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Herndon Strategies: Mid Cap Value Equity, abstract image

  1. Domestic Strategies

Mid Cap Value Equity

Mid Cap Value Equity

“To everything there is a season...” (Ecclesiastes 3:1). True value is defined by companies that trade at a discount to what their fundamentals merit. Identifying sound companies out of favor with investors due to temporary conditions has historically proven to be a successful strategy as their true value is ultimately recognized in the marketplace. We call these companies value-creating opportunities.

Our process identifies stocks based upon relative value versus the other stocks in our Russell Mid Cap Index. We combine fundamental analysis in a valuation-oriented framework with risk assessment. We do not want to own stocks merely because they appear "cheap."  We screen our value candidates for performance-based characteristics to avoid "value traps."  The stocks we own tend to have low valuation metrics, but they also have sound fundamental characteristics, hopefully leading to outperformance as their value is recognized in the market.

Performance, Supplemental Information and Disclosures

Our Systematic Process

Strategy Icon: stock selection

Stock Selection

  • Step 1: Identify VCO
  • Step 2: Qualify for Potential Inclusion
  • Step 3: Rank
  • Step 4: Fundamental Analysis
  • Step 5: Purchase

Strategy Icon: sector allocation

Sector Allocation

  • Step 1: Compare overall VCOs in Russell Mid Cap Index to each sector in Russell Mid Cap
  • Step 2: Calculate Target Sector Weights based on Russell Mid Cap Value utilizing information from step 1
  • Step 3: Adjust Portfolio

Strategy Icon: risk management

Risk Management

  • Sector diversification rules
  • Security diversification rules S
  • eek to be fully invested
  • ~40 – 70 securities
  • Top 10 positions are earned not purchased

Strategy Icon: sell discipline

Sell Discipline

  • Weekly Sector Adjustments:
  • Profit taking
  • Fundamental assessment
  • Conviction Check