As of 09-30-2017

Highlights

  • Market preferences shifted during the quarter from growth to value and large cap to small cap
  • Strong growth-oriented stocks contributed to performance; value-oriented stocks detracted

Looking back

Just as in the second quarter of this year, the third quarter brought low positive returns (the Russell 3000 Index returned 4.57%) but a varying market environment. Large cap stocks led small cap stocks in the first two months of the quarter, but small caps did very well in September and ended the quarter just ahead of large caps (the small-cap Russell 2000 Index returned 5.67% during the quarter while the mega-cap Russell Top 200 Index returned 4.88%). On the style front, growth stocks outperformed value stocks in July and August, but value stocks offset part of the growth advantage in September (for the quarter, the Russell 3000 Growth Index returned 5.93% and the Russell 3000 Value Index returned 3.27%).

Performance

Federated MDT Small Cap Growth Fund Institutional Shares returned 7.14% in the third quarter of 2017, outperforming the 6.22% return of its benchmark, the Russell 2000 Growth Index.

Performance data 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

  • Growth stocks with high analyst conviction and strong price trend, and good stock selection among stocks with neither high structural earnings nor high analyst conviction
  • Security selection in Information Technology and Consumer Staples sectors
  • Strongest relative performers: Scientific Games Corporation, Cutera Inc., OraSure Technologies, Inc.

Performance Detractors

  • Stocks near the value-growth split with high structural earnings and depressed prices or high structural earnings and favorable cash flow
  • Security selection in Industrials sector
  • Weakest relative performers: PetMed Express, Inc. and Depomed, Inc.

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

Looking ahead

The fund ended the third quarter roughly sector-neutral to the benchmark according to the Thomson Reuters I/B/E/S-based sector definitions used for the strategy. According to the GICS sectors, there was an overweight in Consumer Discretionary and smaller overweights in Information Technology and Financials. There was an underweight in Real Estate (the fund does not hold REITs). Within the GICS sectors, there was an overweight position in the retailing industry and smaller overweight positions in the banks and semiconductors and semiconductor equipment industries. There was an underweight position in the real estate industry.