Virtus NFJ Dividend Value Fund

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Virtus NFJ Dividend Value Fund

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Ticker
PNEAX
CUSIP
92837N105
POP
$ (as of )
Inception
10/31/2001
Total Assets by Class
$324,773,707.72 (as of 04/19/2024)
Total Assets by Fund
$602,626,694.68 (as of 04/19/2024)
Morningstar Category
Large Value

Portfolio Overview

Investment Overview

The Fund seeks capital growth and income by investing in large- to mid-capitalization companies at the intersection of value, quality, and shareholder yield. NFJ seeks to invest in companies diversified across industries with superior competitive positions and consistent financials, employing a time-tested process that capitalizes on low market expectations and strong prospects.

Management Team

Investment Partner

NFJ Investment Group, LLC

NFJ Investment Group (NFJ) is a global value equity manager with a rich heritage and deep roots in Dallas, Texas, dating to 1989. NFJ is unwavering in its commitment to investing at the intersection of value, quality, and shareholder yield, seeking to identify companies with low market expectations and the strongest prospects for returning capital to shareholders.


Learn more about NFJ Investment Group, LLC

Investment Professionals

McKinney, Burns

R. Burns McKinney, CFA

Managing Director, Senior Portfolio Manager/Analyst

Industry start date: 1996
Start date as fund Portfolio Manager: 2007

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Oliver, Thomas

Thomas Oliver, CFA, CPA

Managing Director, Senior Portfolio Manager/Analyst

Industry start date: 1995
Start date as fund Portfolio Manager: 2006

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Reed, Jeff

Jeff N. Reed, CFA, FDP

Managing Director, Senior Portfolio Manager/Analyst

Industry start date: 2004
Start date as fund Portfolio Manager: 2011

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Mowrey, John

John R. Mowrey, CFA

Executive Managing Director, Chief Investment Officer, Senior Portfolio Manager/Analyst

Industry start date: 2007
Start date as fund Portfolio Manager: 2015

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Key Features

Innovative Approach to Value

The investment team uses big data and data analytics to uncover differentiated insights into valuations quickly and efficiently

Focus on Fundamentals

A disciplined, fundamental research process helps identify companies with attractive quality characteristics, shareholder yield, and consistent financials

Decades of Value Investing Experience

NFJ's boutique structure and flat organization has fostered an entrepreneurial mindset and collaborative culture since 1989

Portfolio Characteristics

Characteristics4

(as of 03/28/2024)
Average Weighted Market Cap (billions) $150.58
Median Market Cap (billions) $44.33
Trailing P/E Ex-Negative Earnings 23.29
3-Year Earnings Growth Rate 8.54

Top Holdings (% Fund)

(as of 03/28/2024)
Security
Bank of America Corp
4.40
 4.40%
Alexandria Real Estate Equities Inc
4.24
 4.24%
Intuit Inc
3.78
 3.78%
Rexford Industrial Realty Inc
3.52
 3.52%
NextEra Energy Inc
3.34
 3.34%
Eversource Energy
3.21
 3.21%
Agilent Technologies Inc
3.16
 3.16%
Crown Castle Inc
2.80
 2.80%
Thermo Fisher Scientific Inc
2.46
 2.46%
PNC Financial Services Group Inc/The
2.17
 2.17%

Holdings are subject to change.

Sector Allocation (% Equity)

(as of 03/28/2024)
Financials
25.00
 25.00%
Real Estate
14.19
 14.19%
Health Care
11.43
 11.43%
Industrials
11.10
 11.10%
Utilities
8.57
 8.57%
Energy
6.86
 6.86%
Information Technology
6.42
 6.42%
Materials
5.46
 5.46%
Consumer Discretionary
4.76
 4.76%
Consumer Staples
3.59
 3.59%
Communication Services
2.62
 2.62%

Performance & Risk

Growth of $10,000 Investment

From to
This chart assumes an initial investment of $10,000 made on for Class ddd shares including any applicable sales charges. Performance assumes reinvestment of dividends and capital gain distributions.

Performance

As of
As of

Performance data quoted represents past results. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, so your shares, when redeemed, may be worth more or less than their original cost.

Sales Charge and Expenses

The Index shown represents the Fund's performance index, which may differ from the Fund's regulatory index included in the Fund's Prospectus.

Distribution History2

(as of )
Ex-Date
Income
STCG
LTCG
Reinvest NAV

Risk Statistics3

(as of )
Fund Index
R2
Beta
Alpha
Std Dev

Risk Considerations

Market Volatility: The value of the securities in the portfolio may go up or down in response to the prospects of individual companies and/or general economic conditions. Local, regional, or global events such as war or military conflict, terrorism, pandemic, or recession could impact the portfolio, including hampering the ability of the portfolio's manager(s) to invest its assets as intended.
Issuer Risk: The portfolio will be affected by factors specific to the issuers of securities and other instruments in which the portfolio invests, including actual or perceived changes in the financial condition or business prospects of such issuers.
Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small, medium, or large-sized companies may enhance that risk.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

4Q23

Market Review

U.S. equities surged in the fourth quarter, buoyed by softening inflation, fading calls for recession, and the prospect of interest rate cuts in 2024. Market breadth widened, and small- capitalization companies generally outpaced their larger-capitalization counterparts over the period. Within the benchmark Russell 1000® Value Index, six sectors appreciated double digits, led by robust gains from real estate, financials, technology, and industrials companies. In contrast, energy slumped into negative territory, followed by relative weakness from the consumer staples, healthcare, and utilities sectors.

Fund Performance

The Virtus NFJ Dividend Value Fund returned 14.87% (Class INST) in the quarter, outperforming the Russell 1000 Value Index, which returned 9.50%. Outperformance was driven by robust stock selection, as well as relative sector allocations that were also generally positive. 

Alexandria Real Estate Equities and Bank of America were the largest contributors to performance over the quarter.

  • High-quality office REIT Alexandria Real Estate Equities reported solid quarterly results that beat the Street’s estimates, and management raised adjusted-funds-from-operations guidance on strong leasing trends. The company also increased its annual dividend by 5% and hosted a largely well-received analyst day focusing on the overall health of the life sciences/biotech sector, the company’s capital structure flexibility, and initial 2024 guidance.
  • Quarterly earnings and revenue for Bank of America beat analysts’ expectations, due in part to higher interest rates and loan growth. Additionally, lower interest rates reversed some unrealized losses on the company’s bond portfolio that had weighed on the stock over the summer.
  • Intuit, Crown Castle, and Agilent Technologies were also among the largest contributors in the quarter.

Paycom Software and Ovintiv were the largest detractors from performance in the quarter.

  • Cloud-based human capital management solutions provider Paycom Software delivered disappointing quarterly results, and one of its new products has shown signs of cannibalizing some of the company’s other digital services. We exited the position during the quarter.
  • Oil and gas exploration and production company Ovintiv beat quarterly expectations and hiked 2023 guidance, driven in part by higher-than-expected oil production. However, falling oil prices generally hurt energy stocks over the quarter, and Ovintiv was not immune to this trend.
  • Humana, TransUnion, and Genpact were also among the quarter’s largest detractors.

Portfolio Changes

In addition to the previously mentioned sale of Paycom Software, the investment team exited the portfolio’s position in real estate financing company Blackstone Mortgage Trust, due in part to fundamental concerns.

The team purchased leading beverage company Keurig Dr Pepper, premised in part on attractive valuations and solid fundamentals. Keurig remains the number one single-serve brewer maker in North America, with strong retail relationships and a large installed base.

The team added to an existing position in market-leading athletic footwear brand Nike on compelling valuations and fundamental strength.

Outlook

In the face of falling inflation, the Federal Reserve (Fed) announced the end of its current rate hike cycle and forecasted the possibility of interest rate cuts in 2024. This backdrop, along with the possibility of a soft economic landing, helped propel equities higher in the last quarter of 2023 and lent optimism going into 2024.

Although 2023 may invariably be remembered as the year that the “Magnificent Seven” mega-cap technology stocks and generative AI dominated market returns, many sectors that lagged "growthier" tech began to rally in the fourth quarter. These included small caps, financials, and interest-rate-sensitive areas such as REITs.

We expect this increased breadth driving returns to continue into the new year, given that many equities (apart from the “Magnificent Seven”) have delivered essentially flat performance results over the past two years. Further, valuation spreads for the Russell 2000® and S&P 500® Indexes are near their largest levels in over 20 years. We believe this creates an attractive environment for savvy stock pickers to generate relative outperformance over the year ahead.

The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

Related Literature

Marketing Materials

Virtus NFJ Dividend Value Fund Fact Sheet
Virtus NFJ Mutual Fund Presentation
As Value Stages a Comeback, Emphasize Quality

Financial Materials

Virtus Investment Trust Statutory Prospectus
Virtus NFJ Dividend Value Fund Summary Prospectus
Virtus Investment Trust SAI
Virtus Investment Trust Annual Report
Virtus Investment Trust Semiannual Report

Holdings

Virtus NFJ Dividend Value Fund Monthly Holdings
Virtus NFJ Dividend Value Fund Top Holdings
Virtus NFJ Dividend Value Fund Holdings Fiscal Q1
Virtus NFJ Dividend Value Fund Holdings Fiscal Q3

Section 19(a) Notices

Section 19(a) Notice for Ex-Date December 21, 2023
Section 19(a) Notice for Ex-Date December 22, 2022

Investors should carefully consider the investment objectives, risks, charges and expenses of any Virtus Mutual Fund before investing. The prospectus and summary prospectus contains this and other information about the fund. Please contact your financial representative, call 1-800-243-4361 to obtain a current prospectus and/or summary prospectus. You should read the prospectus and/or summary prospectus carefully before you invest or send money.

Performance data quoted represents past results. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, so your shares, when redeemed, may be worth more or less than their original cost.

Average annual total return is the annual compound return for the indicated period. It reflects the change in share price and the reinvestment of all dividends and capital gains. NAV returns do not include the effect of any applicable sales charges. POP and w/CDSC returns include the effect of maximum applicable sales charges.

Returns for periods of less than one year are cumulative total returns.

1 Yields/Distributions: 30-day SEC Yield is a standardized yield calculated according to a formula set by the SEC, and is subject to change. 30-day SEC Yield (unsubsidized) is the 30-day SEC Yield without the effect of applicable expense waivers. Distribution Rate is calculated by (a) annualizing the latest income distribution for fixed income funds or funds less than 1 year old, or (b) summing all income distributions over the preceding 12 months for all other funds, and dividing by the NAV on the last business date of the period, unless otherwise indicated. The Distribution Rate may be comprised of ordinary income, net realized capital gains and returns of capital.

2 Distribution History: Distributions are represented on a cash basis and may be reclassified at year end for tax purposes. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. STCG: Short Term Capital Gain, LTCG: Long Term Capital Gain

3 Risk Statistics: R2 is a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. Beta is a quantitative measure of the volatility of a given portfolio to the overall market. Alpha is a risk adjusted measure of an investment's excess return relative to a benchmark. A positive Alpha indicates that the investment produced a return greater than expected for the risk (as measured by Beta) taken. Standard Deviation measures variability of returns around the average return for an investment fund. Higher standard deviation suggests greater risk. Risk Statistics are calculated using 36 monthly returns.

4 Characteristics: For Equity Funds: Avg. Weighted Market Cap (bn): The sum of each security's weight within the fund (or index) multiplied by the security's market capitalization. Trailing P/E Ex-Negative Earnings: Per-share stock price divided by the latest 12-months Earnings per Share; Price/Cash Flow: Per-share stock price divided by the per-share operating cash flow; Price/Book: Per-share stock price divided by the latest 12-month per-share Book Value; 3-Year EPS Growth Rate: Average of earnings per share growth for latest 3-year period. The 3-Year EPS Growth Rate is not a forecast of the fund's performance.

4 Characteristics: For Fixed Income Funds: Effective Duration represents the interest rate sensitivity of a fixed income fund. For example, if a fund's effective duration is five years, a 1% increase in interest rates would result in a 5% decline in the fund's price. Similarly, a 1% decline in interest rates would result in a 5% gain in the fund's price.

Morningstar Disclosures:
The Morningstar Rating for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Ratings do not take into account the effects of sales charges and loads.

© year Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.