- Access to capital appreciation potential of small-cap stocks
- Managed by experienced value specialists
- Risk-averse investment philosophy
- Disciplined, pure value process
Process & Philosophy
CAPITAL APPRECIATION POTENTIAL
While past performance is no guarantee of future results, small-cap value stocks have recorded some of the best investment results among all equity asset classes in the past. The main reason: companies typically realize their greatest growth in the early stages of their development.
NFJ Investment Group has a strong small-cap value track record and consists of a team of managers dedicated to a pure, deep value approach to small-cap investing. Each of these professionals participates in the investment process, serving as both portfolio manager and securities analyst. This team approach means broader resources are committed to portfolio construction.
NFJ adheres to a strict value philosophy, seeking undervalued, fundamentally sound companies. What sets the firm apart from other value-oriented managers is its emphasis on risk control. To temper the risks associated with small-cap stock investing, NFJ maintains broad industry diversification and requires that each stock in a Small-Cap Value portfolio pay a dividend-a characteristic they believe is an important sign of financial stability.
DISCIPLINED INVESTMENT PROCESS
NFJ's investment process enables it to identify small-cap stocks offering attractive valuations and superior long-term capital appreciation potential. At the same time, the process seeks to control total portfolio risk.
- Screen for positive fundamentals-Apply a screen for positive fundamental characteristics to a universe of approximately 4,500 stocks.
- Conduct in-depth research and analysis-Research each of the remaining 300-500 possible investments, looking for companies with low price-to-earnings multiples, high dividend yields, positive earnings and quality operations.
- Restrict industry concentrations-Avoid overexposure to any one sector by restricting the number of stocks held in a single industry.
- Construct portfolio-Select approximately 25-40 of the most attractive securities identified, across numerous industries.
- Regularly monitor for buy and sell candidates-Continually repeat the research process to identify new buy and sell candidates. Sell a stock when an alternative stock with equally strong fundamentals demonstrates a substantially lower price-to-earnings ratio, and/or a substantially higher dividend yield.