Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Small Cap Value topic
No spam. Unsubscribe anytime.
NFJ tells trustees small-cap value and regional banks present undervaluation opportunity
Summary
Portfolio managers from NFJ argued small-cap value — particularly regional banks — offers attractive valuations relative to large-cap tech, urging trustees to consider the asset class as part of long-term allocation.
Representatives from NFJ, led by portfolio manager Garth Riley, presented the firm’s small-cap value strategy and argued trustees should consider the asset class as a compelling opportunity given current market valuation dislocations.
Riley said NFJ emphasizes valuation, shareholder yield and quality. He explained the firm filters out unprofitable small-cap names and uses custom peer groups and data-driven screening to find attractively valued companies. Riley said the strategy is biased toward dividend-paying companies with dividend growth and that his team includes data science expertise to support screening and peers.
Riley highlighted regional banks as an example of the opportunity set, citing Cadence Bank as illustrative: he said Cadence trades at roughly 11 times earnings, yields about 3%, and has dividend growth near 9% while growing earnings at roughly 23% annually. “We are finding really good dividend growth opportunities today,” Riley told trustees, and he argued the small-cap value asset class could benefit if the yield curve steepens and interest-rate cuts boost net interest margins for regional banks.
NFJ also argued that current valuation concentration in large-cap technology names creates a potential reallocation opportunity: Riley said small caps are relatively inexpensive on a valuation basis and could benefit if investor flows shift away from concentrated large-cap winners.
Trustees asked about positioning and team composition; Riley described underweight technology and an overweight allocation to small-cap regional banks within the strategy as of June 30. The board did not take action on the presentation; trustees indicated interest in continued monitoring and asked for follow-up materials on portfolio positioning and dividend-growth metrics.
