Virtus NFJ Small-Cap Value Fund

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Virtus NFJ Small-Cap Value Fund

Image specific to each asset class and market style grouping.
$ (as of )
Total Assets by Class
$252,412,314.64 (as of 02/07/2023)
Total Assets by Fund
$418,229,570.30 (as of 02/07/2023)
Morningstar Category
Small Value

Portfolio Overview

Investment Overview

The Fund seeks capital growth and income by investing in small-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

Magnuson, Paul

Paul A. Magnuson

Managing Director, Senior Portfolio Manager/Analyst

Industry start date: 1985
Start date as fund Portfolio Manager: 1995

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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: 2013

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Reed, Jeff

Jeff N. Reed, CFA

Managing Director, Senior Portfolio Manager/Analyst

Industry start date: 2004
Start date as fund Portfolio Manager: 2018

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Reilly, Garth

J. Garth Reilly

Managing Director, Senior Portfolio Manager/Analyst

Industry start date: 2005
Start date as fund Portfolio Manager: 2020

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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


(as of 12/30/2022)
Average Weighted Market Cap (billions) $3.85
Median Market Cap (billions) $3.00
Trailing P/E Ex-Negative Earnings 11.95
3-Year Earnings Growth Rate 13.29

Top Holdings (% Fund)

(as of 12/30/2022)
Sapiens International Corp NV
Medpace Holdings Inc
Kinross Gold Corp
KB Home
Diodes Inc
STAG Industrial Inc
YETI Holdings Inc
Universal Display Corp
Oshkosh Corp

Holdings are subject to change.

Sector Allocation (% Equity)

(as of 12/30/2022)
Consumer Discretionary
Information Technology
Health Care
Real Estate
Consumer Staples
Communication Services

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.


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
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.



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 2000® Value Index, cyclicals led, with materials and energy appreciating 19% and 18%, respectively, followed by strength from the industrials and consumer discretionary sectors. In contrast, healthcare slumped into negative territory, while the communication services and technology sectors underperformed on a relative basis over the quarter.

Fund Performance

The Virtus NFJ Small-Cap Value Fund returned 9.23% (Class I) in the quarter, compared to the Russell 2000® Value Index, which returned 8.42%. Positive sector allocations drove performance results though stock selection also modestly contributed to returns. 

EXACT Sciences and Medpace were the largest contributors to performance over the quarter.

  • Q3 results for cancer screening and diagnostics company EXACT Sciences beat consensus estimates, in part due to rising sales, and management revised FY2022 guidance upward.
  • Clinical trial development services provider Medpace issued strong Q3 results, boosted by higher backlog conversion and gross margins. Management raised FY2022 guidance, boosted 2023 guidance above consensus estimates, and authorized an additional $500 million share repurchase program.
  • YETI Holdings, The Toro Company, and Douglas Dynamics were also the largest contributors.

Wolverine World Wide and Syneos Health were the largest detractors from performance over the quarter.

  • Following weak Q3 results, management for footwear and apparel retailer Wolverine World Wide announced several cost-cutting measures, including the divestment or licensing of its Keds brand and Wolverine Leathers business, as well as staff reductions, to help drive shareholder value.
  • Syneos Health released disappointing Q3 results and reduced FY2022 guidance as lower new business awards, backlog conversion delays, and customer delays negatively impacted the biopharmaceutical solutions provider.
  • Herbalife Nutrition, AudioCodes, and Industrial Logistics Properties Trust were also among the largest detractors.

Portfolio Changes

During the quarter, the investment team purchased Sandy Spring Bancorp and Kronos Worldwide, and sold Industrial Logistics Properties Trust and Glatfelter.

  • The team initiated a position in Sandy Spring Bancorp, a bank holding company operating in the Washington metropolitan area, after identifying a favorable entry point as valuation was deemed attractive relative to regional bank peers. Supportive fundamentals include a large core deposit base, balance sheet liquidity, steady loan growth, and solid net interest margins.
  • The purchase of specialty chemicals company Kronos Worldwide was premised in part on attractive valuation and fundamental considerations. The company appears well positioned to weather the current macroeconomic environment given its pricing stabilization measures, limited industry capacity growth, and a highly liquid and minimally levered balance sheet.
  • Shares of Industrial Logistics Properties Trust have struggled amid a challenging economic environment, and the team sold the stock on weakening fundamentals and rising interest expenses.
  • The team exited its position in paper and paper products company Glatfelter on fundamental concerns early in the quarter.


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 progress 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 Small-Cap Value Fund Fact Sheet - R6
Virtus NFJ Small-Cap Value Fund Fact Sheet - A
Virtus NFJ Small-Cap 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 Small-Cap Value Fund Summary Prospectus
Virtus Investment Trust SAI
Virtus Investment Trust Annual Report
Virtus Investment Trust Semiannual Report


Virtus NFJ Small-Cap Value Fund Monthly Holdings
Virtus NFJ Small-Cap Value Fund Top Holdings
Virtus NFJ Small-Cap Value Fund Holdings Fiscal Q1
Virtus NFJ Small-Cap Value Fund Holdings Fiscal Q3

Section 19(a) Notices

Section 19(a) Notice for Ex-Date December 21, 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.