- Bristol Gate’s US Equity Strategy posted positive Q3 2025 returns but lagged the S&P 500 in a market dominated by narrow mega-cap growth leadership.
- The portfolio’s edge remains its focus on high-quality, dividend-growing US companies, with key contributors in technology, industrials, and financials.
- Healthcare holdings like UnitedHealth and Thermo Fisher detracted amid regulatory and policy uncertainty, highlighting sector-specific risk.
- Management is tilting further toward resilient, service-oriented cash-flow businesses and believes disciplined dividend-growth stock selection will shine over full cycles despite macro risks around rates, inflation, and deficits.
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The Bristol Gate US Equity Strategy’s Q3 2025 letter confirms that while the strategy delivered positive returns, it lagged the S&P 500 Total Return Index in a market heavily favoring narrow growth leadership. However, the strategy’s focus on dividend-growth compounding and business quality has preserved relative value amidst sector rotation. [1]
Sector contributions were uneven: as expected, Information Technology, Industrials, and Financials provided the bulk of absolute return in Q2 and likely carried momentum into Q3, but sector allocation and stock selection for high dividend growth names continued to be the portfolio’s distinguishing factor. The absence or low weight in companies without dividend growth potential provided both protection and opportunity cost relative to the Magnificent Seven tech leaders. [3][4]
Notable detractors include UnitedHealth (due to suspended guidance and CEO turnover) and Thermo Fisher (due to policy risk in drug pricing, R&D uncertainties). These reflect that regulatory risk, particularly in healthcare, remains a sticking point for dividend growers with mixed earnings visibility. [3]
On the portfolio management side, Bristol Gate is emphasizing exposure to service businesses and resilient cash flows with limited direct tariff exposure. The firm is trimming positions where dividend growth expectations have fallen, and adding names with structural growth and shareholder friendly capital allocation. [4]
Looking ahead, the strategic implications are clear: in environments where macro policy uncertainty is high, dividend growth strategies grounded in strong fundamentals may outperform over full cycles, even if they lag in growth-led, narrow markets. However, risks from rate policy, inflation, and deficits remain, and the timing of Fed rate cuts (if any) will be pivotal. Open questions include the pace of regulatory clampdowns, the impact of global supply chain shifts, and whether the narrow leadership of mega-caps can broaden sustainably.
Supporting Notes
- In its Q3 2025 report, Bristol Gate described its US Equity Strategy as consisting of “equities of publicly traded, dividend paying US companies” chosen for future dividend growth and compared benchmarks include S&P 500 Total Return and S&P 500 Dividend Aristocrats. [1]
- The strategy is a concentrated, approximately equally weighted portfolio. The benchmark S&P 500 is market-cap weighted, a divergence material over shorter horizons. [1]
- Recent detractors: UnitedHealth suspended its 2025 outlook and saw CEO change; Thermo Fisher faced regulatory risk tied to drug pricing policy and R&D spending concerns. [1]
- In Q1 and Q2, Bristol Gate added names like Eli Lilly, Westinghouse Air Brake Technologies, Domino’s Pizza, and exited those with reduced dividend growth expectations. [3][4]
- They believe their holdings are resilient—strong market positions, solid balance sheets, free cash flows—and can grow despite volatility. [3]
- Highlighted risks: policy volatility, rising debt/deficits, labor strength, rate path / interest rate cuts, tariffs. [3]
Sources
- [1] www.bristolgate.com (Bristol Gate Capital Partners) — October 22, 2025
- [2] insidermonkey.com (Insider Monkey) — October 2025
- [3] www.bristolgate.com (Bristol Gate Capital Partners) — May 28, 2025
- [4] www.bristolgate.com (Bristol Gate Capital Partners) — April 16, 2025