As of 03-31-2018

Highlights

  • The U.S. equity markets were mixed during the quarter
  • Investors shifted their preference to favor small-cap securities over large-cap
  • The Health Care and Technology sectors contributed positively to the fund’s performance
  • Stock selection drove most of the positive returns for the fund

Looking back

During the first quarter of 2018, the U.S. economy maintained its positive momentum with continued employment gains, strong readings from the U.S. Purchasing Managers Index and interest rates increased from the fourth quarter.  Most global equity markets were negative throughout the quarter.  The U.S. equity markets were led by the Nasdaq Index, which was up 2.6%, followed by small-cap stocks represented by the Russell 2000 Index, down .08%, followed by mid-cap stocks represented by the Russell Mid Cap Index and large-cap stocks represented by the Russell 1000 Index, both down 0.69% during the quarter.  Mid-cap growth stocks also outperformed mid-cap value stocks, continuing the trend throughout last year.

During the quarter, the portfolio team added the following equity positions:  The Bank of New York Mellon Corp., Illumina Inc., Vertex Pharmaceuticals, Apple, Dropbox, Inc. and Workday. Also during the quarter, the portfolio subtracted the following positions in pursuit of better opportunities:  Alexion Pharmaceuticals, Tesaro, CSRA, Martin Marietta Materials, Alphabet Inc., Zoetis and Facebook, Inc.

Performance

Federated Kaufmann Large Cap Fund Institutional Shares returned 4.79% at NAV for the three months ended March 29, 2018.  That compares with its benchmark, the Russell 1000 Growth Index, which returned 1.41% during the same period.

Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after-tax returns, click on the Performance tab.

Click the Performance tab for standard fund performance.

Performance contributors

  • Stocks that made a positive contribution to performance included Amazon.com, Inc, Veeva Systems Inc, Genmab A/S, Mastercard Inc. and Salesforce.com

Click on the Portfolio Characteristics tab for the fund’s top 10 holdings.

Performance Detractors

  • Stocks that detracted from performance included OSRAM Licht AG, Facebook, Inc. Albemarle Corp, Broadcom Limited, and Ulta Beauty Inc.

Looking Ahead

As the U.S. economy enters the second quarter of 2018, the positive economic momentum continues, U.S. business confidence remains high, along with consumer confidence, jobless claims are near a generational low and the ISM Manufacturing Index is at record levels as well.  Earnings growth is expected to be the driving force behind the equity markets as tax reform and U.S. GDP growth support profit growth.  Global markets face some new headwinds with trade discussions grasping the headlines.  The Kaufmann funds continue to be focused in those sectors that have little dependence on the economy improving significantly to generate significant earnings growth.

This quarter the fund had approximately 78% of the portfolio invested in four sectors:  Information Technology, Health Care, Consumer Discretionary and Industrials.  The sector weightings of the portfolio are a byproduct of our bottom-up stock selection strategy with a team of sector-specialist portfolio managers.  We seek to find companies that have company-specific catalysts for growth rather than develop macro themes to construct sector weightings.  These sectors also have historically provided good opportunities for bottom-up growth investors.