Federated MDT Small Cap Growth Fund (IS) QISGX

Share Classes Product Type Asset Class Category
Mutual Fund Equity Small Cap
As of 06-30-2018

Highlights

  • The market favored small-cap stocks over large-cap stocks
  • The stocks with the strongest growth characteristics 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 Growth Fund Institutional Shares returned 8.28% in the second quarter of 2018, outperforming the 7.23% 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

  • Growth stocks with strong relative price trend and high analyst conviction
  • Stocks with significant external financing needs but prices near 52-week highs and positive analyst conviction
  • Security selection in Consumer Discretionary, Information Technology, Consumer Staples and Financials sectors
  • Relatively strong performers overweighted by the fund: Inogen, Inc., Boston Beer Company, Inc. (Class A) and Applied Optoelectronics, Inc.

Performance Detractors

  • Growth-oriented stocks with high analyst conviction and structural earnings that was not low, but low cash flow
  • Stock selection in Health Care sector
  • Relatively strong performer not held by the fund: Exact Sciences Corporation

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 small overweight positions in the commercial and professional services industry and in the health care equipment and services industry. There were small underweight positions in the real estate and pharmaceuticals, biotechnology and life sciences industries.