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Market Overview
US equities surged for the third consecutive quarter as the S&P 500 Index (SP500, SPX) registered a series of record highs. Annualized first-quarter GDP growth was revised lower to 1.4%, down from a blistering 3.4% pace in the fourth quarter, and economic data released during the quarter suggested that the economy continued to gradually moderate. The US Federal Reserve’s (Fed) preferred inflation gauge-the core Personal Consumption Expenditures Price Index-dipped to 2.60% year-over-year in May after remaining stuck in a narrow range of 2.80%-2.90% over the previous five months. The Fed’s median projection showed that policymakers expect only one 25 basis-point reduction in interest rates in 2024, down from three cuts projected in March, although a majority of economists forecast two cuts this year.
The S&P MidCap 400 Index returned -3.45% for the period. Within the Index, seven out of 11 sectors declined over the period. Materials and consumer discretionary were the bottom- performing sectors, while utilities and communication services were the top-performing sectors over the quarter.
Performance Summary
The Hartford MidCap Fund (MUTF:HFMIX, I share) underperformed the S&P Midcap 400 Index for the quarter. Security selection detracted most from relative performance during the quarter. Weak selection in healthcare, information technology, and industrials was partially offset by selection in energy, communication services, and utilities.
Sector allocation, a result of our bottom-up stock selection process, contributed to performance. Allocation effect was driven by our overweight to information technology and underweight to materials, but partially offset by our underweight to real estate.
At the issuer level, the top two relative detractors were our out-of-benchmark positions in Exact Sciences (EXAS) and MongoDB (MDB), while the top two relative contributors were out-of- benchmark positions in Monolithic Power Systems and Fair Isaac.
Positioning & Outlook
Over the past year, the market has been overly focused on short-term trends in fundamentals to determine valuations, rather than the long-term picture. For example, names such as Exact Sciences, a leading cancer screening and diagnostics company, and Apellis (APLS), which offers the leading drug for geographic atrophy, have both sold off on near- term competition concerns. We believe concerns are overdone and not focused on the strength of the existing franchises. While this dynamic is frustrating in the short term, this has also given us the opportunity to own excellent businesses at attractive valuations. We’re excited about the companies we own on your behalf in the portfolio today. As a result, competition for capital in the portfolio has been increasing.
At the end of the period, our largest overweights were to information technology and healthcare. We were most underweight to industrials, real estate, and materials.
|
Top Ten Holdings (%) |
|
|
Datadog, Inc. (DDOG) |
2.79 |
|
CyberArk Software Ltd. (CYBR) |
2.34 |
|
Targa Resources Corp. (TRGP) |
2.34 |
|
DraftKings, Inc. (DKNG) |
2.26 |
|
Monolithic Power Systems, Inc. (MPWR) |
2.25 |
|
PTC, Inc. (PTC) |
2.02 |
|
WEX, Inc. (WEX) |
2.02 |
|
Dexcom, Inc. (DXCM) |
1.98 |
|
NVR, Inc. (NVR) |
1.88 |
|
Veeva Systems, Inc. (VEEV) |
1.82 |
|
Percentage Of Portfolio |
21.70 |
|
Holdings and characteristics are subject to change. Percentages may be rounded. |
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NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE Performance (%)
Morningstar® Category Mid-Cap Growth Lipper Peer Group Mid-Cap Growth Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For more current performance information to the most recent month ended, please visit Home. Share Class Inception: A, Y – 12/31/97; F – 2/28/17; I – 2/27/09; R3, R4, R5 – 5/29/09; R6 – 11/7/14. Performance shown prior to the inception of a class reflects performance and operating expenses of another class(es) (excluding sales charges, if applicable). Had fees and expenses of a class been reflected for the periods prior to the inception of that class, performance would be different. Since inception (SI) performance is from 12/31/97. Performance and expenses for other share classes will vary. Additional information is in the prospectus. Only Class A assesses a sales charge. S&P MidCap 400 Index is an unmanaged index of common stocks of companies chosen by S&P designed to represent price movements in the mid-cap U.S. equity market. Indices are unmanaged and not available for direct investment. 1 Expenses as shown in the Fund’s most recent prospectus. Important Risks: Investing involves risk, including the possible loss of principal. Security prices fluctuate in value depending on general market and economic conditions and the prospects of individual companies. • Mid-cap securities can have greater risks and volatility than large-cap securities. • To the extent the Fund focuses on one or more sectors, the Fund may be subject to increased volatility and risk of loss if adverse developments occur. • Financially material environmental, social and/or governance (‘ESG’) characteristics are one of several factors that may be considered and as a result, the investment process may not work as intended. Investors should carefully consider a fund’s investment objectives, risks, charges and expenses. This and other important information is contained in a fund’s full prospectus and summary prospectus, which can be obtained by visiting Home. Please read it carefully before investing. Mutual funds are distributed by Hartford Funds Distributors, LLC (HFD), Member FINRA. Advisory services are provided by Hartford Funds Management Company, LLC (HFMC). Certain funds are sub-advised by Wellington Management Company LLP. HFMC and Wellington Management are SEC registered investment advisers. HFD and HFMC are not affiliated with any sub-adviser. |
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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