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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 Q3 Investor Letter | Buyside Digest

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

Primary Source Intelligence • Q3 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

Annualized+11.17%

Digest Analysis

Quick Take

"Hotchkis & Wiley's mid-cap value fund underperformed in Q3 as energy holdings declined sharply amid falling oil prices. Technology and financial stock selection provided some offset."

Executive Summary

The Hotchkis & Wiley Mid-Cap Value Fund underperformed the Russell Midcap Value Index in Q3 2024, returning 6.03% versus the benchmark's 10.08%. The fund's overweight in energy significantly detracted from performance as the sector declined 1.7% amid falling oil prices and easing inflationary pressures. Stock selection in consumer discretionary also hurt returns, while underweight positions in real estate and utilities further pressured performance. Positive contributors included stock selection in technology and financials, along with an overweight in financials. Top performers included F5, which rebounded on improved subscription software metrics, Ericsson, which showed revenue stabilization and margin improvement, and CNO Financial, which beat estimates and raised guidance. Energy detractors included Kosmos and APA Corp, pressured by declining oil prices and operational challenges. The fund maintains its focus on identifying businesses with durable balance sheets, sustainable returns, and attractive valuations. With the Russell Midcap Value Index trading at 16.2x forward earnings versus 20.8x for the broader market, the managers believe their value-oriented approach is well-positioned for long-term outperformance as lower interest rates support market conditions.

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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 specific position sizing (top 10 holdings listed with percentages), detailed individual stock analysis, and willingness to add to undervalued positions like Adient. However, the diversified portfolio of named holdings and measured language around market conditions prevents a higher score.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The managers express cautious optimism about markets, noting that lower interest rates are typically favorable as long as the economy stays strong. They highlight attractive valuations in mid-cap value versus the broader market but acknowledge potential economic slowdown risks.

Risk Appetite

15%

DefensiveAggressive

Defensive (15%)

The fund maintains its positioning but shows selective risk appetite, adding to undervalued positions like Adient while dealing with energy sector headwinds. The approach is measured rather than aggressive, focusing on risk management alongside opportunity identification.

Capital Deployment

15%

De-riskingDeploying

De-risking (15%)

Limited deployment activity is evident. The fund increased exposure to Adient after its decline, but no broad-based deployment or cash level changes are mentioned. The activity appears selective and opportunistic rather than systematic deployment.

Forward Guidance

20%

CautiousExpansionary

Cautious (20%)

The managers indicate they will continue their disciplined approach to identifying undervalued assets but do not signal aggressive deployment. They express confidence in their strategy but acknowledge market uncertainties and the need for selectivity.

Language Signal

30%

BearishBullish

Bearish (30%)

Language is moderately positive with terms like attractive valuations, favorable conditions, and positioned to generate returns, but balanced with acknowledgment of risks, underperformance, and market challenges. The tone is constructive but measured.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

Moderate risk perception is evident through discussion of energy sector headwinds, potential economic slowdown impacts on technology, and oil price pressures. Risks are identified and discussed but not characterized as systemic or extreme threats.

Opportunity Density

65%

ScarceAbundant

Abundant (65%)

The managers see selective opportunities, highlighting attractive valuations in mid-cap value versus the broader market (16.2x vs 20.8x forward P/E). They identify specific opportunities in individual holdings but emphasize the need for selectivity and risk management.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

The fund emphasizes a long-term approach focused on generating consistent long-term returns through identifying businesses with durable characteristics. The strategy is positioned for multi-year value realization rather than near-term catalyst dependency, though specific timeframes are not detailed.