Some investors like growth stocks, and some like dividend stocks. Jeremiah Buckley, manager of Janus Henderson Growth and Income Fund (JDNAX) , likes stocks with both qualities.
And that’s what the large-cap fund Janus Growth and Income, with $7 billion in assets, holds.
The fund generated annualized returns of 26% over the past 12 months, 9% over three years, 12% over five years, and 11% over 10 years, according to Morningstar.
Those returns trailed the S&P 500, but the fund’s focus on dividends can limit returns while increasing safety. The fund slid 14% in 2022, compared with an 18% drop for the S&P 500.
In any case, Buckley sees opportunities for dividend/growth stocks in the technology, healthcare, and consumer sectors. He discussed these issues and others, including stock picks, in an exclusive interview with TheStreet.com.
Here are his comments.
Janus Henderson/TheStreet.com
Philosophy: Growth and Dividend Stocks
TheStreet.com: What’s the investment philosophy of your fund?
Buckley: The primary driver is dividend growth: high-quality companies with the ability to thrive in all environments. It’s stocks where the market underappreciates the magnitude or duration of a company’s growth. That growth can drive dividend growth.
Related: Veteran fund manager reveals 3 favorite global stocks
Large-caps are important because they have the scale and ability to invest in new technology like artificial intelligence. They can gain market share and accelerate productivity. Companies that invest in all-weather conditions can distinguish themselves from their peers.
We’re long-term investors, targeting holding periods of five years.
TheStreet.com: Can you talk about the significance of dividends?
Buckley: Returning capital through dividends or share buybacks is a sign of financial strength for companies. That goes back to quality. They have added discipline about how to use their capital.
It indicates a long-term focus, just like our own. Also, we think inflation will be above its long-term average for a while. So dividend growth is important to offset that.
TheStreet.com: Are there any particular market sectors that you like?
We’re bottom-up investors, but there’s always a top-down aspect to it. We have been overweight technology for a number of years. There are still attractive opportunities. Generative AI is accelerating revenue growth and productivity gains for companies with data and an adequate tech budget.
We like companies that provide tech-infrastructure equipment for companies that can’t build their own. We like companies, such as ones is the health-care and consumer sectors, that are using AI to become more efficient and better serve their customers.
Other tech companies that we like are in software, semiconductor, and semiconductor equipment production.
Street.com: Can you discuss why you like consumer and healthcare companies?
Buckley: Household wealth has risen, and while inflation is sticky around current levels, it has come down. So, consumer discretionary stocks look attractive, particularly travel. Credit companies are benefiting from that. They have good exposure to consumer travel spending.
We like innovation. That means healthcare, with pharmaceuticals and medical devices. There are obvious benefits for patients, and innovation lowers costs.
Street.com: Are there any sectors you’re avoiding?
Buckley: We don’t think returns are as attractive in areas that require substantial investment capital and don’t have differentiated products. So we’re underweight materials, energy, utilities, banks, and real estate investment trusts.
The market is a little too excited about the Fed lowering interest rates. Interest-rate-sensitive companies rallied last year. That was premature. Given the strength of the economy, the Fed could go slower [in cutting rates].
Three of Buckley's Top Stock Picks
Street.com: Can you talk about three of your favorite stocks?
1. Microsoft (MSFT) [the software stalwart] is well positioned on generative AI through its cloud platform and has a productive software platform. We think the personal computer business will resume growth.
Fund manager buys and sells:
- Warren Buffett just sold shares of this popular streaming stock
- Paul Tudor Jones’ hedge fund just made a big bet on Nvidia stock
- Stanley Druckenmiller just sold two AI tech stocks
The company has dividend growth and buybacks. The multiple has increased, but so has the duration of growth. The multiple remains reasonable.
2. American Express (AXP) [the credit card titan] is well positioned to capitalize on the growth of consumer spending, especially on travel, where it has a high exposure.
It has loyal customers and differentiated products. The penetration of digital payments will increase growth for transactions and lending.
The credit environment is still manageable, and AmEx has attractive dividend growth.
3. Abbott Laboratories (ABT) [the medical diagnostics and device maker] is defensive but has an opportunity for growth. It has been a laggard over the past couple years, with earnings falling amid the drop in covid tests.
But there’s hidden strength in the rest of the business. Abbott has an innovative pipeline of core diagnostics. Structural heart issues, hearing failure, and diabetes will continue to drive growth.
The author owns shares of Microsoft and Abbott Labs.
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