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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 2025 Q1 Investor Letter | Buyside Digest

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

Primary Source Intelligence • Q1 2025 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-5.63%

YTD-5.63%

Annualized+10.63%

Positioning StanceConstructive

Market CapMid Cap

GeographyUS

Digest Analysis

Quick Take

"Mid-cap value fund underperformed in Q1 2025 as recession fears replaced post-election optimism. Portfolio trades at attractive 6x normal earnings versus market's frothy multiples."

Executive Summary

The Hotchkis & Wiley Mid-Cap Value Fund underperformed in Q1 2025 as investor sentiment shifted from post-election optimism to recession concerns amid tariff prospects, persistent inflation, and weakening macroeconomic factors. The Russell Midcap Value Index declined 2.1% while the fund fell 5.63%. Energy stock selection was the primary detractor, while healthcare and technology contributed positively. The portfolio trades at an attractive 6x normal earnings versus 16x for the Russell Midcap Value Index and 28x for growth, exhibiting an 11% earnings yield. Key contributors included AIG following a $7.5 billion buyback authorization, CVS on better Medicare reimbursement rates, and F5 benefiting from improving IT spending. Major detractors were Kosmos Energy on OPEC+ production restart plans, Fluor on weak Q4 results, and Adient on tariff concerns. The manager believes periods of uncertainty create the greatest valuation displacements, providing opportunities for value investors as fundamentals should eventually drive market performance rather than sentiment.

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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

75%

CautiousHigh

High Conviction (75%)

The manager demonstrates high conviction in their value approach, providing specific valuation metrics (6x normal earnings vs 16x for benchmark) and expressing strong belief that fundamentals will eventually drive market performance. Detailed individual stock analysis shows conviction in holdings.

Growth Outlook

30%

BearishBullish

Bearish (30%)

The manager describes a shift from post-election optimism to concern about potential recession due to tariff prospects, persistent inflation, and weakening macroeconomic factors. However, they also express optimism about their value approach benefiting from current market conditions.

Risk Appetite

20%

DefensiveAggressive

Defensive (20%)

The portfolio maintains steady positioning with consistent fundamental risk ratings. The manager expresses confidence in their holdings despite market volatility, suggesting a measured but positive risk appetite focused on value opportunities.

Capital Deployment

0%

De-riskingDeploying

De-risking (0%)

No explicit discussion of cash level changes or significant portfolio adjustments. The manager appears to be maintaining current positioning while monitoring for opportunities, suggesting neutral deployment activity.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

The manager believes the current environment of uncertainty creates opportunities for value investors and that fundamentals should drive markets going forward, which would be conducive to their investment approach.

Language Signal

10%

BearishBullish

Bearish (10%)

Language includes both risk-focused terms like 'recession concerns' and 'weakening macroeconomic factors' balanced with opportunity-focused language like 'attractive valuation' and 'providing opportunities for value focused investors.'

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The manager acknowledges multiple macro risks including recession concerns, tariff impacts, persistent inflation, and weakening macroeconomic factors. However, they frame these as creating opportunities rather than requiring defensive positioning.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

The manager sees periods of uncertainty as creating 'the greatest displacement of stock valuations from intrinsic values, providing opportunities for value focused investors.' They believe current market conditions favor their approach.

Time Horizon

80%

Short-TermLong-Term

Decade+ (80%)

The manager references Ben Graham's long-term view of markets as weighing machines and focuses on intrinsic value and fundamental earnings power, suggesting a patient, long-term investment approach rather than short-term catalyst dependency.