Oppenheimer Rising Dividends Fund

Transcription

1 Ticker Symbols: OARDX (Class A shares), OYRDX (Class Y shares), OIRDX (Class I shares) Performance Summary Portfolio Managers Raman Vardharaj, CFA Since 6/18 Manind Govil, CFA Since 10/16 Client Portfolio Manager Emanuele Bergagnini, CFA Portfolio Inception April 30, 1980 Portfolio Assets $2.6 Billion Morningstar Category Large Blend During the fourth quarter ending 12/31/18, (Class A Shares w/o Sales Charge) declined %, while the Russell 1000 benchmark declined % for the period. During the fourth quarter, the primary positive contributors to relative performance included Pfizer, American Tower, and Duke Energy. During the fourth quarter, the primary negative contributors to relative performance included DXC Technology, Activision Blizzard, and Apple. Annual s (%) As of December 31, 2018 (Class A Shares w/o Sales Charge) (Class A Shares w/ Sales Charge) (Class Y Shares) (Class I Shares) Q Year 3-Year 5-Year 10-Year Inception Russell 1000 Index¹ Morningstar Percentile Rank and Ranking: Large Blend Category² (Class A Shares based on total return) 61 st #821/ rd #1117/ th #929/ th #765/805 s for periods of less than one year are cumulative and not annualized. Class A share inception date is 4/30/1980 Class Y share inception date is 12/16/1996 Class I share inception date is 2/28/2012 Annual Expense Ratios: Class A shares: Gross: 1.07%. Class Y shares: Gross: 0.81%. Class I shares: Gross: 0.65%. The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor s shares, when redeemed, may be worth more or less than the original cost. Current performance and expense ratios may be lower or higher than the data quoted. For performance data current to the most recent month-end, visit oppenheimerfunds.com or call CALL OPP ( ). Fund returns include changes in net asset value with dividends and capital gains reinvested. Class A shares include the 5.75% maximum sales charge except where indicated. Class Y and Class I shares are not subject to a sales charge. s do not consider capital gains or income taxes on an individual s investment. Generally, I shares are only available to institutional investors and can only be purchased with a $1 million initial investment. Generally, Y shares are only available to certain investors, including those in wrap-fee based programs or commissionable brokerage platforms that charge sales commission. For additional information, please visit our website at oppenheimerfunds.com 1

2 Market Overview The U.S. economy continues to exhibit good economic growth, low unemployment and modest inflation. This is driven partly by tax cuts, technological innovation and falling regulatory hurdles. That said, the effects of the strain in the trading relationship with China have been a headwind to growth, but not nearly enough to offset the strong momentum in the economy. This economic growth has been fairly broad-based across sectors. However, the stock price performance has not been as broadbased. Value stocks outperformed growth stocks during the quarter, snapping a streak of seven consecutive quarters of the Russell 1000 Value Index underperforming the Russell 1000 Growth Index. This was helped by a rotation into defensive stocks and out of some of the high-flying technology names. However, growth stocks still significantly outperformed for the full calendar year. We continue to focus on the fundamentals of each business to drive our investment decisions versus getting caught up in the temporary emotions of the market, always with the long-term welfare of our shareholders in mind. Our philosophy is to focus on companies with sustainable competitive advantages that can outperform in most market environments. We combine this with our valuation discipline to seek a margin of safety, with downside protection ever an important consideration. That being said, we do have a history of underperforming in go-go markets and outperforming in bear markets. Portfolio Review During the fourth quarter ending 12/31/18, declined % (Class A Shares w/o Sales Charge), while the Russell 1000 benchmark declined % for the period. On the heels of a very strong third quarter, the fourth quarter of 2018 experienced the largest quarterly decline since the fourth quarter of The Fund s strong performance in stock selection was offset equally by negative sector allocation. Strong relative performance was realized within the Consumer Discretionary, Financials and Real Estate sectors. This was offset by weakness within the Consumer Staples, Information Technology and Materials sectors. During the fourth quarter, the primary positive contributors to relative performance included Pfizer, American Tower, and Duke Energy. Pfizer (Relative Contribution to : +0.32) Pharma, which is often viewed as a defensive sector did better in Q4 based on the overall market dynamics. Also in Q4, Pfizer and GlaxoSmithKline PLC announced a global joint venture with their respective consumer health assets. Pfizer will own 27% of the joint venture and receive a 32% equity stake in the joint venture. There is the potential for future value creation through a separation/ipo, which GlaxoSmithKline PLC expects to complete within three years of the joint venture closing. American Tower (Relative Contribution to : +0.29) American Tower reported strong trends in domestic leasing, and announced a settlement with Tata, a partner in their India venture that has faced a high degree of churn. The outperformance in the U.S. and certainty in India caused an improvement in American Tower s multiple. Duke Energy (Relative Contribution to : +0.25) Utilities performed well in Q4 as long-term interest rates came down. Furthermore, Duke Energy has executed well during the year and the valuation discount it was trading on earlier in the year was partially closed. The company s regulatory regime is constructive and points to further stable earnings growth of 5-6%. During the fourth quarter, the primary negative contributors to relative performance included DXC Technology, Activision Blizzard, and Apple. DXC Technology (Relative Contribution to : -0.33) Shares of DXC declined sharply on a quarterly revenue shortfall. We believe the primary issues driving the revenue shortfall are company specific and self-inflicted and thus should be fixable. The company attributed the shortfall to a reorganization in the sales force that resulted in execution issues and a shortage of skilled labor to meet demand for digital transformation projects, both of which are being addressed. Activision Blizzard (Relative Contribution to : -0.30) Shares of Activision declined sharply on the push out of release titles slated for 2019 and a slowdown in two core existing titles. We believe the lack of new titles is a short-term issue for 2019 and the slate for 2020 will be strong. We also believe the business model drivers including the move to digital and the potential for scaling up and monetizing esports and advertising remain intact. 2

3 Apple (Relative Contribution to : -0.25) Apple reported a solid quarter, driven by iphone pricing up 28% year-over-year. From a disclosure perspective, Apple will no longer provide units, which was viewed negatively by the market. In terms of guidance, Apple discussed Emerging Market weakness (ex-china) and the strong USD as being revenue headwinds. Given the outperformance of the stock in the results, the market was disappointed by the disclosure change and tepid revenue outlook. Performance Analysis by Issuer - Top 5 Q4 2018³ (%) Effect Active Amazon.com, Inc Cons Disc Pfizer Inc Health Care American Tower Corporation Real Estate Duke Energy Corporation Utilities Twenty-First Century Fox, Inc Comm Services Performance Analysis by Issuer - Bottom 5 Q4 2018³ (%) Effect Active DXC Technology Co Info Tech Activision Blizzard, Inc Comm Services Apple Inc Info Tech Procter & Gamble Company Cons Staples Valero Energy Corporation Energy Holdings are subject to change, and are dollar-weighted based on net assets. The mention of specific sectors or securities is subject to change and does not constitute a recommendation on behalf of the Fund or OppenheimerFunds, Inc. Past performance does not guarantee future results. 3

4 Performance Analysis - Q4 2018³ (%) Avg. Avg. Active Strategy Index Attribution Analysis Contribution to Avg. Contribution to Allocation Stock Selection Effect Consumer Discretionary Financials Real Estate Energy Utilities Industrials Health Care Comm Services Materials Information Technology Consumer Staples Cash Holdings are subject to change, and are dollar-weighted based on net assets. Attribution methodology notes: The attribution provides analysis of the effects of several portfolio management decisions, including allocation and security selection. Securities classified as "Other" may include non-equity securities, derivatives and securities for which a sector classification may not be appropriate. The Fund is actively managed and portfolio holdings are subject to change in accordance with the prospectus. The percentage weights represented for the Fund are dollar weighted based on market value. Performance numbers include all share classes and may not tie to actual Fund returns. Contribution to measures the performance impact from portfolio holdings over a defined time period. It takes into account both weight and performance of the portfolio holdings. Contribution to is calculated at security level and reported at sector/strategy level. Past performance does not guarantee future results. The mention of specific sectors or securities is subject to change and does not constitute a recommendation on behalf of the Fund or OppenheimerFunds, Inc. Past performance does not guarantee future results. Outlook and Positioning In the short term, we expect the U.S. economy to continue to show economic growth, albeit at slower rates than experienced in 2018 as the sugar high from tax cuts wears off. This will be driven by favorable ongoing consumer confidence, falling regulatory hurdles as well as technological innovation. The biggest macro risks we see are trade tariffs and higher interest rates. Speculation remains at an elevated level. Mania around cryptocurrency earlier in the year and cannabis stocks more recently are symptoms of these. We believe an equally big risk to stock prices is the stock market s preference for so called disruptors and the potential for stocks with this perceived characteristic to become crowded trades and have valuations untethered to financial reality. While some of the high flyers lost altitude in the fourth quarter as the market corrected, a true capitulation point has not yet been reached. Regarding trade tariffs, while concern has risen in recent weeks, the market continues to view bluster from D.C. as a negotiating tactic and is implying that all will end well. So far this has been borne out in trade negotiations between the U.S., Mexico & Canada. A true escalation could severely hamper global growth and thereby stock prices. Innovation, while a positive for the overall economy over the long term, creates short-term disruptions to be cognizant of. Lastly, we are afraid companies have become addicted to low interest rates. If interest rates were to continue to rise materially, some companies historical decisions will look like a misallocation of capital and negatively impact their stock prices. We believe a rise in interest rates and other monetary tightening will have profound implications for the equity markets. Due to the 2008 crisis, interest rates were driven to record lows and a flood of liquidity was unleashed. Short-term interest rates were at essentially zero and even longer rates were driven to around 2%. This was not just flash in the pan either, as the rates stayed at these levels for multiple years. When the cost of money became close to zero and its availability abundant, the equity market s horizon became longer for start-ups delivering profits. As a result, we have seen several companies focus on revenue growth through disruption without regard to profit generation. We are afraid even established companies are addicted to low interest rates which is not sustainable for longer-term profitable growth. Once this corrects, it will be healthy in the longer term because it will drive companies to generate profits. Profitable Revenue Growth is better, tougher and more sustainable than mere Revenue Growth. Over time, companies that generate such profitable growth are more durable investments with better down-side protection even though they may look a little short in a speculative environment. As a famous investor once said, you don t know who has been swimming naked until the tide rolls out. At the moment, the tide is lower than it was a few months ago, but still relatively high. We know this won t be the situation in perpetuity. 4

5 We continue to maintain our discipline around valuation and focus on companies with competitive advantages and skilled management teams that are out-executing peers. The evidence we look for in our companies include high returns on invested capital, consistently strong pricing power, and/or rising market shares. During times of economic volatility such companies frequently widen their lead over weaker competitors. We seek to invest in companies characterized by these qualities at compelling valuations and believe this disciplined approach is essential to generating superior long-term performance, especially in down markets. We fully believe that over a complete market cycle, the value of our strategy will become apparent again. We thank you for your confidence in us, and we are invested alongside you in the Fund. Special Risks There is no guarantee that the issuers of stocks will declare dividends in the future, or that dividends will remain at their current levels or increase over time. Derivative instruments entail higher volatility and risk of loss compared to traditional stock or bond investments. Diversification does not guarantee profit or protect against loss. 5

6 DISCLOSURES Past performance does not guarantee future results. 1. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the Russell 3000 Index. The index is unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict performance of the Fund. Past performance does not guarantee future results. 2. Source: 2018 Morningstar, Inc., 12/31/18. Morningstar ranking is for Class A shares and ranking may include more than one share class of funds in the category, including other share classes of this Fund. Ranking is based on total return as of 12/31/18, without considering sales charges. Different share classes may have different expenses and performance characteristics. Fund rankings are subject to change monthly. The fund's total-return percentile rank is relative to all funds that are in the Large Blend Funds Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top performing fund in a category will always receive a rank of Holdings and sector allocations are subject to change, do not constitute recommendations by OppenheimerFunds, Inc., and are dollar-weighted based on total net assets. Top Holdings exclude cash and cash equivalents. Attribution analysis is a process used to analyze the absolute return (often called contribution) and the excess return (often called relative return) between a portfolio and its benchmark. The total effect measures both the allocation effect to a sector as well as stock selection within a sector. Holdings are subject to change, and are dollar weighted based on total net assets. Negative weightings may result from the use of leverage. Leverage involves the use of various financial instruments or borrowed capital in an attempt to increase investment return. Leverage risks include potential for higher volatility, greater decline of the fund's net asset value and fluctuations of dividends and distributions paid by the fund. The mention of specific companies does not constitute a recommendation by any particular fund or by OppenheimerFunds, Inc. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation. These views represent the opinions of the portfolio managers at OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the close of business on December 31, 2018, and are subject to change based on subsequent developments. The Fund s portfolio and strategies are subject to change. returns do not show the effects of income taxes on an individual s investment. Taxes may reduce an investor s actual investment returns on income or gains paid by the Fund or any gains realized if the investor sells his/her shares. Before investing in any of the Oppenheimer funds, investors should carefully consider a fund s investment objectives, risks, charges, and expenses.fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com, or calling CALL OPP ( ). Read prospectuses and summary prospectuses carefully before investing. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. 225 Liberty Street, New York, NY OppenheimerFunds Distributor, Inc. All rights reserved. CO December 31, 2018 Visit Us oppenheimerfunds.com Call Us Follow Us 6