Artisan Mid Cap Value Fund Q1 2025 Commentary

2025-05-06 02:25:00 ET

Summary

• The Q1 equity market saw a sharp rotation from growth to value stocks, driven by policy uncertainty and the DeepSeek AI model news.
• Our portfolio outperformed the Russell Midcap® Value Index, with strong stock selection in industrials, information technology, and consumer staples sectors.
• Key contributors included Genpact, Baxter International, and Dollar General, while detractors were Bio-Rad Laboratories, nVent Electric, and Polaris.
• We added Permian Resources and exited Marriott International and Dentsply Sirona, focusing on shareholder-oriented management and capitalizing on market volatility.

Investing Environment

The growth stock trade that had propelled US stocks higher from late 2022 came undone in Q1. First was news of DeepSeek ( DEEPSEEK ), the Chinese artificial intelligence model, which sparked a selloff in US tech stocks beginning on January 27. Then came broader weakness in US equities driven by a surge in policy uncertainty created by the new US administration’s policies (tariffs, DOGE, immigration) that created concerns about earnings and economic growth. Stocks rallied after the November election on hopes of a business-friendly administration focused on reducing regulation and lowering taxes. However, the president’s focus on using tariffs to reorder global trade, decrease the US trade deficit, promote US manufacturing and generate revenues has raised alarm bells among economists and investors. Tariffs are ultimately just taxes on consumers and businesses. They raise prices and reduce profit margins. We remember enough from our macroeconomics 101 classes to know that tariffs create deadweight loss—making the pie smaller. Regrettably, the odds of a US recession have increased considerably as business and consumer confidence are being negatively impacted by the uncertainty created by these policies and actions. Without clarity, companies are delaying long-term investments and hiring, which will weigh on near-term growth....

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