Mid Cap Value

At Chartwell, we believe you can locate value not only in traditional sectors, but also in unexpected corners of the market, where other value managers rarely venture.  Rather than restrict ourselves to investing in only traditional value stocks, we broadly diversify and invest in undervalued companies wherever they can be found.

Yet we also believe that simply emphasizing valuation is not enough. We seek to purchase those companies most likely to realize their full potential sooner, not later.  To this end, we systematically incorporate techniques to find the inflection points --- indicators that undervalued stocks are in the early stages of achieving their true value. Our uncommon approach to value investing has resulted in good performance and lower risk, relative to our peers.

For clients in our Mid Value portfolios, we use a conservative approach to attain returns that exceed the Value Indices over the long term and provide lower risk scores versus our peer group.  Our investment approach identifies companies with favorable valuations, margin improvement, product innovations and a visionary management team.

Our investment process integrates the efforts of several kinds of specialists: quantitative analysts, fundamental analysts and a Portfolio Management Team.

• Quantitative analysis:  Our process begins with a universe of securities that are statistically inexpensive versus the market (Russell Mid Cap Value) and possess the highest potential total return characteristics based on a range of sector-specific valuation parameters.  Our focus list continues to narrow as we identify companies priced at the lower end of their historical valuation ranges.  A careful assessment of a company's price history uncovers where they are positioned in their current valuation cycle and from this we can determine those stocks that offer attractive risk/reward characteristics.
  
  
• Fundamental analysis:  The first stage of our fundamental research evaluation process concentrates on developing a composite valuation assessment, combining multiple valuation measures along with historical return, margin, balance sheet and growth data.  Using this broad quantitative snapshot avoids the dependence on a single valuation tool, which may unduly focus the portfolio or miss important elements of company valuation.  Next, we uncover the causes of the perceived undervaluation and answer the question, "Why does the market pay so little for this company?"  A clear understanding of the cause is vital; only then can we determine what changes must occur to realize the company's valuation potential.  The most decisive element of our research process is an appraisal of the company's value, separating those with real value from those that are merely inexpensive on a simple statistical valuation measure. 
  
  
• Portfolio Management:  The final portfolio is constructed primarily as a bottom-up residual of stock selection.  We weigh a number of factors including fundamentals, timing of catalysts, and growth prospects when determining portfolio positions.  In symmetry with our buy process, valuation at the high end of a company's historical range indicates an unfavorable risk/reward profile and therefore a potential sell.  Deterioration in fundamentals or dissipation of the change elements prompts us to sell. 

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*5 year relative to the Russell MidCap Value Index
Statistics as of 12/31/16

Investment Team

David C. Dalrymple, CFA, MBA
Managing Partner, Senior Portfolio Manager
30 years experience

Mark S. Goodman, CFA 
Senior Portfolio Analyst
13 years experience

Reid T. Halloran
Portfolio Analyst
10 years experience

T. Ryan Harkins, CFA, MBA
Senior Portfolio Manager 
18 years experience