Is the Davenport Value & Income Fund (DVIPX) Doing its Job?

June, 2026

Our Value & Income strategy was started years ago with a dual mandate of:

1. Value Investing
2. Providing a solid and growing income stream via dividends

The strategy began in 2001 as a separately managed account, with the Davenport Value & Income Fund (DVIPX) opening in 2010. The genesis was a periodic Davenport research piece titled “Incoming Ideas” that focused on stocks with high dividend yields for income-oriented and more conservative investors. Since inception, DVIPX has generated annualized returns of nearly 10% while demonstrating less volatility than the broader market or the Russell 1000 Value® Index (R1V).

Recently, during this “risk on” phase concentrated on all things AI infrastructure, we have stuck to our mandate. Although delivering on our promise, our returns look pedestrian versus the R1V benchmark during this time of rising speculation and risk taking. Understandably, this has caused some investors to develop benchmark envy, and we aren’t sure they realize the composition of our increasingly risky and irrelevant benchmark.

For further context, the Value & Income Fund now yields 2.6% versus 1.7% for the Russell 1000 Value. As the benchmark index has become “growthier” and led by low dividend payers, we have effectively been penalized for maintaining our income emphasis. The average dividend yield for the index’s top 20 performers this year (a list comprised almost exclusively semiconductor/AI infrastructure names) is a mere 0.08%.

Clearly, many of the hot names in the index don’t qualify for inclusion in our Fund given paltry dividend yields. We don’t ignore technology and have benefitted from tech stocks that offered both attractive valuations and solid dividends. As an aside, DVIPX’s price-to-earnings ratio (P/E) as of 4/30 was 17x versus 22x for the R1V, which now trades almost at parity with the S&P 500® Index.

Also, consider the following:

• Technology now accounts for over 20% of the R1V versus 10% in 2016.
• The biggest position in the index (3%) is a hot semiconductor stock that is up 900% over the last 12 months and yields 0.05%. Its beta of 2.6x suggests it is twice as volatile as the market.
• A number of momentum-fueled AI infrastructure stocks are part of the index. They are up sharply, incredibly volatile, and yield next to nothing. They may have a place in some funds, but do not fit DVIPX.

We don’t think it makes sense to change our stripes. We’ve heard anecdotes from beleaguered value managers that are buying top performers “because they are in the benchmark.” This scares us. Many so-called “value funds” that are indexing to this benchmark may find themselves holding a less than desirable bag, and their investors may not fully appreciate the heightened risk of what they own.

If anything, now may be a time to focus even more on preserving capital rather than increasing risk in hot corners of the market. Remember, DVIPX is designed for more conservative equity investors and its goal is to not only generate income, but also be low beta and somewhat defensive.

To that point, DVIPX has shown defensive characteristics during certain periods. Since inception, the Fund has generally held up better than both the S&P 500 and the Russell 1000 Value during periods of market duress. Recent proof points are no exception. DVIPX exhibited downside protection during swoons in 2022, summer 2024, 2025 tariff fears and earlier this year.

While just one day, a very recent drawdown is also illuminating. On Friday June 5, when the AI trade took a large blow, our Fund was essentially flat (-0.10%) versus declines of 2.6% and 1.9% for the S&P and Russell. This is important and reassuring. For what it’s worth, all of our Funds exhibited higher returns on this day.

The Value & Income Fund is also designed to be differentiated from the Core Leaders Fund (DAVPX), which has a clear growth bias (albeit admittedly not as turbo growth as the S&P 500). Recall, over the last couple years we’ve taken steps to make these Funds even less correlated (and by extension make DVIPX less correlated to the S&P 500).

So is DVIPX doing its job? We think the answer is “yes”. It may not seem like it when we are being trounced by an increasingly risky and irrelevant index. But, the Fund has adhered to its mandate and delivered solid risk-adjusted returns during market pullbacks. During this period of AI exuberance, we will keep plodding along with our boring approach as we seek to both grow and protect capital while providing income.

Last Month End 5/31/2026	1 Year	5 Year*	10 Year*	Since Inception*†
Davenport Value & Income Fund	14.42	5.81	8.43	9.86
S&P 500 Index	29.78	14.15	15.65	14.45
Russell 1000 Value Index	28.55	10.42	11.37	11.40