| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.37% | 0.12% | 0.12% |
Kennedy Capital's Mid Cap Value composite returned 0.12% net in Q1 2026, trailing the Russell Midcap Value Index by 357 basis points primarily due to March sell-off from Middle East conflict effects. Three key factors drove underperformance: homebuilding and building products exposure declined from petroleum input cost inflation and rising mortgage rates, accounting for roughly half the relative shortfall; sector positioning with Industrials overweight and Utilities/Refiners underweight detracted as conflict escalated; and lack of exposure to five cyclical Information Technology companies tied to data centers that generated 87% average returns. The manager maintains homebuilding exposure believing valuations are attractive with catalysts expected over 1-2 years, added refining exposure for sustained profitability potential, and initiated an electric utility position. They view the data center technology stocks as highly cyclical and lower quality, not aligning with their approach. Given fluid geopolitical conditions, tactical adjustments are being implemented rather than widespread positioning changes while executing their consistent stock selection methodology.
Kennedy Capital maintains a disciplined mid-cap value approach focused on companies with demonstrated ability to generate above-average returns on invested capital, seeking undervalued opportunities with reinvestment potential despite Q1 headwinds from geopolitical disruption.
Manager expects tactical incremental adjustments versus widespread positioning changes given fluid geopolitical situation. Focused on executing consistent stock selection approach and confident portfolio company management teams will optimize businesses as conditions evolve.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 24 2026 | 2026 Q1 | - | Homebuilders, industrials, mid cap, Refiners, technology, Utilities, value | - | Kennedy Capital's mid-cap value strategy underperformed in Q1 due to homebuilding exposure amid rising rates and conflict-driven sector rotation away from Industrials toward Utilities and data center technology stocks. Manager maintains homebuilding positions on attractive valuations, added refining exposure, and avoids cyclical tech names while making tactical adjustments to navigate geopolitical volatility. |
| Jan 22 2026 | 2025 Q4 | - | AI, CFROI, industrials, mid cap, Style, technology, underperformance, value | - | Kennedy Capital's value-focused Mid Cap strategy significantly underperformed in 2025 as their high-CFROI approach was out of favor during AI-driven market leadership. The firm maintains conviction in their core philosophy while making tactical adjustments, exiting rate-sensitive positions and adding underappreciated AI beneficiaries. They view current headwinds as temporary style rotation. |
| Oct 30 2025 | 2025 Q3 | - | AI, fundamentals, mid cap, Quality, value |
ROG LEA ROG LEA |
Kennedy Capital's Mid Cap Value strategy underperformed in Q3 2025 as AI and speculative themes drove markets over fundamentals. Despite benefiting from data center exposure, they lack key AI beneficiaries while holding quality businesses facing AI disruption concerns. The firm maintains disciplined value approach, modestly repositioning for future opportunities while expecting fundamentals to eventually regain importance over speculation. |
| Jul 29 2025 | 2025 Q2 | - | Economic Growth, industrials, inflation, mid cap, tariffs, Trade Policy, value | - | Kennedy Mid Cap Value underperformed in Q2 despite market recovery from tariff-induced April lows. Trade policy uncertainty created volatility but economic fundamentals remain supportive. The firm maintains overweight Industrial positioning despite sector softness, confident in diversified portfolio's ability to drive earnings growth through cycles. Long-term value approach focuses on companies generating above-average returns on invested capital. |
| Mar 31 2025 | 2025 Q1 | - | fundamentals, mid cap, tariffs, Trade Policy, value, volatility | - | Kennedy Capital's Mid Cap Value strategy underperformed in Q1 2025 amid trade policy volatility from Trump's aggressive tariffs on key trading partners. The firm maintains its disciplined, bottom-up value approach, viewing the 20-40% decline in many small and mid-cap stocks as creating potential long-term opportunities despite near-term margin pressures from elevated input costs. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
HomebuildersHoldings in homebuilding and building products declined due to concerns around petroleum-based input cost inflation and sharp increase in 30-year mortgage rates. Manager maintains exposure believing recent weakness is indiscriminate and current valuations are attractive with company-specific catalysts expected over the next 1-2 years. |
Homebuilders Building Products Mortgage Valuations |
Data CentersThe benchmark includes five Information Technology companies tied to optical communications and data storage that benefited from global data center expansion, generating an average return of 87% in Q1. Manager views these stocks as highly cyclical and lower quality, not aligning with their stock selection approach. |
Data Centers Optical Storage Technology | |
RefinersRefiners outperformed as crack spreads widened, driven by geopolitical disruptions in Venezuela and Iran. Manager has added refining exposure where they see potential for sustained enhanced profitability given current geopolitical dynamics. |
Refiners Crack Spreads Geopolitical | |
| 2025 Q4 |
AfricaFund had exceptional performance in 2025 with 67.21% gains, more than doubling 2024's 27% returns and outperforming the 44.7% benchmark. Portfolio remains attractively valued with forward PE of 6.1x, dividend yield of 8.0%, and expected EPS growth of 19.2% in 2026. Manager emphasizes this is not too late to invest as valuations haven't expanded. |
Frontier Markets Emerging Markets Valuation Growth Performance |
LiquidityManager addresses liquidity concerns in African frontier markets, explaining challenges in buying meaningful quantities without affecting prices and potential redemption risks. Notes that liquidity varies cyclically and structurally, with foreign investor participation, local retail, and institutional involvement all affecting market depth. Expects liquidity to improve in current bull market environment. |
Market Structure Trading Redemptions Volatility | |
Capital MarketsDiscussion of African capital market structure shows corporates own 24% of listed equity versus 19% in emerging markets and 9% globally, reducing free float. Recent IPO activity in Nigeria including Aradel and Ellah Lakes, plus Kenya Pipeline privatization. OECD study highlights structural factors affecting African market development. |
IPOs Market Structure Free Float Development | |
| 2025 Q3 |
AIThe firm recognizes the transformation underway across technology, industrial, and energy industries driven by advances in artificial intelligence. Their portfolio benefits from this trend through ownership of businesses that participate in data center or power-oriented end markets. However, relative performance has suffered from lack of exposure to key AI beneficiaries in the Russell Midcap Value Index and maintaining holdings in high quality businesses where the market has rapidly priced in nascent risks to long term business models associated with AI disruption. |
Data Centers Technology Disruption Power Industrial |
ValueKennedy Capital maintains their longstanding philosophy of finding high quality businesses with durable business models at attractive prices. They emphasize staying grounded in fundamentals and evaluating each business on its merits with a disciplined, long-term perspective focused on multi-year value creation. The strategy typically lags during speculative periods but has historically outperformed as fundamentals and valuation come back into focus. |
Fundamentals Quality Discipline Long-term Undervalued | |
| 2025 Q2 |
Trade PolicyPresident Trump's aggressive tariff policies announced on April 2nd raised concerns of a global trade war with potentially disastrous consequences for the US economy. Tariffs are essentially an inflationary tax leading to higher finished goods prices and weaker economic growth. Incremental signs of de-escalation in trade tensions, particularly with China, contributed to the market rebound. |
Tariffs China Inflation Trade War Economic Growth |
IndustrialsDespite ongoing softness in broader U.S. industrial activity, the firm maintains confidence in their overweight positioning within the Industrial sector. They maintain a highly diversified industrials portfolio across key end markets and believe these businesses are well-positioned to drive earnings growth and margin improvement through economic cycles. |
Manufacturing Diversification Earnings Growth Margin Improvement Economic Cycles | |
| 2025 Q1 |
Trade PolicyPresident Trump's increasingly aggressive trade policies created market volatility during the quarter. Tariffs were announced targeting Mexico (25%), Canada (25%), and China (additional 20%), plus new levies on steel and aluminum (25%). These measures heightened investor concerns about a broad trade war and detrimental effects on the U.S. economy. |
Tariffs Trade War Input Costs Margins Inflation |
ValueWith many small and mid-cap stocks down 20-40% in recent months, maintaining a disciplined valuation framework to assess what's already priced into current stock prices becomes a major competitive advantage. The firm evaluates investments from the bottom up with a focus on long-term fundamentals, not short-term noise. |
Valuation Fundamentals Bottom Up Disciplined Framework |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 30, 2025 | Fund Letters | Gary Kauppila | ROG | Rogers Corporation | Information Technology | Electronic Components | Bull | NYSE | 5G, Automation, Electric Vehicles, growth, innovation, Margins, materials | Login |
| Oct 30, 2025 | Fund Letters | Gary Kauppila | ROG | Rogers Corporation | Information Technology | Electronic Components | Bull | NYSE | 5G, Automation, Electric Vehicles, growth, innovation, Margins, materials | Login |
| Oct 30, 2025 | Fund Letters | Gary Kauppila | LEA | Lear Corp. | Consumer Discretionary | Auto Parts | Bull | NYSE | Auto parts, backlog, capital allocation, Electrification, EVs, Free Cash Flow, growth | Login |
| Oct 30, 2025 | Fund Letters | Gary Kauppila | LEA | Lear Corp. | Consumer Discretionary | Auto Parts | Bull | NYSE | Auto parts, backlog, capital allocation, Electrification, EVs, Free Cash Flow, growth | Login |
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