As of 12-31-2017


  • Small-cap value stocks continued to make new highs during the quarter.
  • Strong stock selection across sectors contributed to the fund’s outperformance.
  • The fund finished the quarter and the year ahead of both its benchmark and its peer average.

 Looking Back

The final quarter of 2017 was not all that different from the three that came before it. Stocks continued their persistent rise, with no volatility to speak of, against a backdrop of positive economic data in the U.S. and abroad. The relative tranquility of stock returns throughout most of the year sharply contrasted with an often-chaotic political environment. Yet for all the confounding news – fake or otherwise – coming out of Washington and spreading through the Twittersphere, the Trump administration punctuated the year by delivering on its big promise of sweeping tax reform. By slashing the corporate tax rate – a move that disproportionally benefits small-cap companies – the new tax bill provides an immediate boost to business confidence, and is expected to encourage U.S. business investments for years to come.


The Federated Clover Small Value Fund (Institutional Shares, NAV) rose 3.95% for the quarter, outpacing the Russell 2000 Value Index, which returned 2.05% during the same period. The fund ended the calendar year with a 12.39% annual net return, compared to a 7.84% return for the index.

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. Performance does not reflect the maximum 5.5% sales charge for A Shares. If included, it would reduce the performance quoted.

Click the Performance tab for standard fund performance.

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

Performance Contributors

  • Quarterly outperformance was paced by the Financials sector, led by OM Asset Management and mortgage insurer Radian Group Inc.
  • The Industrials sector was a significant contributor, highlighted by strong performances from machinery firm Kennametal and construction and engineering company Dycom Industries.
  • In Consumer Staples, salty snack maker Snyder’s-Lance gained over 30% in the quarter upon news of their acquisition by Campbell Soup Company.

Performance Detractors

  • The fund’s holdings in the Technology sector detracted from the quarterly result, as electronic equipment companies Insight Enterprises and Benchmark Electronics gave back some of their recent gains.
  • The Utilities sector was slightly detractive, due to unimpressive results from the fund’s electric utilities investments.

How We Are Positioned

As 2018 gets underway, there is good cause for optimism. The economy remains on solid footing, with healthy corporate earnings, full employment, and a significant tailwind in the new tax structure. Small-cap companies in particular should benefit from tax relief, as they have typically endured a higher effective tax rate than large multinational corporations. The Fed is working to normalize monetary policy, but rates remain low, and inflation does not look to be a concern in the near future. Low and rising rates are generally positive for stocks, and a signal of economic growth. Valuations are indeed becoming elevated – how can they not be nine years into a bull market? – but with central banks stepping back and letting markets do what they do, opportunities for active managers such as ourselves are more abundant.