As of 09-30-2018

Highlights

  • Small-cap growth stocks outperformed small-cap value stocks
  • The stocks with the strongest growth characteristics contributed to performance
  • Fund ended quarter roughly sector neutral to benchmark

Looking back

The third quarter of this year opened with two strong months for the domestic equity market but finished with a less favorable month in September (the Russell 3000 Index returned 3.32%, 3.51% and 0.17% in their respective quarters for a total quarterly return of 7.12%). Large caps led the market: the mega-cap Russell Top 200 Index returned 8.38%, the Russell Midcap Index returned 5.00%, the small-cap Russell 2000 Index returned 3.58% and the Russell Microcap Index returned only 0.83%. The style results showed the Russell 3000 Growth Index returning 8.88% for the quarter, topping the Russell 3000 Value Index return of 5.39%. Last quarter, the Russell 3000 Growth Index had topped the Russell 3000 Value Index by even more but the entire growth advantage had been very narrow, driven by just the technology stocks in the mega-cap Russell Top 200 Index. This quarter, the advantage for growth stocks was broader and more consistent: growth led value by a similar amount in every one of Russell’s capitalization ranges.

Performance

Federated MDT Small Cap Growth Fund Institutional Shares returned 8.37% in the third quarter of 2018, outperforming the 5.52% return of its benchmark, the Russell 2000 Growth 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 on the Portfolio Characteristics tab for the fund’s top 10 holdings.

Performance Contributors

  • Strong growth stocks, including those with very high analyst conviction and strong technical factors
  • Security selection in Information Technology, Health Care and Consumer Discretionary sectors
  • Relatively strong performers overweighted by the fund: SPS Commerce, Inc., SeaWorld Entertainment, Inc. and Inogen, Inc.

Performance Detractors

  • Growth stocks close to the growth-value split (flat or improving earnings-to-price and low analyst conviction)
  • Stock selection in Industrials sector
  • Relatively weak performers overweighted by the fund: NCI Building Systems, Inc. and Shutterfly, Inc.
  • Relatively strong performer not held by the fund: Integrated Device Technology, Inc.

How We Are Positioned

The fund ended the third quarter roughly sector-neutral to the benchmark according to the GICS sectors, except for a small underweight in Real Estate (the fund does not hold REITs). Within the sectors, there was a small overweight position in the software and services industry and a small underweight position in the real estate industry.