Portfolio Manager Perspectives

Jeff Benjamin

RidgeWorth’s Don Wordell: Industrial and financial stocks are worth a look

Fund manager uses dividends as initial measure of a company’s strength

Mar 10, 2010 @ 10:18 am

By Jeff Benjamin

The economic catalysts are now in place for industrial and financial-sector stocks, according to Don Wordell, manager of the RidgeWorth Mid-Cap Value Equity Fund Ticker:(SAMVX).

Mr. Wordell, who has managed the $800 million fund since RidgeWorth Capital Management Inc. launched it in November 2001, uses dividends as an initial measure of a company’s strength.

“Dividends promote financial transparency and discipline, and it’s also a signal that management sends to the marketplace,” he said.

That perspective is what persuaded Mr. Wordell to reduce his exposure to financial-sector stocks ahead of the market’s meltdown in 2008.

“Our focus on dividends helped us outperform our benchmark the last two years,” he said. “It also moved us into higher-quality companies through the bottom of the cycle.”

Today, the dividend outlook is such that Mr. Wordell has increased his weighting in the financial sector, where he believes credit issues are declining and an improving economy will help financial firms develop more operating leverage.

The appeal of the industrial sector, he said, follows the theme of a “massive global infrastructure spend-out over the next 20 years.”

Although Mr. Wordell requires that any stock added to the portfolio pays a dividend, there is no requirement on the size of the dividend payout.

“Dividends are an important source of total return, and I’m very confident that most investors don’t spend enough time focusing on dividend payers,” he said.

The fund gained 48.3% last year, which compares with a 34.2% gain by its benchmark Russell Midcap Value Index.

Mr. Wordell said that the mid-cap focus on companies with market capitalizations of between $500 million and $15 billion provides a unique opportunity.

The companies are small enough that there are still inefficiencies and research gaps that can be taken advantage of, he said.

And, by being mid-cap, the stocks have enough liquidity to fit his needs and the size of his fund, Mr. Wordell said.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.


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