Page 27 - Investment Advisor July/August 2022

Large Cap Equity Manager of the Year

Alley Company
Alley Dividend Portfolio

n 1977, Steve Alley, today head of the
Iasset manager Alley Company, was
on the University of Wisconsin-Madison
hockey team, which was facing off
against the University of Michigan for
the national championship. The game
went into overtime, and just seconds
later, Alley scored the winning goal.
That type of success has followed
Alley into to his career as an asset man-
ager (with a stop at the Olympics and
playing in the NHL along the way).
The Alley Dividend Portfolio won the
Envestnet/Investment Advisor Large
Cap Asset Manager of the Year award.
Although the award is for perfor-
mance in 2021, when presenting it
to Alley, Envestnet Chief Investment Steve Alley as the year moved on and investors were
Officer Tim Clift said it really was for Title: Manager looking for quality, the portfolio caught
the portfolio’s overall performance. As up and actually surpassed the benchmark
Envestnet analysts point out, the portfo- Years with firm: 24 by 250 basis points.
lio’s alpha is 4.50% since 2007, and “this Years in Financial Services: 39 “We want to find companies that have
was accomplished with less volatility consistent revenue and earnings and
than the Russell 1000 Value Index.” Yet Investment/Asset Class Focus: cash flow growth, [that have] strong
2021 was still strong, beating the bench- Large Cap Equity balance sheets, meaning not too much
mark by 2.6%, they stated. debt, and [that] have plenty of dividend
The philosophy of the company, and Asset management firm: coverage,” he explained.
the portfolio, is search for the best- Alley Company He emphasized the portfolio has been
quality stocks. They sort this into two Year firm founded: 1998 around for 16 years, and has had only
buckets: Half the portfolio is made up of one dividend cut, and that was during
“yielders,” stocks that yield between 3% Number of employees: 6 the 2008–2009 financial crisis.
to 5%. “That gives the portfolio ballast,” AUM as of March 31, 2022: Alley gave an example of one purchase
Alley explained. (est.) $3.1 billion in the last two years, Snap-on tools, that
The other half is made up of dividend “has a terrific dividend record. They’ve
growers, which are companies that are maintained or increased their dividend
growing dividend yields between 1% and 3%, “but whose every year since 1939, that’s like 80 straight years. It had always
dividend growth rate is much higher, maybe high single digits been on the radar, but had been expensive, but during the COVID
[and] in many cases, double digits. So today the portfolio yields crisis, the stock got down to 12 times normalized earnings with a
about 3%, 2.9%,” he said. 3.8% yield. We bought it at $130 and it’s around $222 today.”
Reviewing the last couple of years, Alley noted that “in Alley’s hockey background weighs heavily into his disci-
2020, the market really gravitated toward quality,” he said. plined approach to investing. A friend, Hall of Fame NHL
“What we endeavor to do is find high-quality companies at General Manager Ken Holland, once said his key to success
cheap prices.” In 2020, the portfolio outperformed the Russell is “you need to have a plan. You need to work hard. And you
1000 by almost 1,000 basis points. need to have a little luck.” In managing money, Alley trans-
However, early in 2021, when many cyclical stocks were hot — lated that to: “You need to have a philosophy, you need to
think cruise lines, airlines and autos — Alley, which doesn’t work hard, and to generate a little luck, you need to stick to
invest in those sectors, lagged the first three to five months. But your philosophy.” — GS

JULY/AUGUST 2022 INVESTMENT ADVISOR 25