from the S&P/TSX Composite Total Return Index, with the number of portfolio holdings usually ranges between 20 and 30 different securities.

The ETF typically invests in securities of companies in six or more industry sectors. Approximately every three months, subject to market conditions and manager discretion with respect to specific timing, the portfolio is rebalanced so that all of the securities in the portfolio are approximately equally weighted at that time.

As of April 22nd, the AUM for BGC was $18.31 million.

Conclusion

For investors seeking equity income-oriented solutions, the offerings of Bristol Gate Capital Partners Inc. are worthy of consideration. Given the concentrated and unique makeup of their portfolios, they can be complementary holdings within a balanced portfolio.

Furthermore, given the active nature of these mandates, investors benefit from the ongoing tactical changes implemented by the manager, resulting in either increasing returns, reducing risk or sometimes doing both.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.