Mid Cap Value Fund (DALCX)
Dean Family of Fund's Small Cap Value, Mid Cap Value, and Equity Income Funds are distributed by Unified Financial Securities. All funds are open to investors.
Commentaries are for financial professional use only. Please contact info@chdean.com to obtain the password for the quarterly commentary.
| Dean Mid Cap Value Fund | |
|---|---|
| Ticker | DALCX |
| Benchmark | Russell Midcap Value |
| Morningstar Category | Mid Cap Value |
| Fund Assets (as of 11/30/24) | $188.6 Million |
| Minimum Initial Purchase | $1,000 |
| Minimum IRA Purchase | $250 |
| Gross Expense Ratio | 1.08% |
| Net Expense Ratio | 0.85% |
| Sub-advisor Inception date | 6/30/08 |
| Investment Strategy Change - Mid Cap | 3/31/11 |
| Portfolio Guidelines | |
|---|---|
| Market Capitalization | $3.5 billion to $40 billion |
| Number of Holdings | 40 - 60 Stocks |
| Sector Variance | ± 15% |
| Security Max | 5% @ purchase 7% @ market |
| Typical top 10 concentration | 15% - 35% |
| Cash Exposure | < 5% |
| Foreign Exposure | < 10% |
Why Mid Cap Value Fund
UNDERFOLLOWED
MARKET SEGMENT
Mid Cap stocks ($3.5B – $40B in Mkt. Cap.) are less frequently followed by Wall Street.
ADVANTAGES OVER
LARGE CAP FUND
Large companies are generally slower growing, mature companies with relatively stable businesses. Typically higher earnings and revenue growth than larger companies. Nimble – ability to react to environment quickly (add to workforce, ramp up production, etc.).
ADVANTAGES OVER
SMALL CAP FUND
Typically less financial risk, and range of outcomes typically not as wide. Typically more mature and established business model. Proven management team that has navigated the small cap space.
Our Investment Objective
The Dean Mid Cap Value Fund seeks long-term capital appreciation and, secondarily, dividend income.
Principal Strategies
The Fund primarily invests in mid cap companies with market capitalization similar to companies listed on the Russell Midcap Value Index* at the time of investment. As of March 31, 2023, the market capitalization of companies listed on the Russell Midcap Value Index ranged from $536.7 million to $53.1 billion, and the median was $9.1 billion. The Fund’s portfolio managers utilize a multi-factored valuation method to identify companies that are trading below intrinsic value or that may have been overlooked by the marketplace. The portfolio managers consider such factors as a company’s normal earnings power, its discounted cash flows, as well as various ratios, including the price-to-earning or price-to-book value ratios. The Fund’s portfolio managers evaluate companies using fundamental, bottom-up research. The Fund seeks to preserve capital in down markets and to diversify its portfolio in traditional, as well as relative, value-oriented investments.
The portfolio managers look for stocks of companies that they believe are undervalued at the time of purchase. The managers use a value investment strategy that looks for companies that are temporarily out of favor in the market. The managers attempt to purchase the stocks of these undervalued companies and to hold each stock until it has returned to favor in the market and the price has increased to, or is higher than, a level the managers believe more accurately reflects the fair value of the company.
Companies may be undervalued due to market declines, poor economic conditions, actual or anticipated bad news regarding the issuer or its industry, or because they have been overlooked by the market. To identify these companies, the portfolio managers look for companies with earnings, cash flows and/or assets that are not accurately reflected in the companies market values. The managers may also consider whether the companies securities have a favorable dividend and/or interest-paying history and whether such payments are expected to continue.
The portfolio managers may sell stocks from the Fund’s portfolio if they believe:
• A stock no longer meets their valuation criteria
• A stock’s risk parameters outweigh its return opportunity more attractive alternatives are identified
• Specific events alter a stock’s prospects
Under normal circumstances, the Fund will invest at least 80% of its net assets in equity securities of U.S. and foreign mid cap companies directly, or indirectly, through other investment companies (including exchange-traded funds) that invest primarily in U.S. and foreign mid cap companies. Equity securities in which the Fund and underlying funds may invest include common stocks, securities convertible into common stocks (such as convertible bonds, convertible preferred stocks and warrants), and equity real estate investment trusts (REITs). Equity REITs trade like common stocks and invest directly in real estate, or other readily marketable securities that are issued by companies investing in, or that are secured by, real estate or real estate interests. The Fund may invest in foreign mid cap companies directly or through depository receipts such as American Depository Receipts (ADRs) and Global Depository Receipts (GDRs). Generally, ADRs, in registered form, are denominated in U.S. dollars and are designed for use in the U.S. securities markets, while GDRs, in bearer form, may be denominated in other currencies and are designed for use in multiple foreign securities markets. ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying foreign securities, while GDRs are foreign receipts evidencing a similar arrangement.
The Fund may invest its remaining assets in equity securities of small-cap or large-cap companies, preferred stocks, or derivative instruments such as put and call options and futures contracts, and in fixed income securities, including corporate bonds.
*The Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell Midcap Index is a subset of the Russell 1000® Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Index represents approximately 27% of the total market capitalization of the Russell 1000 companies.
Principal Risks
- Market and Geopolitical Risk. The increasing interconnectivity between global economies and financial markets increases the likelihood that events or conditions in one region or financial market may adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may underperform due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters, climate and climate related events, pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of global events similar to those in recent years, such as terrorist attacks around the world, natural disasters, social and political discord or debt crises and downgrades, among others, may result in market volatility and may have long term effects on both the U.S. and global financial markets. There is a risk that you may lose money by investing in the Fund.
- COVID-19 Risk. The novel coronavirus (COVID-19) global pandemic and the responses taken by many governments resulted in travel restrictions, closed international borders, enhanced health screenings, disruption and delays in healthcare services, prolonged quarantines, cancellations, temporary store closures, social distancing, government ordered curfews and business closures, disruptions to supply chains and consumer activity, shortages, highly volatile financial markets, and negative impacts, in many cases severe negative impacts, on markets worldwide. It is not known how long such impacts, or any future impacts of other significant events described above, will or would last, but there could be a prolonged period of global economic shutdown, which may impact your Fund investments.
- Small and Mid Cap Risks. Securities of companies with small or medium market capitalizations are often more volatile and less liquid than investments in larger companies. Medium and small capitalization companies may face a greater risk of business failure, which could increase the volatility of the Fund’s portfolio.
- Active Management Risk. The portfolio manager’s judgments about the attractiveness, growth prospects and value of a particular asset class or individual security in which the Fund invests may prove to be incorrect and there is no guarantee that individual companies will perform as anticipated.
- Sector Concentration Risk. The Fund may focus its investments in securities of a particular sector. Economic, legislative or regulatory developments may occur that significantly affect the sector. This may cause the Fund’s net asset value to fluctuate more than that of a fund that does not focus in a particular sector.
- REIT Risk. The value of REITs can be negatively impacted by declines in the value of real estate, adverse general and local economic conditions and environmental problems. REITs are also subject to certain other risks related specifically to their structure and focus, such as: (a) dependency upon management’s skills; (b) limited diversification; (c) heavy cash flow dependency; (d) possible default by borrowers; and (e) in many cases, less liquidity and greater price volatility.
- Publicly Traded Master Limited Partnership Risk. Investments in publicly traded MLPs are subject to various risks related to the underlying operating companies controlled by the MLPs, including dependence upon specialized management skills and the risk that the underlying companies may lack or have limited operating histories. The success of the Fund’s investments also will vary depending on the underlying industry represented by the MLP’s portfolio. For example, when the Fund invests in MLPs that invest in oil and gas companies, its return on the investment will be highly dependent on oil and gas prices, which can be highly volatile. Similarly, MLPs that invest in real estate typically are subject to risks similar to those of a REIT. Unlike ownership of common stock of a corporation, the Fund would have limited voting rights and have no ability annually to elect directors in connection with its investment in an MLP.
- MLP Tax Risk. MLPs, typically, do not pay U.S. federal income tax at the partnership level. Instead, each partner is allocated a share of the partnership’s income, gains, losses, deductions and expenses. A change in current tax law or in the underlying business mix of a given MLP could result in an MLP being treated as a corporation for U.S. federal income tax purposes, which would result in the MLP being required to pay U.S. federal income tax on its taxable income. The classification of an MLP as a corporation for U.S. federal income tax purposes would have the effect of reducing the amount of cash available for distribution by the MLP. Thus, if any of the MLPs owned by the Fund were treated as corporations for U.S. federal income tax purposes, it could result in a reduction of the value of your investment in the Fund and lower income, as compared to an MLP that is not taxed as a corporation.
- Fixed Income Securities Risk. If interest rates increase, the value of any fixed income securities held by the Fund may decline. Fixed income securities are also subject to credit risk, which is the risk that the issuer of the security may default on payment of principal or interest.
- U.S. Government Securities Risk. It is possible that the U.S. Government would not provide financial support to its agencies or instrumentalities if it is not required to do so by law. If a U.S. Government agency or instrumentality in which the Fund invests defaults, and the U.S. Government does not stand behind the obligation, the Fund’s share price or yield could fall. Securities of certain U.S. Government sponsored entities, such as Freddie Mac or Fannie Mae, are neither issued nor guaranteed by the U.S. Government.
- Issuer Cybersecurity Risk. Issuers of securities in which the Fund invests, counterparties with which the Fund engages in transactions, exchange and other financial market operators, banks, brokers, dealers and other financial institutions may experience cybersecurity breaches. These breaches may result in harmful disruptions to operations and may negatively impact the financial condition of an issuer or market participant. The Fund and its shareholders could be negatively impacted as a result.
