Invesco Global Equity Income Trust: Building a resilient investment strategy

Constructing a resilient portfolio - one designed to navigate both rising and falling markets - is central to our investment philosophy.

So far this year, our approach has delivered solid results¹. We've limited the impact of market downturns (known as ‘drawdowns’) and capitalised on periods of volatility by acquiring high-quality companies at more attractive valuations.

A key tool: The stock comparison sheet (SCS)

One of the tools that helps us stay on track is our stock comparison sheet (SCS). This tool helps us make smart investment decisions, especially when the market is behaving unpredictably. 

The SCS looks at three main factors that influence how much a stock might return over the next 3–5 years: 

1. Dividend Yield – This is the income you earn from a stock in the form of dividends, expressed as a percentage of the stock’s price. 
2. Business Growth – We measure this by looking at how much a company’s profits or value is growing over time. Metrics Cash Flow per Share (how much cash the company generates after expenses) or Book Value per Share (the company’s net worth divided by the number of shares). 
3. Change in Valuation – This refers to how the market’s opinion of the company changes. If investors are willing to pay more for each pound of earnings, the stock’s price can go up even if the business hasn’t changed much. 

We combine these three factors to estimate something called the Internal Rate of Return (IRR) - a forecast of the annual return we might expect from a stock. 

How we have used the SCS this year

Earlier this year, our SCS showed that we could expect similar returns (around 10%) from two very different companies: A stable insurance company, and a more volatile investment firm. In that case, we chose the insurance company because of its stability. 

But in the first quarter, the investment firm’s stock dropped sharply while the insurance company held steady. This shift made the investment firm much more attractive from a return perspective. By 1^st April, our SCS estimated a potential return of 25% for the investment firm versus just 5% for the insurance company. So, we adjusted our portfolio - buying more of the investment firm and similar “cyclical” stocks (which tend to rise and fall with the economy) and reducing our holdings in ‘defensive’ stocks like the insurance company (which tend to be more stable in tough times). 

This kind of adjustment is called portfolio turnover - selling some investments and buying others. While we usually take a long-term view, we’re also ready to act when opportunities arise. In this case, our research paid off. 

Why we’re acting faster

• We’ve also been studying how the stock market itself is changing. What started as a gut feeling turned into a deeper analysis, with some firm conclusions: 
• The market has changed a lot in the past 10 years, and the pace of change is speeding up. 
• More investors today are focused on short-term gains. These include hedge funds that trade rapidly, trend-following strategies, and risk managers who care more about short-term price changes than long-term value. 
• Fewer investors are focused on long-term investing, which means there’s less stability in the market. 
• Information spreads instantly now, so prices can rise or fall very quickly. This gives investors less time to react. 
• Some investors are forced to sell quickly when their risk limits are hit, even if the stock is still a good long-term investment. This can create great buying opportunities for those who are ready. 

Our advantages

In this fast-moving environment, we believe our approach gives us an edge: 

1. We think long-term - we make decisions based on a 3–5 year outlook, which is rare today. 
2. We’re nimble - our small team can act quickly without needing layers of approval. 
3. We’ve been through tough markets before - and we’ve developed a solid playbook for how to respond. 
4. We know our investments well - so we’re confident in our research, even when the market disagrees. 

This summary is designed to provide a general overview and should not be seen as investment advice and should be read in conjunction with the investment risks below. Investors should consider their own circumstances and consult with a financial advisor before making any investment decisions.