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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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.
"Hotchkis & Wiley underperformed in Q2 2026 by avoiding the speculative AI-driven momentum rally that pushed valuations beyond dot-com bubble levels. The managers question the sustainability of earnings growth fueled by $850 billion in AI data center spending against minimal revenue generation."
The Hotchkis & Wiley Mid-Cap Value Fund returned 4.67% in Q2 2026, underperforming the Russell Midcap Value Index which gained 13.40%, as the market rewarded speculative momentum stocks while fundamentally stable businesses lagged. The fund avoided technology hardware and semiconductors that led the index, with the hardware and storage group returning 84% and semiconductors up 51%. The managers express deep concern about valuations exceeding dot-com bubble levels and question the sustainability of earnings growth driven by $850 billion in AI data center capital expenditures against minimal revenue generation. Energy holdings detracted as oil prices retreated following the reopening of the Strait of Hormuz, though the managers maintain conviction in a structurally undersupplied global energy market. Healthcare was the largest positive contributor, with Centene beating earnings by 48% and raising guidance. The managers increased exposure to non-cyclicals including healthcare and consumer staples amid improving relative valuations. They remain focused on quality businesses with strong balance sheets and attractive valuations, believing the mania-driven market will revert when euphoria gives way to rational fundamentals, positioning their portfolio for that inevitable reversion.
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