| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.91% | 15.6% | - |
Kennedy Capital's Mid Cap Value composite returned 15.6% net in Q2 2026, outperforming the Russell Midcap Value Index by 217 basis points despite a 350 basis point headwind from three unowned index constituents. The index returned 13.4%, driven by AI-linked stocks in Information Technology which rose 58.7% and contributed over 52% of index returns despite representing only 15% of the benchmark. The manager avoided Sandisk, Western Digital, and Corning based on historical cyclicality and lower returns on capital, viewing their pricing power from memory and storage shortages as temporary. Outperformance came from stock selection in Industrials, Materials, and Consumer sectors. In late June and early July, the manager reduced exposure to AI winners where valuations limit further upside and redeployed proceeds into stocks experiencing excessive pessimism. While AI spending is expected to increase in 2027, the portfolio maintains its discipline of investing in companies with above-average returns on capital and sustainable reinvestment opportunities.
Kennedy Capital pursues mid cap value investing by focusing on companies with demonstrated ability to generate above-average returns on invested capital and opportunities to reinvest cash flows at rates exceeding their cost of capital, while avoiding cyclical businesses with lower return profiles even when they experience temporary pricing power.
The manager expects AI spending to increase again in 2027, though valuations in certain AI-linked stocks have reached levels limiting further upside. The portfolio is positioned with reduced exposure to AI winners and increased allocation to stocks experiencing excessive market pessimism, reflecting a value-oriented approach focused on companies with strong returns on capital.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 29 2026 | 2026 Q2 | GLW, SNDK, WDC | AI, industrials, Information Technology, materials, mid cap, value | - | Kennedy Capital outperformed by 217 basis points in Q2 2026 despite avoiding three AI-beneficiary stocks that created a 350 basis point headwind. The manager trimmed AI winners as valuations reached limiting levels and rotated into excessively pessimistic stocks. The portfolio maintains its focus on companies with above-average returns on capital while avoiding cyclical businesses experiencing temporary pricing power. |
| 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. |
| Dec 31 2024 | 2024 Q4 | - | energy, financials, healthcare, materials, mid cap, Trump, value | - | Kennedy Capital's Mid Cap Value strategy underperformed in Q4 2024 but managers remain optimistic on 2025 prospects. They cite Trump administration tailwinds including deregulation and increased M&A activity, plus continued economic growth. The firm maintains its disciplined value approach focused on quality businesses with strong capital returns trading at attractive valuations. |
| Oct 31 2024 | 2024 Q3 | - | Fed policy, mid cap, rates, small caps, value | - | Kennedy Capital's Mid Cap Value strategy slightly outperformed its benchmark in Q3 2024, benefiting from Fed rate cuts and small cap outperformance. The manager maintains a constructive outlook on small and mid cap equities despite mixed economic signals, emphasizing their disciplined value approach focused on companies with superior fundamentals at attractive valuations. |
| Jun 30 2024 | 2024 Q2 | - | financials, mid cap, rates, small caps, value | - | Kennedy Capital's Mid Cap Value strategy suffered significant Q2 underperformance due to market sentiment shifts and company-specific weakness. However, the manager remains optimistic about small cap opportunities, noting early July's positive sentiment reversal toward smaller caps and rate-sensitive stocks. They maintain conviction in their fundamental approach despite the challenging quarter. |
| Mar 31 2024 | 2024 Q1 | - | consumer discretionary, financials, healthcare, materials, mid cap, value | - | Kennedy Capital's Mid Cap Value strategy delivered 10.1% in Q1 2024, outperforming its benchmark by 1.8%. Materials and Healthcare sectors led performance while Financials lagged. The firm maintains its disciplined focus on mid cap companies with superior returns on invested capital and attractive reinvestment opportunities. |
| Dec 31 2023 | 2023 Q4 | FRCB, SBNY, SIVB | Banking, financials, interest rates, mid cap, Process, real estate, value | - | Kennedy Capital's Mid Cap Value strategy outperformed significantly in Q4 2023, delivering 15.7% net returns versus 12.1% for the Russell Midcap Value index. The firm maintains their disciplined value approach focused on companies generating above-average returns on capital with reinvestment opportunities, seeking undervalued names with favorable fundamentals at attractive valuations despite market volatility. |
| Sep 30 2023 | 2023 Q3 | - | credit, energy, financials, mid cap, rates, value | - | Kennedy's Mid Cap Value strategy outperformed in Q3 despite a 4.19% decline, benefiting from strong sector allocation in Financials and Health Care. Rising rates and tightening credit conditions created headwinds, but the managers view current uncertainty as creating attractive long-term opportunities for their disciplined value approach focused on quality companies at reasonable valuations. |
| Jun 30 2023 | 2023 Q2 | - | consumer discretionary, Federal Reserve, industrials, inflation, mid cap, value | - | Kennedy Capital's Mid Cap Value strategy delivered 7.31% net returns in Q2 2023, outperforming by 345 basis points through strong stock selection in Industrials and Consumer Discretionary. The disciplined value approach focuses on companies with competitive advantages and pricing power, identifying opportunities where market expectations disconnect from fundamentals despite ongoing inflation concerns. |
| Mar 31 2023 | 2023 Q1 | - | consumer discretionary, financials, mid cap, Regional Banks, value | - | Kennedy Capital's Mid Cap Value strategy outperformed by 446 basis points in Q1 2023 despite regional banking turmoil from Silicon Valley Bank and Signature Bank failures. Strong stock selection in Consumer Discretionary and Financials drove returns. The manager maintains focus on fundamentally superior companies at attractive valuations while monitoring potential credit tightening impacts on the broader economy. |
| Dec 31 2022 | 2022 Q4 | - | energy, industrials, inflation, mid cap, rates, value | - | Kennedy Capital's Mid Cap Value strategy lagged its benchmark in Q4 2022 despite positive returns, with full-year underperformance driven by rising rates compressing valuations. The firm maintains its disciplined value approach, viewing current uncertain conditions with high inflation and Fed tightening as creating attractive long-term opportunities for fundamental-focused investors seeking margin of safety. |
| Sep 30 2022 | 2022 Q3 | - | industrials, materials, mid cap, rates, value, volatility | - | Kennedy Capital's Mid Cap Value strategy outperformed by 330 basis points in volatile Q3 2022 as Fed rate hikes drove market uncertainty. The firm's disciplined value approach targets undervalued companies generating above-average returns on capital with strong reinvestment opportunities, constructing portfolios with superior fundamentals at attractive valuations for long-term outperformance. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI-linked stocks drove over 52% of the Russell Midcap Value Index return in Q2 despite representing only 15% of the index, with Information Technology up 58.7%. The manager reduced exposure to certain AI winners in late June and early July as valuations reached levels where further upside appears limited. While AI spending is expected to increase again in 2027, the manager views some AI applications as durable over the next few years. |
Information Technology Valuations Applications |
Semiconductor CycleMemory, storage, and optical component shortages created temporary pricing power for Sandisk, Western Digital, and Corning, fueling outsized returns. The manager avoided these businesses due to historical cyclicality and lower returns on capital, viewing the current pricing power as temporary rather than durable. These stocks exited the midcap index during the June 2026 Russell reconstitution after outgrowing the universe. |
Memory Storage Cyclicality Pricing Power | |
ValueThe manager redeployed proceeds from AI winners into stocks where the market has reached excessive pessimism, reflecting a value-oriented approach. The portfolio focuses on companies with demonstrated ability to generate above-average returns on invested capital and opportunities to reinvest cash flows at rates exceeding their cost of capital. This value discipline led to avoiding cyclical tech names despite their strong recent performance. |
Returns on Capital Undervalued Excessive Pessimism | |
| 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 | |
| 2024 Q4 |
AINumerous practical applications of AI have emerged across software coding optimization, cloud resource management, call center operations, fraud prevention, and equipment maintenance. AI demand tailwinds benefited numerous companies and equity performance across Tech, Industrials, and Utilities sectors. |
Technology Software Automation Cloud |
RatesFederal Reserve began lowering interest rates in September 2024 after a 2+ year tightening cycle, prompted by softening inflation trends. However, a more cautious Fed tone with fewer expected rate cuts in 2025 and sharp increases in longer-dated bond yields pressured equity markets in December. |
Federal Reserve Monetary Policy Bonds Inflation | |
| 2024 Q3 |
Small CapsSmall caps notably outperformed large caps during Q3, with Russell 2000 up 9.3% versus Russell 1000 return of 6.1%. The manager believes the long-term investment opportunity in small cap equities remains bright, particularly for fundamental investors. |
Small Caps Russell 2000 Outperformance |
ValueThe manager focuses on constructing a portfolio of companies with superior fundamental attributes relative to the overall market, but at valuation levels that provide sufficient margin of confidence. This disciplined value approach is described as a winning recipe for portfolio returns over the market cycle. |
Value Valuation Fundamental | |
RatesThe Federal Reserve reduced the Federal Funds rate by 50 bps to 4.75-5.00% range in September, responding to easing inflation and softening employment. Falling interest rates are expected to support improved financial conditions and provide tailwinds to economic growth and corporate earnings. |
Fed Interest Rates Monetary Policy | |
| 2024 Q2 |
Small CapsManager believes long-term investment opportunity in small cap equities remains bright, particularly for fundamental investors. Notes that sentiment has already shifted positively towards smaller cap stocks in early July after Q2 weakness. |
Small Caps Value Fundamentals |
RatesInflation moderated in May and June, increasing odds of interest rate cuts from Federal Reserve later this year. 10-year treasury yields declined over 40 basis points during quarter in reaction to cooling inflation. Manager notes they are positioned as lower interest-rate beneficiaries. |
Rates Inflation Federal Reserve | |
| 2023 Q4 |
ValueKennedy Capital emphasizes their fundamentals-based, process-oriented approach focused on companies generating above-average returns on capital. They seek undervalued companies with opportunities to reinvest cash flows at attractive rates of return, maintaining valuation discipline as their core investment philosophy. |
Value Fundamentals Returns on Capital Valuation Process |
Regional BanksThe sharp rise in interest rates created asset/liability mismatch issues within the banking sector, prompting failures of three large regional banks: Silicon Valley Bank, Signature Bank, and First Republic. Regional bank equities fell over 18% in March amid fears of a widespread banking crisis. |
Regional Banks Banking Credit Stress Interest Rates | |
RatesThe Federal Reserve raised rates to 5.25-5.50% to combat inflation, with 10-year treasury yields peaking at 5.0% in October before falling below 4.0% by year-end. Rising rates were a headwind to equity valuations in the first three quarters, but falling rates in Q4 provided tailwinds to financials and real estate. |
Interest Rates Federal Reserve Treasury Yields Monetary Policy | |
| 2023 Q3 |
RatesRising interest rates were the prevailing theme during Q3, with the 10-year treasury yield increasing 76 basis points to 4.57%, reaching the highest level since 2007. Higher rates create negative implications through higher discount rates lowering asset values, reduced credit availability, and higher borrowing costs eroding corporate profitability. |
Interest Rates Treasury Discount Rates Credit Borrowing Costs |
Credit StressThe net percentage of domestic banks tightening standards for commercial and industrial loans to large/middle market firms is at the third highest level in 20 years. BAA corporate bond yields have more than doubled from 2020/2021 lows and are now at 10+ year highs, reflecting significantly higher borrowing costs for companies. |
Bank Lending Credit Standards Corporate Bonds Borrowing Costs | |
ValueThe manager emphasizes their disciplined value approach, constructing portfolios of companies with superior fundamental attributes at valuation levels that provide adequate margin of safety. They focus on businesses generating returns above cost of capital with opportunities to reinvest at attractive rates, believing this creates a winning recipe for long-term compounding. |
Value Investing Margin of Safety Fundamentals Returns on Capital | |
| 2023 Q2 |
InflationInflation remains at elevated levels but data is showing signs of moderation. The Federal Reserve maintained rates at 5.0-5.25% in June but signaled further increases possible to bring inflation down to 2% target versus latest Core CPI reading of 5.3%. |
Inflation Federal Reserve Interest Rates Core CPI Monetary Policy |
ValueThe investment process focuses on companies with competitive advantages that can maintain and improve returns through operational rigor and pricing power. Disciplined approach to valuation protects from overpaying and helps identify opportunities where market expectations are disconnected from fundamentals. |
Value Competitive Advantages Pricing Power Valuation Fundamentals | |
| 2023 Q1 |
Regional BanksTwo large regional banks failed in March following deposit runs due to solvency concerns, forcing regulatory intervention. The failures sent regional bank stocks down significantly and highlighted the impact of higher interest rates on the real economy. |
Regional Banks Credit Stress Financials |
ValueThe portfolio focuses on companies with superior fundamental attributes at valuation levels that provide sufficient margin of safety. This approach is viewed as a winning recipe for long-term portfolio returns. |
Value Fundamentals Margin of Safety | |
| 2022 Q4 |
ValueThe manager emphasizes their disciplined value approach, constructing portfolios with superior fundamental attributes at attractive valuations. They believe current market conditions present attractive long-term investment opportunities for value-focused strategies with sufficient margin of safety. |
Value Fundamentals Margin of Safety Valuation Undervalued |
RatesRising interest rates and Federal Reserve monetary tightening are identified as the predominant factor driving negative equity returns in 2022. Higher discount rates reduced the present value of future cash flows, particularly impacting historically expensive market areas. |
Interest Rates Federal Reserve Discount Rate Monetary Policy | |
InflationInflation measured by CPI increased at high single digit rates, reaching the highest levels since the early 1980s. This prompted the Federal Reserve's shift to monetary tightening and contributed to challenging market conditions. |
Inflation CPI Price Pressures | |
| 2022 Q3 |
ValueKennedy Capital focuses on identifying undervalued companies with opportunities to reinvest cash flows at rates of return in excess of their cost of capital. The firm seeks companies that generate returns above their cost of capital over a market cycle and have attractive reinvestment opportunities. |
Value Undervalued Capital Returns Reinvestment |
RatesThe Federal Reserve raised the target discount rate to 3.25% from 1.75% during the quarter and maintained its stance that more rate increases will likely be needed to control inflation. The Fed's messaging quelled hopes of potential easing in financial conditions over the near term. |
Rates Federal Reserve Inflation Monetary Policy | |
VolatilityTightening financial conditions coupled with increasing macroeconomic uncertainty drove higher levels of equity market volatility during the quarter. The quarter was characterized as a tale of two halves with significant swings in market performance. |
Volatility Uncertainty Market Financial Conditions |
| 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 | 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 | 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 |
| TICKER | COMMENTARY |
|---|---|
| SNDK | These three companies (Sandisk, Western Digital, and Corning) created a 350 bps relative performance headwind for the portfolio in the quarter and a 612 bps headwind over the last twelve months. We avoided these businesses based on characteristics that don't align with our stock selection approach in Tech: historical cyclicality and lower returns on capital. Shortages of memory, storage, and certain optical components have created a period of unique (and we believe temporary) pricing power for these businesses that fueled outsized returns. As of the end of June, all of these stocks had outgrown the midcap universe and they exited the index during the recent Russell reconstitution on 6/26/26. |
| WDC | These three companies (Sandisk, Western Digital, and Corning) created a 350 bps relative performance headwind for the portfolio in the quarter and a 612 bps headwind over the last twelve months. We avoided these businesses based on characteristics that don't align with our stock selection approach in Tech: historical cyclicality and lower returns on capital. Shortages of memory, storage, and certain optical components have created a period of unique (and we believe temporary) pricing power for these businesses that fueled outsized returns. As of the end of June, all of these stocks had outgrown the midcap universe and they exited the index during the recent Russell reconstitution on 6/26/26. |
| GLW | These three companies (Sandisk, Western Digital, and Corning) created a 350 bps relative performance headwind for the portfolio in the quarter and a 612 bps headwind over the last twelve months. We avoided these businesses based on characteristics that don't align with our stock selection approach in Tech: historical cyclicality and lower returns on capital. Shortages of memory, storage, and certain optical components have created a period of unique (and we believe temporary) pricing power for these businesses that fueled outsized returns. As of the end of June, all of these stocks had outgrown the midcap universe and they exited the index during the recent Russell reconstitution on 6/26/26. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
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| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
