Nuance Mid Cap Value Semi-Annual Update | June, 2026

In this episode, Scott Moore, CFA^®, Jack Meurer, CFA^®, and Adam West, CFA^® provide a semi-annual update for the Nuance Concentrated Value strategy. Hosted by Ben Becker, CFA^®.

This material should be reviewed in conjunction with the below presentation:
Nuance Concentrated Value Semi-Annual Update Presentation.

Ben Becker, CFA^®
Hi everyone. Welcome to another episode of Sharpe Focus with Nuance Investments. My name is Ben, and I’m the Director of Data and Quantitative Research here at the firm. The focus of today’s episode is a Semi-Annual Review of our Nuance Concentrated Value strategy. Joining me on today’s podcast is our President & CIO, Scott Moore, along with Portfolio Managers Jack Meurer and Adam West.

We will begin today’s episode with Scott, who will give an update on the firm and the team, then Adam will provide a review of Concentrated Value’s, year-to-date performance. Finally, Jack and Adam will discuss our outlook for the remainder of the year. A link to the presentation used in today’s episode can be found in the show notes.

If you have any questions or would like to learn more about Nuance, please reach out to us at client.services@nuanceinvestments.com. With that, I’ll turn it over to Scott to get us started.

Scott Moore, CFA^®
Thank you, Ben, and thanks to everyone for joining us today. On page three, we will begin with a Nuance firm-wide update. As we approach our 18th anniversary, there are several points we want to highlight. First, from our original seed capital of $30 million, we now manage about $940 million across our strategies, modestly higher than at the end of June.

Despite a difficult start to 2026, and a market that remains narrowly focused on the AI-related CapEx Supercycle and higher Beta stocks, we want to remind our clients that both of our products have been consistent award winners over time. Nuance Mid-Cap Value was named PSN Top Guns Manager of the Decade for the years ending 2018, 2019, 2020, 2021 and 2022, with 2018 being our first year of eligibility. The topic of today’s call, the Nuance Concentrated Value product also earned PSN Top Guns Manager of the Decade awards for the years ending 2018, 2019 and 2020. The more recent absence of awards is not surprising in an environment where the market has favored higher Beta, more expensive stocks, and segments of the economy that we believe are over-earning, clearly our clients know, are not consistent with our process.

Further, both products remain top tier within their respective peer groups, since inception. Nuance Mid Cap Value remains first percentile on a risk-adjusted return basis since its inception in 2008, and Nuance Concentrated Value ranks at the eighth percentile since its inception versus its peers in 2008. From an ownership perspective, Nuance remains 100% employee owned, and we have consistently right sized the organization to withstand difficult market environments. Cyclicality in assets under management, and cyclicality and market preferences is not new to us, and we have been prepared for these periods since our beginnings.

Importantly, and in typical Nuance contrarian style, these cyclically negative periods for our firm have typically created the largest opportunities for us and for our clients. As such, we are energized by the opportunity set created by today’s narrowly focused market. Paradoxically, many of our dominant market share businesses that we own today should benefit explicitly from AI productivity improvements, and they are available today at compelling valuations in our opinion. This kind of setup is familiar and certainly reminds us of the tech bubble in the late 1990s and is well within the Nuance team and process wheelhouse.

Turning to page four, you can see our investment team. This group continues to emphasize detailed, thorough bottoms-up company analysis and deep valuation work  each day, just as it has since our inception. I would also note that despite a market that has not appreciated our process for several years, this team’s cumulative 60+ years of experience continues to uncover interesting risk reward opportunities.

Recent contrarian and uncorrelated ideas include a significant overweight in the trucking industry with large positions in Marten Transport and Werner Enterprises. Marten’s stock has improved from about $10 per share at its trough, where we established our peak weight to nearly $18 today. It also includes an opportunity we identified several years ago in the United Kingdom Water Utility space.

United Utilities was generally purchased by our clients in the mid-$20s, and today trades in the mid-$30s, producing an approximate 40% return in what we view as a lower risk, valuation driven opportunity that still has some room for growth. These examples give you a sense of the varied opportunities that this process has identified over the long term.

On page five, you can see a one-page schematic of the Nuance Investments process. 18 years later, and this process continues to be the cornerstone of our firm. Consistency of process through cycles is critical to disciplined execution and long-term performance.

The summary is that our process in team searches for leading business franchises, studies them carefully, and invests only when the risk reward is better than the market’s broader opportunity set. That typically occurs when a market share leader is facing temporary under-earnings. Those temporary pressures then create attractive entry points from a risk reward perspective.

With that firm wide overview, let’s turn to our first half performance with Adam West. Adam.

Adam West, CFA^®
Thanks, Scott. Taking a look at performance, I’d like to point out that since-inception the Nuance Concentrated Value product has eighth percentile risk adjusted returns versus the Lipper Multi-Cap Value peers, and second percentile risk adjusted returns when compared to Morningstar Mid-Cap Value peers, with a Sharpe ratio of 0.78, net of fees, since inception. We believe that after underperforming in recent years, this shows that this investment process has performed well over full market cycles, and we believe the portfolio is set up very well for the future.

Looking at the next slide, Concentrated Value is now slightly underperforming our primary benchmark, but notably we have done so with less risk as measured by standard deviation.

More recently I’d like to talk about some of the wild swings we have seen in individual names, especially stocks that have benefitted from the AI related trade. If you look the month of June for instance, the Nuance Concentrated Value portfolio was up more than 4% versus the S&P 500 Index, which was down 1% and outperforming our primary benchmark by 3% during the month. The point here is that things can change very quickly, and we like our portfolio of high-quality companies that we believe are undervalued, especially when compared to the broader market that we view as materially overvalued.

Turning to the next slide and looking at attribution, what I want to point out here is just how much of a headwind the Technology sector has been this year. In the Russell 3000 Value benchmark, the Technology sector was up almost 90% in the first six months, which is by far the best performing sector. Even after being the second-best performing sector in the benchmark in 2025, [where it was] was barely behind Communication Services, which was led by Alphabet. I want to mention that the IT sector is a core part of our investment process over time. There are several market share leaders with strong competitive positions within the sector that we believe should grow in excess of GDP over time. Our attribution since inception until the end of 2025 would show positive attribution from the IT sector. However, with the strong returns of the sector this year, our long-term attribution within this has turned negative. Additionally, I want to show some further color behind what has happened this year and just how narrow and concentrated this trade has become. Within the Tech sector, four stocks have been a cumulative headwind of more than 5% to our relative performance. Intel and Micron were up nearly 300% in the first half of the year. Western digital was up 240% and SanDisk was up about 780%. These are all stocks that have benefited from the AI build out.

Memory and storage companies, in particular, have seen strong performance as demand for AI has led to memory shortages, and memory prices are at record highs. The leading memory companies Micron, SK Hynix and Samsung are projected to earn returns on capital well over 100% by the end of the year, which is a level none of them have seen in at least the past 30 years. This includes the dot-com bubble, and you can say the same for the smaller peers in SanDisk and Western Digital. This is really a classic over-earning and overvalued scenario for a transitory reason, that being unsustainably high memory prices. New competition in memory is emerging from China, and the traditional leaders are all building capacity to meet the elevated demand. Typically, that leads to lower prices as expectations for a more balanced supply and demand environment come into focus.

But if the AI build out eventually leads to an over build, this new supply could come online at the same time the demand begins to shrink meaningfully, which would likely lead to a big correction in memory prices and much lower earnings across the space. Micron, for example, the history of the stock is that that it typically trades between 1- and 3-times book value. And it is traded below book value three times since then inception of Nuance. It recently traded at almost 19 times book value, well above where it traded at its prior peak in 2000 during the dot-com bubble. If it were to fall to current book value of roughly $87 per share, it would mean a roughly 90% decrease in the stock price.

This is just one of many examples of downside risk that we see across the sector, and others that have benefited from AI, and it’s one reason we see our portfolio as differentiated from the market and our peers and set up very well for the future.

With that, I’ll turn it over to Jack to talk about the mid-year outlook.

Jack Meurer, CFA^®
Great, so we’ll shift gears now to our outlook, and I’ll begin with just a few of our team’s perspectives on the current investment environment and what this could mean looking out into the future. So, through the first half of the year, our style of investing has continued to face a fairly unfavorable near-term backdrop. We’ve continued to see high Beta stocks and consensus AI related businesses propel both the growth and the value indices higher.

As this has gone on, it’s our belief that the relative long-term opportunity to own businesses that have been neglected during this risk-seeking period just continues to get more and more compelling. Our team is certainly seeing this in the stock-by-stock work and the risk rewards that are bubbling up in our portfolio. And we’ll highlight some of those in a bit.

I also think that this chart does a really nice job of highlighting just the extremity of the divergence that we’ve been seeing. So the chart here is showing the trailing ten-year annualized performance of low beta stocks relative to high beta stocks.

There is more than 60 years of data here covering effectively the total market, and we’re defining low- and high-beta as the bottom and top quintiles. What I’d point out here is that, first of all, the magnitude of high-beta outperformance has recently now surpassed the decade that led up to the peak of the dot-com bubble, with high beta outperforming low beta by over 1,500 basis points annually over the period.

Secondarily, the last time we saw similar relative outperformance of high beta, which peaked in March of 2000, the next decade resulted in a really meaningful outperformance from lower risk value stocks and in what was ultimately a lost decade for the S&P 500 Index. I think in our short-term focused world is often forgotten that not too long ago, there was a whole decade where the total annualized return for the S&P was negative.

Growth indices were even worse over this stretch. And then, by contrast, the Russell 3000 Value Index returned around 3.5% annualized, and the lower-to-average beta stocks within the Russell 3000 Value Index, which is more or less the pond that we typically fish from, returned around 9% annualized over that period. This, of course, is no guarantee of future performance, but what we do believe is that the conditions that made lower-risk stocks really exceptional long-term investments back in that 1999-2000 period, that we’re seeing similar conditions at play again in the current environment today.

So where are we finding the best risk reward opportunities?

You can see our top 10 holdings and sector over- and under-weights, but In short, it’s in businesses with relatively more stability, that have relatively more certainty, and that lack the speculative qualities that the market’s been favoring in recent years. Many of these opportunities are showing up in the Consumer Staples, Health Care, and Utilities sectors. As you can see in our over- and under-weights. And broadly speaking, while these businesses in our portfolio may lack the attention-grabbing AI upside stories, we believe the valuations are inexpensive on an absolute basis and very much so on a relative basis.

And just [given] the nature of these businesses, being scaled and leading operators in the space, we think they’ll be able to utilize AI-related tools to further enhance their competitive positions as they’ve done time and time again with other technologies over what have been very long operating histories for most of these businesses.

And while there’s certainly some business models out there that may be in the crosshairs of potential competitive disruption from AI, we do not believe that to be the case for the businesses in our portfolio.

I think the best way to show this is to walk through a couple of our top investment ideas right now. And so, I’ll kick it back over to Adam to discuss one of the many great risk rewards we’re finding in the Consumer Staples sector, which is a sector that Adam’s covered for a very long time.

Adam West, CFA^®
Thanks Jack. I’d like to talk about Beiersdorf, which is a leading producer of beauty and personal care products such as facial moisturizers, body lotions, and deodorants. It also is a leading producer of tape-style adhesives that are geared toward industrial and electronic manufacturing end markets. The company has well-known brands including Nivea, Eucerin, Coppertone, and La Prairie. We view beauty as an attractive category within staples because it is typically grown faster than traditional Staples categories, and it also has an attractive growth opportunity longer term in Emerging Markets due to rising incomes.

We also view adhesives as an attractive space that has been gaining share from traditional fasteners such as nuts and bolts and screws. Adhesives allow for lighter automobiles and airplanes, they allow for miniaturization of electronic products, they allow for better connection points, and they are also more environmentally friendly than your traditional fasteners.

Beiersdorf has been gaining share for several years, but recently weaker consumer spending, especially in Europe, has caused growth to slow from high-single-digits to low-single-digits, and potentially even flat in the near future. Beiersdorf has also committed to spending more on R&D and marketing to protect its market share, which is causing fears of margins declining. Additionally, the war in the Middle East has caused fear of increasing input costs with some of their primary inputs as a derivative of oil including plastics related to packaging.

We also believe that this is a company that should benefit from AI as a tool to improve productivity, and a way to lower costs and improve margins, and they shouldn’t really need to spend anything on that in the near term.

They have a strong balance sheet at about €4 billion, or roughly $4 per share in ADR terms. This allows Beiersdorf to better withstand the current environment or take advantage of lower valuations, which includes repurchasing shares at what we view as attractive valuations, which the company has recently done, or potentially taking the opportunity to make an acquisition at attractive valuations.

The stock is now traded at around 12 times our Normal Earnings Per Share. It typically trades around 20 times or higher, and we believe it should trade at about 19 times. This is a high-quality company and it’s trading at a meaningful discount to our view of Fair Value. And it’s just one example of a lot of great opportunities in Consumer Staples that we’re finding.

With that, I’ll let Jack discuss another one of our top holdings.

Jack Meurer, CFA^®
Great! The next investment that we’ll discuss is a stock that’s in a relatively out of favor Health Care sector. The company is called Qiagen, the ticker is Q-G-E-N, and it is now one of our largest holdings.

The business is a dominant leader in the two core business lines where they operate, which, combined account for about two thirds of the total business. The first of which is the sample preparation business, where they’ve had the gold standard product with market share in excess of 60% going back almost 50 years at this point. These products are critical to preparing biological samples in lab applications and [are] used for both Life Science research as well as diagnostics end markets. We expect this business to continue to benefit from tailwinds including increased lab automation, aging populations, and more precision medicine.

The second large franchise is the blood-based tuberculosis, or TB testing business, where Qiagen has established their test as the standard of care in the category. TB is the leading cause of death among all infectious diseases and Qiagen’s blood-based tests, continue to take market share from legacy skin tests, and they’ve maintained their advantages in the category against competitors. So strong competitive position overall for Qiagen.

All of this has led to very high and stable returns on capital over time, but the business is currently facing a couple of transitory issues that are pressuring near-term results. First and foremost, in recent years, we’ve seen spending hesitation from key research customers. This has been most prominent in the academic research category, where concerns regarding NIH funding, there’s been disruptions and turnover at the FDA have resulted in some cyclical weakness, really, across the Life Science Tools industry broadly and Qiagen has been no exception to that. Secondarily, there’s been some geographic specific softness in their immigration related testing volumes in the US and the Middle East, which led to disappointing near-term results recently for Qiagen. We view this as a short-term and a one-off issue.

Notably, the company also has a market cap right around $8 billion. This has long been a business that we’ve seen as a natural takeover candidate in what’s been an increasingly consolidated Life Science Tools industry. There’s many larger players now, where Qiagen’s business could fit into a larger portfolio in what we think could be a very complimentary way. There’s been rumored acquisitions for Qiagen multiple times throughout its history. Recently, in January of this year, and then again after the end of the second quarter. In early July, there was alleged private equity interest in the company. After those initial takeover rumors in January, the stock declined about 30% through the end of the second quarter.

We’ve seen the management respond by increasing the cash dividend by 40% and stepping up their open market share repurchases to up to 10% of the shares outstanding for the company as well. At these depressed stock price levels, we like it when management teams step in and buy back the stock. I think it’s a good reminder of one of the many reasons why Balance Sheet strength, and the optionality that it creates, is a key focus for us in our investment process as it allows the company to kind of help you out as a shareholder when the stock price goes down. So, the capital allocation has been quite good at the company.

At the end of the quarter, shares were trading at around $39 per share. They are now a bit higher on the renewed takeover speculation, to roughly 16 times our Normalized Earnings estimate, which is a significant discount to Qiagen’s own history as well as their peer group, which they’ve historically traded at a premium to. So, an undemanding valuation, in our opinion, a fantastic opportunity to own a high quality leader with a good Balance Sheet in a great category longer-term, especially as we think through potential AI implications in healthcare; how new tools and capabilities could support more biological data generation broadly, more precision health care, more pharma R&D spend, all of which we think should be beneficial to demand for Qiagen’s products over the long term.

So, all that is why Qiagen is a large weight in our portfolio. It’s nice to see some potential acquirers take interest in the opportunity that we’re seeing as well early in the third quarter here. So, we’ll see how that plays out.

To conclude, I hope these examples really highlight the nature of the opportunities that our team is finding, and our whole portfolio, frankly, is comprised of a bunch of these. We own stable, market-leading businesses that we think are not only insulated from AI disruption but can actually benefit from productivity gains and have valuations that look attractive, particularly versus a lot of the consensus favorites today.

As we think about how our portfolio looks right now versus where all of the attention and the capital is flowing into, we believe strongly that the opportunity for our products and our investors will be meaningful when this crowded market leadership inevitably changes, and our team is very energized about that opportunity.

So, with that, as always, feel free to reach out to us with any questions you may have, either on what we covered today or anything else, and we appreciate your ongoing support of Nuance. Thanks.

Disclosures
The views expressed are those of Nuance Investments as of the date of this presentation and are subject to change at any time. These views are for informational purposes only and should not be relied upon as a recommendation to purchase any security or as investment advice. This audio recording should be reviewed in conjunction with the accompanying disclosure or composite presentation, which contains standardized performance figures and other important information. Investing involves risk, including the possible loss of principal. For more information or a copy of our disclosure brochure, please contact client.services@nuanceinvestments.com.

Definitions

The Price to Earnings ratio measures the price of a company’s stock in relation to its earnings per share.

Nuance Normalized Earnings are internally derived, based on proprietary financial statement analysis.

Beta measures volatility as compared to that of the overall market. The Market’s beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than the market, while a beta lower than 1.00 is considered to be less volatile.

A basis point is one hundredth of one percent.

Disclosures

As of 6/30/26 composite weights of names discussed are as follows: BDRFY (11.1%), GOOGL (0.0%), INTC (0.0%), KRX:005930 (0.0%), MRTN (0.9%), MU (0.0%), QGEN (9.7%), SKHY (0.0%), SNDK (0.0%), UUGRY (1.2%), WDC (0.0%), and WERN (0.8%).

Nuance Investments, LLC (the “Firm”) is a Registered Investment Advisor. The Firm’s Nuance Concentrated Value Composite (the “Composite”) is a composite of actual accounts invested in the Nuance Concentrated Value investment strategy. The creation and inception date for the Composite is 11/13/2008. The Composite includes all accounts that have invested in the strategy; including accounts no longer managed by the Firm and are presented in US Dollars. Actual account returns may be higher or lower than the Composite returns due to differences in portfolio holdings, timing of security transactions, and account inception date. The Primary Benchmark for the Composite is the Russell 3000 Value Index. The Russell 3000 Value Index measures the performance of the broad value segment of the U.S. equity universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. The Secondary Benchmark for the Composite is the S&P 500 TR Index. The S&P 500 TR Index is a market-value weighted index representing the performance of 500 widely held publicly traded large-capitalization stocks. Individuals cannot invest directly in any index. Indices are used for comparison purposes only, do not include the reinvestment of dividends, and are not meant to be indicative of a portfolio’s performance, asset composition, or volatility. The performance of the Composite may differ markedly from that of compared indices due to varying degrees of diversification and/or other facts.

The Nuance Concentrated Value Composite is an all-capitalization value investment product and consists of separately managed accounts in the Nuance Concentrated Value strategy. Rankings and peer group comparisons are created internally on a quarterly basis using data from FactSet. Nuance pays a licensing fee to FactSet to access their platform and to use their data, including peer group rankings, in marketing materials. The peer groups consist of mutual funds within the stated category with performance history available from the Composite inception date. For peer group comparisons, all Returns, Standard Deviation and Sharpe Ratio calculations, including those of the Composite were calculated by FactSet based upon funds with monthly net return data from December 2008 to the displayed date. Prior to December 2020, Nuance utilized Zephyr and eVestment for peer group data. For additional performance periods, please visit: https://nuanceinvestments.com/peer-group-disclosures/. Additional Information: Portfolio composition will vary over time and may change without notice. Over the product life, the Nuance Concentrated Value Separate Account Product has been classified by Morningstar in the following categories: Large Value and Mid-Cap Value. Lipper does not provide product level classifications. Current investment style and assigned peer groups may differ from the styles presented. Nuance utilizes fund peer groups due to the limited availability of separate account data. The Nuance Concentrated Value Composite is compared to various fund peer groups as defined by investment style and constructed in a manner that is similar to the guidelines and classifications of the third party category groups to which it is compared. However, fund category groups differ from separate account category groups. Morningstar Categories are based on the average holdings statistics over the past three years and are applied to both funds and separate accounts. Morningstar Style Box Methodology is based on growth versus value scores using historical measures of various portfolio components and weights. A complete description of Morningstar’s Category classifications and Style Box Methodology can be found at https://www.morningstar.com/research/signature. For Morningstar ratings of our separate accounts, please visit: https://nuanceinvestments.com/awards-concentrated-value/. Lipper’s Fund Classifications have a prospectus-based methodology with diversified funds having an additional portfolio-based classification and are applied to open-ended funds but not to separate accounts. A complete description of Lipper’s fund classification methodology can be found at https://lipperalpha.refinitiv.com. Standard Deviation is a statistical measure of the historical volatility of a portfolio that reflects its dispersion or deviation from its mean. The Sharpe Ratio is a calculation of a product’s risk-adjusted performance over time. The ratio is calculated by taking a product’s annualized excess return over a risk-free rate (The Firm uses the Citigroup 3-month Treasury Bill as the risk-free rate) and dividing by its annualized standard deviation calculated using monthly returns.

The information presented related to the Nuance investment decision and selection process is intended to be informational in nature, speak to our process and does not represent a recommendation in any specific security or securities. Information not specific to a cited source constitutes the opinion of the Nuance Investment Team and should not be relied upon to make investment decisions. Investors should be aware of the risks associated with data sources including without limitation, fundamental, technical, qualitative, and quantitative factors used in our investment process. Errors may exist in data acquired from third party vendors, the development of investment ideas, the analysis of data, and the portfolio construction process. While Nuance takes steps to verify information to minimize the impact of potential errors, we cannot guarantee that errors will not occur.

Past Performance is not a guarantee of future results. Securities are subject to general market risks due to a variety of factors that affect the overall market. There is no guarantee that an investment with the strategy will be profitable or meet its investment objectives, and it may underperform the market. Please contact client.services@nuanceinvestments.com to request a copy of the Firm’s Disclosure Brochure for more information.