Overview

The Montag & Caldwell Mid Cap Growth strategy extends the Firm’s capabilities into the mid cap asset class while leveraging the strength of the Firm’s resources and its successful, time-tested, fundamentally driven investment process.

Philosophy

The Mid Cap Growth strategy invests in high-quality, mid cap growth stocks that offer a compelling combination of earnings growth and attractive value. Our objective is to identify stocks that are selling at a discount to intrinsic value and exhibit above-median near-term relative earnings strength. We favor companies with leading franchises, proven management teams, strong finances, and attractive long-term secular growth characteristics. Through our stock selection criteria we seek to manage risk through portfolio construction and a strict sell discipline.

Process

The Mid Cap Growth process focuses primarily on companies between $2.5 billion and $10 billion in market capitalization. We employ the same bottom-up, fundamentally driven investment discipline as the Firm’s Large Cap Growth process. The primary difference in these two strategies, other than market capitalization and benchmark, is the number of target holdings (45 to 65) due to the lower liquidity in the mid cap universe.

 

 

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Sector Weights

Sepember 30, 2017

Portfolio sector weights are of the Montag & Caldwell Mid Cap Growth Representative Account.  Please see the disclosures presentation at the bottom of this page for important information that is pertinent to this chart.  Source: FactSet

Vehicles

Separate Accounts

The Mid Cap Growth strategy is offered through separate account mandates which we introduced in April 2007. This product leverages our firm’s investment process and discipline in the mid cap area.  The Mid Cap Growth strategy is a logical extension of our large cap strategy and expands our research level to companies with approximately $2 billion in market capitalization.  Many of these names are currently being covered for our Large Cap Growth strategy and therefore this work does not compromise the integrity of that strategy in any way.

Mutual Fund

The AMG Managers Montag & Caldwell Mid Cap Growth Fund was launched on November 1, 2007. The Fund offers Montag & Caldwell’s philosophy and investment process to the general public.  Primarily marketed through institutional networks, the AMG Managers Montag & Caldwell Mid Cap Growth Fund is utilized by investors as a way to access a daily valued product of our management services for accounts that are below our minimum individually managed account size of $1 million. The AMG Managers Montag & Caldwell Mid Cap Growth Fund offers investors the same mid cap, high quality growth investment process that has been applied to our individually managed accounts.

AMG Managers Montag & Caldwell Mid Cap Growth Fund Link

Performance

M&C’s high quality growth investment strategy enables its portfolios to participate fully in those market conditions that favor growth-oriented investment styles that are based upon earnings growth, not pure momentum regardless of valuation or earnings levels.  Typically, these are periods of low to moderate economic growth and low or declining interest rates.  In stable economic environments, the long-term consistent growth-rate of the Firm’s type of companies is in favor with most investors, and helps to drive the higher valuations of these companies relative to more cyclically oriented companies.  In low interest rate environments, investors are willing to pay more for high-quality and consistent earnings streams.

One of the hallmarks of M&C’s Mid Cap Growth investment process is that it does not often stay out of favor for long periods.  The Firm’s attention to the valuations of the growth companies it buys allows it to find good opportunities even when the growth style of investing may be out of favor.

Our investment process also tends to experience less downside risk relative to peer processes, and it would not be unusual for our product to outperform in a down market.  Our use of a stock-specific, risk-adjusted discount rate, which is a unique component of our valuation work, combined with our use of conservative growth assumptions in our quantitative valuation process have contributed to reducing risk in our portfolios while allowing us to maximize upside potential.  Our stock-specific, risk-adjusted discount rate is determined by our proprietary financial scoring process which rewards high quality companies, and also advantages companies with historically predictable earnings.

The most difficult environment for M&C’s approach is one of speculative excess driven purely by price momentum and disconnected from fundamentals.

Quarterly Returns

Composite performance is annualized for periods greater than 1 year.  Returns as of September 30, 2017.  Source: Axys

Please see the disclosures presentation at the bottom of this page for important information that is pertinent to this table.

 3Q17Year to Date1 Year2 Years3 Years4 Years5 Years6 Years7 Years8 Years9 Years10 YearsSince Inception 4/30/07
Mid Cap Growth Composite Gross of Fees3.7214.1615.0410.949.899.4211.5713.7312.513.3710.597.327.86
Mid Cap Growth Composite Net of Fees3.5413.6414.3710.329.298.8210.9513.111.8812.769.986.757.32
Russell Midcap Growth5.2917.2917.8314.499.9711.0714.1916.1813.8514.3912.658.218.31
S&P Midcap 4003.239.4117.5316.4211.1811.3414.4316.6713.9214.412.0498.81

Monthly Returns

Composite performance is annualized for periods greater than 1 year.  Returns as of September 30, 2017.  Source: Axys

Please see the disclosures presentation at the bottom of this page for important information that is pertinent to this table.

 9/30/2017YTD*1 Year*2 Years**3 Years**4 Years**5 Years**6 Years**7 Years**8 Years**9 Years**10 Years**Since Inception 4/30/07**
Mid Cap Growth Composite Gross of Fees2.4114.1615.0410.949.899.4211.5713.7312.513.3710.597.327.86
Mid Cap Growth Composite Net of Fees2.3513.6414.3710.329.298.8210.9513.111.8812.769.986.757.32
Russell Midcap Growth2.8317.2917.8314.499.9711.0714.1916.1813.8514.3912.658.218.31
S&P Midcap 4003.929.4117.5316.4211.1811.3414.4316.6713.9214.412.0498.81

Calendar Year Returns

Understanding our style through relative performance is important, and is easily shown on a calendar year basis.  As we discussed above, our clients do well in growth-oriented markets driven by earnings, rather than momentum regardless of valuation.  Our clients also tend to do better in down markets, often as a result of a growth at any price environment coming to an end, resulting in volatility as the market re-prices risk commensurate with valuation.

Please see the disclosures presentation at the bottom of this page for important information that is pertinent to this table.  Source: Axys

YearMid Cap Growth Composite Gross of FeesMid Cap Growth Composite Net of FeesRussell Midcap Growth IndexS&P MidCap 400
20164.363.87.3420.74
20152.922.37-0.2-2.18
20149.028.4311.929.77
201328.4527.7335.7633.49
201211.8911.2615.817.89
20114.193.64-1.66-1.73
201028.9428.326.3926.64
200938.7938.0546.337.4
2008-44.73-44.98-44.32-36.23
Partial 200711.0911.042.68-0.95

Risk

Our use of a stock-specific, risk-adjusted discount rate, which is unique, and conservative growth assumptions in our quantitative valuation process have contributed to reducing risk in our portfolios while allowing us to maximize upside potential.

The chart shows the standard deviation of the Montag & Caldwell Mid Cap Growth Composite vs. the Russell Midcap Growth Index.  Please see the disclosures presentation at the bottom of this page for important information that is pertinent to this illustration.  Data as of September 30, 2017.  Source: National Consulting Firm

Standard Deviation

 

Portfolio Detail

As of September 30, 2017

Portfolio characteristics and top ten holdings are of the Montag & Caldwell Mid Cap Growth Representative Account.  Please see disclosure presentation at the bottom of this page for important information that is pertinent to these tables.  

Characteristics

Source: FactSet

Number of Holdings42
Weighted Average Market Cap$14,540MM
Price to Earnings-Trailing27.12
Price to Earnings (NTM)21.3
Estimated 3-5 Year EPS Growth14.07%
Active Share88.97%

Top Ten Holdings

Source: Axys

References to specific portfolio securities are not intended as recommendations of those securities and carry no implications about past or future performance.  Information about all recommendations made within the past year is available upon request.

Edwards Lifesciences Corp3.3
Copart Inc.3.2
Laboratory Corp of America Holdings3.1
Ross Stores Inc3.1
JB Hunt Transport Svcs Inc3.1
Dollar Tree Inc.3
WEX Inc3
Blue Buffalo2.9
Newell Rubbermaid Inc2.9
Genpact LTD2.9