As of 06-30-2018

Highlights

  • The market favored small-cap stocks over large-cap stocks
  • Strong value-oriented stocks and strong growth-oriented stocks contributed to performance
  • Fund ended quarter roughly sector neutral to benchmark

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 Small Cap Core Fund Institutional Shares returned 7.85% in the second quarter of 2018, outperforming the 7.75% return of its benchmark, the Russell 2000 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

  • Deep value stocks with depressed prices and high structural earnings
  • Growth stocks with strong price trend and very high analyst conviction
  • Security selection in Consumer Discretionary, Information Technology and Materials sectors
  • Relatively strong performers overweighted by the fund: Inogen, Inc., Medifast, Inc. and W&T Offshore, Inc.

Performance Detractors

  • Stocks with high structural earnings and analyst conviction that was not low
  • Security selection in Industrials and Financials sectors
  • Relatively weak performers overweighted by the fund: Titan Machinery Inc. and Penumbra, 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 were overweight positions in the banks and health care equipment and services industries. There was a significant underweight position in the real estate industry and a smaller underweight position in the pharmaceuticals, biotechnology and life sciences industry. At the end of the period, the fund was tilted slightly toward growth stocks.