Federated Federated Kaufmann Small Cap Fund

Post on: 12 Июль, 2015 No Comment

Bringing you the opportunity for capital appreciation from small cap growth companies

Why Consider Small Caps Now?

Today’s low interest rate environment is particularly favorable for small companies because it makes it less expensive for them to grow and expand. Currently, the valuation levels of small company stocks appear extremely attractive versus larger caps (Source: Leuthold Group).

Small caps’ earnings growth is expected to outpace that of larger cap stocks over the next 3-5 years. (Source: Merrill Lynch Small Cap Research).

Historically, small cap stocks tend to outperform larger stocks during the early stages of a recovery (Source: CRSP, University of Chicago; Prudential Securities).

What Type of Investor Should Consider This Fund?

A small cap growth fund may make sense for you if you are:

Seeking an investment that strives to appreciate over time

Willing to accept higher risk for higher return potential

Looking to diversify a portfolio of value stocks, large cap stocks or bonds using small cap growth stocks

Investing for a financial goal that may be at least five years away

Small stocks’ prices have tended to be more volatile than those of large stocks and have been more sensitive to changes in economic conditions.

The Extensive Experience of its Management Team

Federated Kaufmann Small Cap Fund’s management team includes two world-renowned equity fund managers, Lawrence Auriana and Hans Utsch. They have managed money together for more than 26 years and boast more than 70 years of combined Wall Street experience. Co-manager and Vice President Aash Shah has 13 years of investment experience and the eight Kaufmann team analysts average 11 years of experience. Federated’s impressive research and technological capabilities allow the fund’s managers to focus solely on their detailed, bottom-up stock selection process.

How Does the Fund Select its Holdings?

Examines Each Stock Individually

The fund management team uses a hands-on approach. meeting face-to-face with management, industry analysts and competitors. This gives the team unique insights into the company’s strengths, its business model, competitive advantages, and corporate culture.

The stock selection process is called bottom-up because it focuses on specific stocks rather than trying to time the highs and lows of the market or concentrating on certain industries or sectors.

This intensive investment process is particularly important when picking small cap stocks because, unlike large companies, small firms have little, if any analyst coverage. The information gained through individual interviews is often not reflected in raw data and often enables the team to find companies with exceptional growth prospects.

Selection Criteria:

The fund invests in companies that meet the following criteria:

Are profitable and potential leaders in their industry

Have distinct products and services that address substantial markets

Appear to have superior, proven management, solid balance sheets, and sustainable competitive advantages

Have the potential to grow annual earnings by at least 20% for the next three to five years

Stocks that are reasonably priced relative to its apparent value

What Does the Fund Own?

At least 80% of the fund’s portfolio will be invested in small cap companies. Small cap companies are defined as those with market capitalizations similar to companies in the Russell 2000 Index 1 or the Standard & Poor’s 600 SmallCap Index. 2

How Does this Fund Manage Risk?

The fund manages risk three ways:

Sector diversification: Holdings are spread across many industry sectors to reduce the risk of a single sector having a significant negative effect on fund performance.

Stock diversification: The fund will typically hold more than 100 stocks and will not initially invest more than 5% of net assets in any single security.

Disciplined sell strategy: The fund will sell an individual security when a company fails to meet expectations, its fundamentals deteriorate or its prospects are poor.

Low Interest Rates Favor Small Cap Growth Stocks

When interest rates fall, it costs small companies less to borrow for growth and expansion. And lower rates make growth stocks more attractive to institutional investors, who use sophisticated dividend discount models to compare corporate earnings with current interest rates. ( John Waggoner, USA Today, 11/18/02)

Seasoned Equity Managers

While many equity fund managers have only known the tremendous bull market of the late ’90s and the recent bear market, Utsch and Auriana’s 26-year history as a team spans the more tumultuous markets of the mid to late ’80s and early ’90s.

Federated Kaufmann Small Cap Fund is subject to investment risks including possible loss of principal amount invested. For more complete information on this fund, please call your investment professional for a prospectus or visit our Web site at www.federatedinvestors.com. Please read the prospectus carefully before you invest.

Past performance is no guarantee of future results.

Diversification does not assure a profit nor protect against loss.

1 1 Russell 2000 Small Stock Index is an unmanaged capitalization weighted index consisting of 2,000 small capitalization common stocks. Investments cannot be made in an index.

2 S&P 600 SmallCap Index-is an unmanaged capitalization-weighted index representing all major industries in the small range of the U.S. stock market. Investments cannot be made in an index.

For additional information, including definitions of related terms and indexes, see the Financial Glossary and Benchmark Index Glossary .