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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Hotchkis & Wiley Mid-Cap Value Fund 2024 Q4 Investor Letter | Buyside Digest

Back to Fund Profile (Hotchkis & Wiley Mid-Cap Value Fund)

Primary Source Intelligence • Q4 2024 Letter Analysis

Hotchkis & Wiley Mid-Cap Value Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Hotchkis & Wiley Mid-Cap Value Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-2.39%

YTD+3.63%

Annualized+10.96%

Positioning StanceConstructive

Market CapMid Cap

GeographyUS

Digest Analysis

Quick Take

"Mid-cap value fund underperformed in Q4 but maintains conviction in valuation-driven approach. Overweight energy and financials sectors while finding selective opportunities across undervalued companies."

Executive Summary

The Hotchkis & Wiley Mid-Cap Value Fund underperformed in Q4 2024, returning -2.39% versus -1.75% for the Russell Midcap Value Index, continuing a challenging year where value lagged growth for the seventh time in ten years. The fund's core thesis centers on exploiting valuation disparities across the market, maintaining significant overweights in energy and financials while underweighting real estate, industrials, and materials. Energy remains the largest sector overweight, with the manager seeing continued value in companies trading at low multiples of normal earnings, supported by capital discipline among US producers and OPEC+ production restraint. The portfolio benefits from a considerable valuation advantage relative to the benchmark, combined with strong underlying businesses and healthy balance sheets. Key risks include potential economic slowdown impacting oil prices and inflation concerns from new policy initiatives. The manager believes current valuation disparities create an environment highly conducive to long-term focused active management, expressing confidence in the portfolio's prospects relative to passive alternatives.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

68%

CautiousHigh

Moderate (68%)

The fund demonstrates moderate-high conviction through concentrated sector positioning with energy as the largest overweight and specific named holdings with detailed investment theses. The manager provides clear rationale for individual positions like ADNT, OLN, and CRGY, though the diversified nature across multiple sectors and acknowledgment of challenging market conditions prevents a higher score.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The manager expresses cautious optimism about market opportunities, noting that valuation disparities create a favorable environment for active management. However, this is tempered by acknowledgment of challenging conditions where value has lagged growth for seven of the past ten years and concerns about inflation and economic slowdown risks.

Risk Appetite

15%

DefensiveAggressive

Defensive (15%)

The portfolio maintains concentrated sector bets with energy as the largest overweight and significant underweights in real estate, industrials, and materials. However, the manager made only minor changes during the quarter, suggesting a cautious approach to new risk-taking despite maintaining existing positions.

Capital Deployment

5%

De-riskingDeploying

De-risking (5%)

The manager explicitly states they made very minor changes during the quarter in terms of individual positions, indicating minimal net deployment activity. Current sector weightings are described as more reflective of industry performance rather than active allocation decisions, suggesting a largely static approach to capital deployment.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

The manager expresses confidence about the portfolio's prospects and believes the current environment is highly conducive to long-term focused active management. They maintain conviction in their positioning while acknowledging the need for selectivity in finding attractive opportunities.

Language Signal

20%

BearishBullish

Bearish (20%)

Language is balanced with positive terms like attractive valuation, promising outlook, and confident about prospects, but also includes risk-aware language about challenging conditions, underperformance, and potential economic headwinds. The net balance leans slightly positive but remains measured.

Perceived Risk

55%

Low RiskElevated

Moderate Risk (55%)

The manager identifies several specific risks including potential economic slowdown impacting oil prices, inflation concerns from policy changes, and the challenging environment where value has underperformed growth. These risks are discussed with meaningful detail but not presented as systemic threats, indicating moderate risk awareness.

Opportunity Density

45%

ScarceAbundant

Selective (45%)

The manager sees selective opportunities in defined areas, particularly in energy stocks trading at low multiples and companies with valuation advantages. However, they note fewer attractive opportunities in real estate, industrials, and materials, and emphasize the need for selectivity, suggesting a moderately constrained opportunity set.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The manager emphasizes long-term focused active management and discusses multi-year themes like energy sector dynamics and valuation mean reversion. The approach appears oriented toward holding through short-term volatility with confidence in longer-term value realization, though specific timeframes are not explicitly stated.