Global Equity Barbell
Pair dominant US growth stocks with cheaper non-US markets
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 98%
The Global Equity Barbell places dominant US growth companies on one side and attractively valued non-US developed equities on the other. It avoids the binary choice between chasing a concentrated US index and abandoning its strongest companies. The non-US allocation qualifies only when a fundamental catalyst accompanies its valuation discount. Timmer emphasizes shareholder payout—dividends plus buybacks—as a practical way to compare what earnings deliver to owners. When non-US payout ratios and payout growth become competitive with the United States while valuations remain lower, the cheaper market offers genuine diversification rather than a value trap. Currency exposure can add another source of return if the dollar weakens. The result is a broader equity opportunity set with less dependence on a handful of US companies.
Origin
Extracted from Masters in Business, where Jurrien Timmer proposed combining Magnificent Seven exposure with non-US stocks after improving international shareholder payouts created a fundamental catalyst.
Core principles
- 01Avoid making diversification an all-or-nothing bet
- 02Retain exposure to dominant secular growers
- 03Demand a fundamental catalyst before buying cheap markets
- 04Compare shareholder payouts as well as earnings
- 05Use valuation gaps only when fundamentals are competitive
How to run it
- 1
Diagnose concentration
Measure how much of the domestic index and its recent return depends on its largest companies. Determine whether a reversal in those names could overwhelm gains elsewhere.
Pro tip Compare cap-weighted and equal-weighted index behavior.
Watch out Broad index ownership does not guarantee meaningful diversification.
- 2
Preserve secular winners
Keep an allocation to dominant US growth companies rather than shorting or fully abandoning them. Their scale and earnings can continue expanding longer than expected.
Pro tip Use a diversified vehicle if selecting individual growth stocks is outside your expertise.
Watch out Do not let the growth side become the entire portfolio.
- 3
Find the international catalyst
Look for improving relative earnings, payout growth, governance, or capital returns in non-US markets. Cheap valuation alone is not enough.
Pro tip Track changes in fundamentals rather than just their absolute level.
Watch out A market may remain cheap indefinitely without a catalyst.
- 4
Compare shareholder payouts
Calculate dividends plus buybacks as a share of earnings for each region. Favor discounted markets whose payout ratios and growth are competitive with the United States.
Pro tip Account for regional differences in the preference for dividends versus buybacks.
Watch out Do not compare dividend yields alone when buyback practices differ.
- 5
Build the barbell
Pair the US growth allocation with broad non-US developed equity exposure. Size both sides according to risk tolerance and existing portfolio concentration.
Pro tip Rebalance periodically rather than reacting to short-term relative performance.
Watch out The barbell remains equity-heavy and does not eliminate drawdown risk.
- 6
Monitor currency and fundamentals
Track the dollar, relative earnings, payout growth, and valuation spreads. Reduce the thesis if the international catalyst reverses.
Pro tip Evaluate local-market performance and currency effects separately.
Watch out A strengthening home currency can offset foreign equity gains.
In the wild
Timmer argues against shorting the Magnificent Seven because they may continue getting larger. Instead, he pairs them with non-US developed stocks, where payout ratios have reached roughly comparable levels while valuations remain substantially lower and currency exposure may benefit from dollar weakness.
→ The investor retains US growth participation while gaining cheaper, fundamentally improving international exposure.
Suppose a foreign index trades at a large discount but its earnings and shareholder payouts keep deteriorating. The investor waits rather than buying on valuation alone. Once payout growth turns positive and approaches domestic levels, the investor adds it as the second side of the barbell.
→ The allocation follows a measurable catalyst rather than a vague expectation of mean reversion.
Common mistakes
Buying cheap without a catalyst
Low valuation may accurately reflect weak fundamentals. Require evidence that earnings or shareholder payouts are improving before expecting mean reversion.
Abandoning US leaders
Concentration risk does not prove that dominant growth companies must immediately underperform. The barbell retains them while adding a distinct opportunity set.
Ignoring payout differences
Regions return capital through different combinations of dividends and buybacks. Comparing only one channel creates a distorted fundamental picture.
Is it for you?
Best for
It is best for equity investors concerned about Magnificent Seven concentration who still want exposure to secular US growth.
Not ideal for
It is not ideal for investors who cannot tolerate equity volatility or who lack access to diversified international funds.
From the transcript
“So you need a catalyst to make the mean reversion invaluation to trigger that.”
“But rather than going down cap in the US, do a barbelle of Max seven and non US stocks.”
“You can get equally good fundamentals for a fifteen pe instead of a twenty four pe.”
From the episode
'Barbell' Investing Strategies With Jurrien Timmer
Jurrien Timmer