As of 06-30-2018

Highlights

  • Large-cap growth stocks outperformed large-cap value stocks
  • The most strongly value-oriented stocks contributed to underperformance
  • Fund ended quarter roughly sector neutral to benchmark except for its Real Estate underweight

Looking back

The second quarter began with small positive returns in April, improved significantly in May for all but large-cap value and finished weakly positive again in June as uncertainty concerning the developing trade dispute may have diminished the optimism of market participants. The Russell 3000 ended the quarter with a return of 3.89%, led by small-cap stocks (the small-cap Russell 2000 Index returned 7.75%, the mega-cap Russell Top 200 Index returned 3.86% and the Russell Midcap Index trailed at 2.82%). Small-cap stocks benefited as people saw that they had less exposure to international trade. While growth did lead value in the Russell 3000, almost all of that lead was attributed to technology stocks: Microsoft plus the FAANGs – Facebook, Amazon Apple, Netflix and Alphabet (Google) – were the top contributors to the Russell 3000 Index. To us, the narrow focus on the popular FAANG stocks and the relatively strong performance of small-cap stocks are confirming signs of investor worry over the brewing trade war.

Performance

Federated MDT Large Cap Value Fund Institutional Shares returned 0.58% in the second quarter of 2018, underperforming the 1.18% return of its benchmark, the Russell 1000 Value 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.

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

Performance Contributors

  • Value stocks close to the value-growth split (strong price trend, neutral to high analyst conviction and not high structural earnings)
  • Security selection in Energy, Information Technology and Health Care sectors
  • Relatively strong performers overweighted by the fund: Valero Energy Corporation, Baxter International Inc. and NetApp, Inc.

Performance Detractors

  • Strong value stocks with high structural earnings and favorable cash flow
  • Strong value stocks with very high tangible book-to-price, high structural earnings and favorable cash flow
  • Underweighting the Real Estate sector, security selection in Industrials and Financials sectors
  • Relatively weak performers overweighted by the fund: J.M. Smucker Company, Owens Corning and Prudential Financial, Inc.

How We Are Positioned

The fund ended the second quarter roughly sector-neutral to the benchmark according to the GICS sectors, except for an underweight in Real Estate (the fund does not hold REITs). Within the sectors, there was a significant overweight position in the insurance industry and a smaller overweight position in the capital goods industry. There were underweight positions in the real estate, diversified financials and media industries.