As of 09-30-2018

Highlights

  • The U.S. equity markets were positive for the quarter
  • Investors continued to prefer growth stocks over value
  • The Technology and Industrials sectors contributed positively to the fund’s performance
  • Stock selection and sector weightings drove most of the fund’s negative relative performance

Looking Back

During the third quarter of 2018, the U.S. economy continued its positive momentum with continued employment gains, strong second quarter U.S. gross domestic product readings, strong demand shown by the U.S. Purchasing Managers Index and continued record low unemployment rates, which drove interest rates higher for the quarter.  Most global equity markets were mixed throughout the quarter.  The U.S. equity markets were led by the S&P 500 Index, which was up by 7.80%.  This was followed by large-cap stocks represented by the Russell 1000 Index and the Nasdaq Composite Index, both up 7.51%, followed by the Nasdaq Index, up 6.61%, followed by mid-cap stocks represented by the Russell Mid-Cap Index, up 5.15%, and followed by small-cap stocks represented by the Russell 2000 Index, up 3.46%.  Large-cap growth stocks also outperformed large-cap value stocks, a continuation from most of the year.

During the third quarter, the portfolio team added the following equity positions:  XPO Logistics, Abbot Laboratories, GoDaddy, Inc, Elanco Animal Health, Inc., Merck & Co. and Biogen, Inc.

Also during the quarter, the portfolio subtracted or reduced the following positions in pursuit of better opportunities:  FedEx Corp., Facebook, Inc., Salesforce.com, Broadcom, Inc. and Vertex Pharmaceuticals.

Performance

Federated Kaufmann Large Cap Fund Institutional Shares returned 8.65% at NAV for the three months ended September 28, 2018.  That compares with its benchmark Russell 1000 Growth Index, which returned 9.33%, 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 Veeva Systems Inc., Amazon, Salesforce.com, Microsoft Corporation and Worldpay Inc.

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

Performance Detractors

  • Stocks that detracted from performance included Las Vegas Sands Corp., Facebook, Inc., Dropbox, Inc., Alibaba Group Holdings and Alnylam Pharmaceuticals

How We Are Positioned

As the U.S. economy enters the fourth quarter of 2018, the positive economic momentum continues, U.S. business confidence remains high, jobless claims are near a generational low, along with consumer confidence and the ISM Index 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 Federated 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 80% of the portfolio invested in four sectors:  Information Technology, Health Care, Consumer Discretionary and Industrials.  The sector weightings of the portfolio is 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.