Insights

Commentary - December 2024Greenspring Mid Cap Fund

The Portfolio Managers discuss the Fund’s performance in 2024, their “investing for the long term” mentality, an investment case for a newer holding, and a look ahead for mid-cap investors.

How did the Fund perform in 2024?

The Cromwell Greenspring Mid Cap Fund ended 2024 with a total return of 16.08%, outperforming the Russell Midcap Index, which posted a 15.34% gain.

We remain focused on providing shareholders with attractive longterm, risk-adjusted returns. Over the past three years, the Fund’s equity investments generated an annualized total return of approximately 6.8%, exceeding the 3.8% annualized return of the Russell Midcap Index. This outperformance was achieved while subjecting shareholders to less volatility, evidenced by a 17% lower standard deviation.

We attribute these results to our disciplined approach to investing in well-capitalized businesses that have produced significant free cash flow and are led by strong management teams capable of effectively deploying capital to create long-term shareholder value.

Average Annual Total Returns (%)¹

(As of 12/31/24)

	QTD	YTD	1 YR	3 YR	5 YR	10 YR
Fund	1.95	16.08	16.08	5.88	9.33	7.51
Russell Midcap Index	0.62	15.34	15.34	3.79	9.92	9.63
Blended Benchmark²	-0.72	11.08	11.08	5.11	6.97	6.76

Expense Ratio: 1.16%

¹The Fund reorganized into the Cromwell Greenspring Mid Cap Fund on 8/11/23. Prior to the close of business on 8/11/23, the Fund was managed as a mixed-asset fund investing in both equities and fixed income securities and had income as a secondary investment objective of obtaining income. From 12/31/20 to 8/11/23, the Fund held between 11% and 20% in fixed income securities; from 5/31/14 to 12/31/20, the Fund held between 22% and 48% in fixed income securities.

²Prior to the reorganization, the Fund’s benchmark consisted of a weighted average comprised of 60% Russell 3000 Value Index, 30% ICE BAML 1-3yr BB Cash Pay High Yield Index, and 10% ICE BAML 3-month T-Bill Index (rebalanced monthly).

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the 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. For performance information through the most recent month end please call 855.625.7333 or visit thecromwellfunds.com.

Most of the Fund’s positions have been held in the portfolio for more than a year. Would you please discuss how this reflects your investment philosophy and conviction?

We strive to identify and invest in high-quality businesses that generate substantial free cash flow and trade at attractive prices. In the hands of a skilled management team, this excess capital may be used to compound shareholder value over a long period of time.

As patient investors, we focus on company-specific or secular tailwinds that can fuel the creation of shareholder value over an extended period of time. While catalysts often take time to play out, as long as our original investment thesis remains intact, we are willing to absorb, and use, short-term market volatility as an opportunity when appropriate.

New holdings typically start as relatively small positions and grow as our conviction strengthens. This disciplined approach results in relatively low turnover in the Fund’s portfolio.

Would you please provide an example of a new holding?

One of the Fund’s largest purchases in 2024 included initiating a position in Teleflex, Inc.

Teleflex designs, develops, manufactures, and supplies single-use medical devices used by healthcare providers in diagnostic, therapeutic, critical care, and surgical procedures. Its share price came under pressure during 2024 due to what we believe are temporary challenges. We took advantage of the price decline to purchase shares at a discount to their typical valuation.

As the company addresses these challenges, we believe growth will likely reaccelerate and cause the share price to recover. Supported by a strong balance sheet and high free cash flow generation, Teleflex’s experienced and highly regarded management team has multiple avenues to enhance shareholder value, including share repurchases and strategic acquisitions.

As you look ahead, what should mid-cap investors consider?

As 2024 came to a close, mid-cap stocks appeared attractively valued, especially compared to large-cap stocks. At year-end, the Russell Midcap Index traded at a price-to-forward 12 months earnings ratio nearly 20% lower than the S&P 500—one of the largest valuation disparities in over 20 years!

While the timing is uncertain, we expect this gap to narrow as mid-cap companies continue to deliver earnings growth. Additionally, investors may increasingly turn to mid-cap stocks for diversification as the S&P 500 has become highly concentrated, with the top seven holdings accounting for over one-third of the index’s value.

Equity markets are likely to remain sensitive to economic growth, inflation trends and interest rate fluctuations. In recent months, market volatility has increased as investors reassess the pace of the Federal Reserve’s easing cycle and consider the potential implications of the new administration’s policy priorities. While mindful of myriad macroeconomic flashpoints, we remain focused on company-specific fundamentals that we believe can drive strong, risk-adjusted returns in diverse market conditions.

Our emphasis on domestically oriented companies with strong management teams, solid balance sheets, and robust free cash flow generation gives us confidence that our portfolio holdings are well situated to adapt, as needed, to political and monetary shifts.

Importantly, we will continue to use periods of market volatility to refine and upgrade the portfolio, striving to maximize the potential for attractive long-term performance while maintaining a lower risk profile.