In the second quarter of 2025, the Victory Diversified Stock Fund A-Shares (SRVEX) showcased remarkable performance, surpassing its S&P 500 Index benchmark by approximately 342 basis points. This strong showing was largely attributed to astute stock selection, particularly within the Industrials and Health Care sectors. During this period, the S&P 500 Index experienced a significant shift where growth-oriented investments outperformed value investments by 15.9%, fueled by renewed enthusiasm and increased spending on AI infrastructure by large-cap hyperscalers. The fund's strategic asset allocation reflects its core investment philosophy, which prioritizes companies exhibiting robust earnings growth, substantial return on invested capital, positive earnings momentum, and fair valuation across various market segments.
The fund's investment strategy is deeply rooted in identifying and capitalizing on companies that demonstrate not only strong financial health but also promising future prospects. By focusing on firms with a healthy return on invested capital and positive earnings momentum, the fund aims to achieve superior long-term returns. At the close of the quarter, the fund maintained a strategic overweight position in the Health Care sector, anticipating continued growth and stability. Conversely, it was underweight in Consumer Staples, Technology, and held no exposure to Utilities, reflecting a cautious approach to sectors perceived as less dynamic or facing headwinds.
The portfolio's current composition illustrates a deliberate effort to balance growth potential with prudent risk management. The active management style, which includes making timely adjustments to sector allocations and individual stock holdings, such as exiting JD.com due to tariff and profitability concerns and reducing its underweight in NVIDIA following impressive results, played a crucial role in its outperformance. This adaptability allows the fund to navigate evolving market conditions effectively, always seeking to optimize its holdings for maximum benefit.
The consistent outperformance of the Victory Diversified Stock Fund underscores the importance of a well-defined investment philosophy coupled with dynamic portfolio management. By meticulously selecting companies that exhibit strong fundamentals and favorable market dynamics, the fund not only achieves impressive financial results but also embodies the principles of sound investment, paving the way for sustained growth and prosperity for its investors.