As of 12-31-2017

Highlights

  • The U.S. equity markets continued to favor large and growth-oriented securities.
  • The Health Care sector hurt much of the fund’s performance.
  • Stock selection and sector weighting had negative impacts on the fund.

Looking Back

During the fourth quarter of 2017, the U.S. economy maintained its positive momentum with continued employment gains, strong readings from the U.S. Purchasing Managers Index and interest rates that increased from the third quarter. Most global equity markets were positive throughout the quarter.  The U.S. equity markets were led by the S&P 500 Index, which was up 6.64%, followed by large-cap stocks represented by the Russell 1000 Index, up 6.58%, followed by mid-cap stocks represented by the Russell Mid Cap Index, up 6.05%, followed by small-cap stocks represented by the Russell 2000 Index, up 3.33%.  Large-cap growth stocks also outperformed large-cap value stocks, continuing the trend throughout the year.

During the quarter, the portfolio team added the following positions:  Albermarle Corp, Alnylam Pharmaceuticals, Raytheon Co, Veeva Systems and Osram Licht . Also during the quarter, the portfolio subtracted the following positions in pursuit of better opportunities:  Alexion Pharmaceuticals, Incyte Genomics, Tesaro, Starbucks and Vantiv, Inc.

Performance

Federated Kaufmann Large Cap Fund Institutional Shares returned 4.57% for the three months ended December 29, 2017. That compares with its benchmark, the Russell 1000 Growth Index, which returned 7.86% 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., Sherwin-Williams Co, Microsoft Corp, Zoetis and BlackRock.

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

Performance Detractors

  • Stocks that detracted from performance included Genmab, Alexion Pharmaceuticals, Tesaro, Boston Scientific and Incyte Corporation.

How We Are Positioned

As the U.S. economy enters 2018, the positive momentum in output has accelerated from its tepid pace in the previous few years as global growth has picked up. U.S. business confidence reached new highs and the U.S. passage of historic corporate tax reform may help sustain the recent GDP acceleration in 2017. Earnings growth drove 2017’s equity market rally, helped by stable global growth and a weaker dollar, as well as accommodative central bank policies around the world.  Global markets have looked past most of the political discourse as the focus returned to company earnings and investment growth in the coming years. Federated Kaufmann Funds expect to be focused in those sectors that historically have had little dependence on the economy improving significantly to generate significant earnings growth opportunities.

During the fourth quarter of 2017, the fund had approximately 77% of its 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.