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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Madison Mid Cap Fund underperformed in Q4 despite strong individual stories like Liberty Formula One's competitive F1 season and Arista's AI momentum. Insurance and housing cyclical headwinds weighed on performance, while IT spending weakness hurt CDW."
Madison Mid Cap Fund returned -1.86% in Q4 2024, underperforming the Russell Midcap Index's 0.62% gain, though delivered 10.46% for the full year versus the benchmark's 15.34%. The portfolio's top contributors included Liberty Formula One, benefiting from increased F1 competitiveness driving viewership and sponsorship growth, and Arista Networks, which posted strong results with promising AI trial outcomes. Brookfield Asset Management continued raising funds despite alternative investment headwinds, while Lithia Motors showed sustainable profitability improvements. Detractors included Arch Capital, facing late-cycle insurance dynamics despite excellent fundamentals, and housing-exposed names Carlisle and Floor & Decor amid sluggish residential demand. CDW struggled with poor IT spending, particularly among small businesses, while Brown-Forman faced persistent spirits volume weakness from multiple headwinds. The team added to Microchip and CDW positions, viewing weakness as cyclical, while selling CarMax due to increasingly difficult market share gains. The managers maintain conviction in their quality-focused approach and portfolio companies' long-term competitive positions.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The fund demonstrates high conviction through concentrated holdings (33 positions with 48.4% in top 10), specific position sizing decisions, and detailed company-specific analysis. Managers provide clear rationale for adds and sells, showing strong conviction in individual names despite acknowledging cyclical challenges.
Growth Outlook
The letter presents a balanced view with some optimism about specific company prospects but acknowledges multiple cyclical headwinds across industries. Managers see opportunities in current weakness but don't express broad market enthusiasm.
Risk Appetite
The fund added to two existing positions (Microchip and CDW) while selling one (CarMax), indicating selective risk-taking. The positioning suggests moderate risk appetite focused on quality names facing temporary challenges rather than aggressive deployment.
Capital Deployment
Limited net deployment activity with adds to two existing positions and one sale. No new investments initiated. The activity suggests selective capital rotation rather than significant new deployment or de-risking.
Forward Guidance
Managers express confidence in long-term prospects of portfolio companies and indicate willingness to 'ride out bumpy weather' but acknowledge uncertainty about cycle timing. The tone suggests patient capital deployment rather than aggressive action.
Language Signal
Language is balanced with equal weight given to positive developments (strong results, robust outlook, competitive advantages) and challenges (sluggish demand, poor environment, industry headwinds). Slightly more cautious than bullish overall.
Perceived Risk
Managers identify multiple sector-specific risks including insurance cycle transitions, housing market weakness, IT spending pressures, and spirits industry headwinds. Risks are discussed with specificity but not characterized as systemic threats.
Opportunity Density
The fund made no new investments and only added to existing positions, suggesting limited new opportunities meeting their standards. Managers focus on existing holdings rather than identifying broad opportunity sets.
Time Horizon
Managers explicitly state willingness to 'ride out bumpy weather' and focus on long-term company fundamentals over cyclical factors. The approach suggests multi-year investment horizons with patience through near-term volatility.
