A Shift To Value

A Shift to Value?

Moody, Aldrich & Sullivan LLC
100 Cummings Center, Suite 104Q
Beverly, MA 01915

August 31st, 2000

A Shift to Value?

What a difference six months makes! Since releasing our report "Does Value Matter?", we have been fortunate enough to reap the benefits of a focus on intrinsic value in a market that suddenly began to recognize intrinsic value. The Russell MidCap Value Index is one of the clear leaders in the market, up nearly 8% YTD, and our portfolios are significantly outperforming the index. More importantly, the majority of our performance has come through superior stock selection.

With the significant changes in the markets, we felt it was important to review and update our analysis -- hopefully you will find this second iteration equally valuable. And while in large part, the analysis reflects a view of the world similar to that in March, there have been some significant changes worth highlighting.

First, the good news. We are thrilled to see that "Value" has begun to outperform "Growth" as an investment style. Of more relevance however, is that the "intrinsic value" opportunities in Mid Cap Value and Small Cap Value have significantly outperformed Large Cap Value as we believe they should:

We continue to believe that these trends will continue; however, we now believe that the markets are not as extreme as they were in March. Strong free cash flow growth in value indices, a stabilization of interest rates and price corrections in Large Cap Growth and Small Cap Growth have improved the investment environment for all sectors:

We continue to believe that the best opportunities lie in Mid Cap and Small Cap Value, but are encouraged by an environment that we feel is ...
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