As of 09-30-2017

Highlights

  • Value stocks added to their recent gains but continued to lag behind other segments of the equity market on a relative basis.
  • Strong stock selection across eight sectors contributed to the fund’s outperformance.
  • Economic and political trends favored the fund’s high conviction ideas in Industrials and Health Care.

Looking Back

Stocks continued their steady rise in the third quarter of 2017, with most equity indices again making new highs. Improving global economic conditions and high confidence among consumers, businesses and investors alike helped propel stocks higher despite a tumultuous period for news flow that included devastating hurricanes, rising tensions between the U.S. and North Korea and the third failed attempt at the “repeal and replace” of Obamacare. Confirmation of the market’s strength was seen with the small-cap Russell 2000’s advance to hit all-time highs as well. Small caps are highly sensitive to economic growth and confidence, and taken together with large-cap stocks, their performance seemed to be discounting a positive outcome on tax reform, as well as the Federal Reserve following through on its desire to normalize monetary policy.

Performance

Federated Clover Value Fund (Institutional Shares at NAV) rose 5.3% for the quarter, outpacing the Russell 1000 Value Index, which returned 3.1% 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

  • In Industrials, Textron rose 14.4%, in sympathy with recent merger and acquisition activity among industrial/defense conglomerates.
  • Cigna Corporation was up 11.7% on strong earnings growth and accretive capital deployment, helping to pace outperformance in the Health Care sector.
  • The Financials sector was a source of strength, driven by Ameriprise, which advanced 17.3%.
  • In Energy, BP added 12.7% as oil prices showed further signs of stabilization.

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

Performance Detractors

  • In Consumer Discretionary, Viacom’s shares slid 18.3% during the quarter due to an extended contract dispute with a top customer, which fueled fears of lower future earnings.
  • In Materials, performance reversed from the previous quarter due to BHP Billiton, which declined 6.4%.

Looking Ahead

The financial markets have been remarkably calm for an extended period of time, causing some to describe this lack of volatility as “eerie.” While we’re not expecting any monsters to jump out of the closet, we remain cautious of the risks of widespread investor complacency and expect that choppier conditions will return sooner than later. October marks the 100th month of this economic expansion which began in mid-2009, and while the risk of recession remains low there is no question that we are in the later stages of the cycle. Entering the fourth quarter, the fund is well positioned to benefit from the anticipated pick-up in infrastructure spending, declining risks to the health care industry and a continuation of favorable economic trends. We remain underweighted in Consumer Staples and Discretionary, Real Estate and Financials, primarily as a function of what we observe to be a lack of attractive valuations at current prices.