As of 09-30-2017

Highlights

  • Small-cap stocks had strong gains during the quarter, narrowing their recent performance gap relative to large-company stocks.
  • Strong stock selection across sectors contributed to the fund’s outperformance.
  • The fund extended its year-to-date lead over both its benchmark and its peers.

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 Small Value Fund (Institutional Shares at NAV) returned 5.89% for the quarter, outpacing the Russell 2000 Value Index, which returned 5.11% 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

  • Telecom provider Vonage Holdings posted a strong quarter on impressive earnings and revenue results.  
  • The Industrials sector was a source of strength, led by Welbilt and Werner Enterprises.
  • The fund’s investments in the electronic equipment and components industry performed well, highlighting relative outperformance in the Information Technology sector.

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

Performance Detractors

  • Performance in the Financials sector was impacted by the struggles of Popular, Inc., which has a large presence in hurricane-ravaged Puerto Rico.
  • The fund’s gains in the Health Care sector did not keep pace with those of the benchmark, largely due to our underweight to the biotech industry.

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 a continuation of favorable economic trends, including the anticipated pick-up in infrastructure spending and corporate tax reform, which could be especially beneficial to small-cap companies, as they typically have a higher effective tax rate than their large-cap counterparts.