Virtus NFJ Dividend Value Fund

Home / Mutual Fund / Virtus NFJ Dividend Value Fund
Mutual Fund Equity Domestic Equity

Virtus NFJ Dividend Value Fund

Image specific to each asset class and market style grouping.
Ticker
PNEAX
CUSIP
92837N105
POP
$ (as of )
Inception
10/31/2001
Total Assets by Class
$363,114,665.52 (as of 02/07/2023)
Total Assets by Fund
$735,240,682.00 (as of 02/07/2023)
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

Show More
Oliver, Thomas

Thomas Oliver, CFA, CPA

Managing Director, Senior Portfolio Manager/Analyst

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

Show More
Reed, Jeff

Jeff N. Reed, CFA

Managing Director, Senior Portfolio Manager/Analyst

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

Show More
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

Show More

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 12/30/2022)
Average Weighted Market Cap (billions) $164.25
Median Market Cap (billions) $55.08
Trailing P/E Ex-Negative Earnings 13.97
3-Year Earnings Growth Rate 16.16

Top Holdings (% Fund)

(as of 12/30/2022)
Security
JPMorgan Chase & Co
4.33
 4.33%
Bank of America Corp
3.78
 3.78%
Stanley Black & Decker Inc
3.47
 3.47%
Home Depot Inc/The
3.26
 3.26%
Celanese Corp
3.22
 3.22%
Verizon Communications Inc
2.61
 2.61%
Microsoft Corp
2.52
 2.52%
Teleflex Inc
2.38
 2.38%
Medical Properties Trust Inc
2.18
 2.18%
Zoetis Inc
2.11
 2.11%

Holdings are subject to change.

Sector Allocation (% Equity)

(as of 12/30/2022)
Financials
19.34
 19.34%
Information Technology
15.39
 15.39%
Industrials
12.39
 12.39%
Consumer Discretionary
11.68
 11.68%
Health Care
11.40
 11.40%
Real Estate
9.21
 9.21%
Materials
9.14
 9.14%
Communication Services
5.65
 5.65%
Energy
2.80
 2.80%
Consumer Staples
2.03
 2.03%
Utilities
0.98
 0.98%

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

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. Price changes may be short- or long-term. Local, regional, or global events such as war or military conflict (e.g., Russia's invasion of Ukraine), acts of terrorism, the spread of infectious illness (e.g., COVID-19 pandemic) or other public health issues, recessions, or other events could have a significant impact on the portfolio and its investments, including hampering the ability of the portfolio's manager(s) to invest the portfolio's 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 or medium-sized companies may enhance that risk.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

4Q22

Market Review

U.S. equities largely rebounded in the fourth quarter on signs that inflation may have peaked, though investors remained wary of future rate hikes and a hard landing for the economy. Value stocks led growth while large-cap companies outpaced their smaller-cap counterparts over the quarter. Within the benchmark Russell 1000® Value Index, cyclicals led, with energy appreciating 23%, followed by strength from the industrials, materials, and consumer staples sectors. In contrast, the communication services, real estate, and technology sectors lagged over the quarter.

Fund Performance

The Virtus NFJ Dividend Value Fund returned 11.33% (Class I) in the quarter, compared to the Russell 1000 Value Index, which returned 12.42%. Negative sector allocations drove performance results while stock selection modestly detracted from returns. 

JPMorgan Chase and Ross Stores were the largest contributors to performance over the quarter.

  • JPMorgan Chase, the country’s largest bank by revenue, benefited from higher interest rates, higher strength from the trading business due to volatile markets, as well as continued consumer spending. Though CEO Jamie Dimon warned of a likely U.S. recession in the next six to nine months, the bank has noticed little sign of slower consumer spending.
  • Discount retailer Ross Stores reported better-than-expected fiscal Q3 results as same-store sales accelerated on improved traffic in the off-brand category, which continues to take share from department stores. Excess merchandise and ongoing inflation pressures have encouraged more off-price retailing, and management raised full year 2022 profit guidance.
  • BlackRock, Teleflex, and The Home Depot were also among the largest contributors.

Crown Castle and Medical Properties Trust were the largest detractors from performance in the quarter.

  • Tower REIT Crown Castle shares slumped as markets tend to penalize the real estate sector during rising interest rate periods. However, the company’s fundamentals remain sound, with growing funds from operations and manageable interest expenses, while backed by powerful secular tailwinds, from rising smartphone/mobile data usage to the rollout of 5G.
  • Q3 results for Medical Properties Trust were mixed, with adjusted funds from operations (FFO) ahead of consensus while revenue was below expectations as two of the company’s largest tenants faced financial challenges. Management for the healthcare REIT approved a $500 million share buyback program during the quarter.
  • Trans Union, Blackstone Inc., and Blackstone Mortgage Trust Inc. were also among the largest detractors.

Portfolio Changes

The investment team sold Merck and Citgroup and purchased Digital Realty and Tyson Foods during the quarter.

  • Pharmaceutical company Merck reported robust quarterly results and hiked guidance, sending shares upwards. The team exited the position after multiples rose to less favorable levels.
  • Financial services company Citigroup reported strong Q3 results, including EPS and revenue that bested analysts’ estimates, and the team trimmed the position.
  • The team initiated a position in global data center REIT Digital Realty in part due to compelling valuations. The company, which has well-known customers like Facebook, IBM, JPMorgan, and Oracle, is well positioned to benefit from the secular digital transformation theme and growth in cloud computing.
  • The team took advantage of an attractive entry point to purchase shares of Tyson Foods. Not only did the company trade at a discount to other protein producers when we added the position, Tyson has a track record of consistent dividend hikes during both favorable and challenging environments. More recently, the meat processor’s Q4 results included ahead-of-consensus sales, supported in part by market-share gains across both food service and retail markets.

Outlook

Many indicators suggest a recession is probable in 2023, likely in the back half of the year, following a slowing in the coming months. In the near term, the job market remains solid and consumer balance sheets are robust. However, the 10- and 2-year Treasury yield curve is as inverted as it has been at any point in over 20 years. Further, the Federal Reserve (Fed) has a poor track record of raising interest rates while engineering a soft landing.

With recession fears surpassing inflation fears in the new year, we do see some bright spots on the horizon. Given the stock market typically reacts poorly to surprises, a highly anticipated recession in 2023 would not catch investors off guard. Also, if the U.S. does encounter a recession, it appears that it would primarily be a “goods recession,” as the services side of the economy is still strong. In our view, these scenarios should offer active managers opportunities to separate winners from losers and generate alpha.

Nevertheless, stock prices continue to see day-to-day fluctuations largely determined by inflation. If inflation figures keep progressing toward the Fed’s desired levels of 2-3%, it could act as a catalyst for the Fed to slow its record tightening pace. While we do not foresee the Fed lowering its target rate this year, the rate path could become more stable and predictable, offering a potentially positive catalyst to investors.

Currently, U.S. stocks are not particularly cheap, with the S&P 500® Index finishing the year at around 17.5 times forward earnings. However, consecutive years in the red are rare for U.S. equities. Since 1946, there were three years when the S&P 500 was down by the magnitude we experienced in 2022. The S&P 500’s average annual return following those three years was 27%. While we do not expect that level of return in 2023, we remain constructive for a more muted return, and possibly a slight gain. That is the type of environment when stocks with attractive dividends and dividend growth can have an outsized impact on investor portfolios.

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 - R6
Virtus NFJ Dividend Value Fund Fact Sheet - A
Virtus NFJ Dividend Value Fund Fact Sheet - INST
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 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.

© 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.