Mid Cap Growth Strategy

OVERVIEW

The Baird Mid Cap Growth Strategy invests in U.S. mid-cap companies and is managed with a strong emphasis on risk control and a long-term perspective. The team strongly believes in having a true mid-cap product, with the majority of the portfolio invested in companies between $2B and $15B in market cap. The primary investment goal is to provide consistent, superior-to-market returns at a risk posture less than that of the market (vs. the Russell Midcap Growth Index). The team does this by finding companies for inclusion in the portfolio that have better growth prospects and capital structures than peers.

Portfolio Construction

  • A concentrated portfolio of generally 50–60 stocks
  • A majority of market cap range from $2 billion to $15 billion
  • The average position is 1%–3%, not to exceed 5% 
  • Sector weights 75%–125% relative to the benchmark, generally limited to 30% of portfolio
TEAM

For more information, contact Todd Haschker or the Intermediary Specialist in your region.

COMMENTARY

Q3 2017 Mid Cap Growth Commentary

Market Update

A combination of solid global growth, modest inflation and rising earnings helped propel stock prices higher in the third quarter, even amid a string of significant natural disasters, rising tensions with North Korea, and another three months passing with mostly acrimony to show for out of Washington D.C. The consistency of the market advance is notable as the Russell® Midcap Growth Index, our primary benchmark, has posted positive returns in all nine months of 2017. The favorable returns are a testament to the ability of businesses to navigate challenges and take advantage of the fundamental uptick demonstrated in many large international economies. 

Portfolio Commentary

Clients of the Baird Mid Cap Growth portfolios enjoyed a third quarter in a row of positive returns, but lagged our primary benchmark. Portfolio returns were 3.8% for the quarter, compared with a return of 5.3% for the benchmark. Strength in materials, energy and industrials were offset by challenges in the financial services and technology sectors. Our sector thoughts and a more in depth description of portfolio changes follow. 

A fairly consistent message of improved global economic activity provided a favorable backdrop for equities and most notably, the more cyclical areas of the market. The same was true for the portfolio, as the materials sector drove the largest contribution to relative performance and newer holding. Albemarle, did the heavy lifting. We believe the company is well positioned as an industry-leading specialty chemical provider that finds itself square in the middle of the secular adoption of lithium-ion battery-powered electric vehicles. During the quarter we increased the overall sector weight as we added two names. We started a position in Univar, the second largest third-party specialty chemical distributor in the world. We believe Univar is in the early stages of significantly improving its business model, which should result in significant earnings growth over the next several years. In addition, we re-introduced Acuity Brands after recently meeting with management at headquarters and leaving with a greater appreciation for Acuity's opportunity to expand the business' addressable market, which should help sustain long-term earnings growth. 

Read Full Baird Mid Cap Growth Commentary