Video - June 24Why Mid-Cap Investing?

Transcript

Click here for performance as of the most recent month's end. 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.

Christian Kansler:

Hi, I'm Christian Kansler, Director of Advisor Sales for the Cromwell Funds. Today, we have Chip Carlson and Mike Goodman, Portfolio Managers from Corbyn Investment Management, Sub-Advisor of our Cromwell Greenspring Mid Cap Fund.

Corbyn is a Baltimore-based Asset Manager founded in 1973 and manages roughly a billion in assets between mutual fund and separate account strategies, with an emphasis on risk-adjusted returns over full market cycles. And I am pleased to say the Fund's equity investments have outperformed the Russell Midcap Index with less volatility over the past three years.

Chip, I'll turn it over to you to discuss your firm and how the team has been able to achieve that very impressive stat.

Chip Carlson:

At Greenspring Funds, we've always been active managers who analyze companies on a bottom-up fundamental basis. Our goal has always been to generate steady, consistent performance for our shareholders looking to provide less volatile performance, particularly during challenging market environments.

In doing so, we look for mid-cap companies that have strong management teams with proven track records of creating shareholder value over a long period of time; mid-cap companies with solid balance sheets and strong financial underpinnings. But most importantly, we look for mid-cap companies that have business models that help them generate ample amounts of free cash flow that can be used to generate value for all shareholders.

Christian Kansler:

Thanks Chip, and Mike, over to you. Now, why do you feel mid-caps are considered to be the sweet spot across all market caps?

Mike Goodman:

We find the mid-cap space is really a home for a lot of really high-quality companies that are available at very attractive prices. And right now, mid-caps are trading at some of their cheapest levels relative to the S&P 500 in over a decade. And with markets becoming increasingly concentrated, mid-caps are becoming a more important component of a diversified portfolio and are increasingly less followed by Wall Street analysts, creating greater inefficiencies for us to take advantage of.

Finally, the mid-cap space is often a fertile ground for merger and acquisition activity. They're often big enough to creatively buy smaller companies and they're also big enough to be interesting acquisition targets for larger companies. It's a place that we have a lot of experience investing in over the years, and we think now, in particular, is an attractive time.

Christian Kansler:

Chip, earlier you mentioned free cash flow. Why is free cash flow so important in your investment process?

Chip Carlson:

Generous amounts of free cash flow allow the management teams of the companies that we're looking at to continue to create value for shareholders because they're operating from a position of strength as opposed to many of their competitors that don't have the same financial wherewithal.

Free cash flow allows companies to do opportunistic acquisitions, to reinvest in their own businesses, to be opportunistic in paying down debt, repurchasing stock, increasing dividends, even during challenging market environments. Put all these attributes together and you get companies that can generate strong shareholder value consistently over time.

Christian Kansler:

Chip and Mike, thank you for the insight into your process and to the advisors tuning in. We hope that you'll consider the Cromwell Greenspring Mid Cap Fund as a part of your clients’ portfolios. If you're interested in discussing the Fund further with me or the investment team featured today, please feel free to contact me directly.

The Fund reorganized into the Cromwell Greenspring Mid Cap Fund on 8/11/23 and was placed in the Mid-Cap Blend category by Morningstar. Prior to that, while Morningstar considered the portfolio’s equity investment style to be Mid-Cap Blend, the Fund also held fixed income securities. 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.