Baird's Chuck Severson Marks 20 Years of Focus on Mid-Cap Stocks
MILWAUKEE--(BUSINESS WIRE)-- This month, Chuck Severson celebrated his 20th anniversary managing mid cap portfolios at Baird Investment Management, the equity asset management group at Robert W. Baird & Co. Over that time, mid cap stocks as measured by the Russell MidCap Index averaged 10.5% growth per year. In comparison, large companies, as measured by Russell 1000 Index, averaged 8.3% growth over the same period. Small cap stocks, as measured by Russell 2000 Index, also averaged 8.3% growth.
Severson recently answered a few questions about why he sees superior opportunity in mid cap:
Institutional investors are often under invested in mid caps - why? Traditionally, pension consultants guided clients to own small and large caps and assumed clients would end up with some mid caps at the top end of small cap portfolios and the low end of large caps. The problem is these investors don't get dedicated mid exposure, especially in the sweet spot of $2-12B. Mid caps represent 30% of the market, but our experience has been that institutional investors average only 10%-15% of portfolios in mid caps.
We believe this is a mistake. Many mid cap companies grow at rates well above GDP growth. Most are profitable and demonstrate rapid earnings growth and margin expansion. Their cash flow can fund new growth, leading to higher quality earnings than you might find in smaller, less mature companies. Also in more difficult times, they are more durable. They don't have to make radical changes to what they do. Post 2008, many of the companies we owned continued to hire management talent, open stores or spend on R&D.
For the full discussion about mid cap investing including some of Severson's favorite stock picks, click here.
Mid-cap companies may be hindered as a result of limited resources or less diverse products or services and have therefore historically been more volatile than the stocks of larger, more established companies.
Past performance is not indicative of future results. The Russell Midcap Index measures the performance of the 800 smallest companies, by market capitalization, in the Russell 1000 Index. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index. The Russell 2000 Index consists of the smallest 2000 companies in the Russell 3000 Index. Indices are unmanaged and are not available for direct investment.
Jody Lowe, 414-322-9311
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