Hotchkis & Wiley Mid-Cap Value Fund Q1 2025: Insights and Analysis
The latest investor letter from Hotchkis & Wiley reveals some intriguing insights into their Mid-Cap Value Fund as it navigates a challenging financial landscape. In Q1 2025, the fund experienced a return of -5.63%, lagging behind the Russell Midcap Value Index, which posted a -2.11% return. This downturn can be attributed to various macroeconomic pressures, including tariffs, high inflation, and overall weak growth indicators, which saw the Russell Midcap Index decline by -3.4%. Meanwhile, the Russell Midcap Growth Index fared even worse, plummeting by -7.1%.
Mid-Cap Stocks Post-Election Surge
Following the recent Presidential elections, U.S. mid-cap stocks were buoyed by expectations of deregulation and lower corporate taxes, which usually stimulate growth. However, the optimism quickly dimmed as economic realities set in. Investors saw a retreat from the initial rally, exacerbated by rising inflation levels that shook the confidence in economic recovery.
Spotlight on CVS Health Corporation (NYSE:CVS)
Among the key players highlighted by Hotchkis & Wiley is CVS Health Corporation (NYSE:CVS), a diversified health solutions provider. The fund reports a one-month return of -4.05% for CVS, with its shares climbing 8.94% over the past year. As of May 16, 2025, CVS’s stock closed at $62.53, contributing to a robust market capitalization of $79.1 billion.
In their Q1 letter, Hotchkis & Wiley presented the following assessment of CVS:
"CVS Health Corporation (NYSE:CVS) operates as a Pharmacy Benefits Manager, health insurer, and retail pharmacy. Following the better-than-expected reimbursement rates for Medicare Advantage plans announced by the Centers for Medicare & Medicaid Services in January, CVS and other significant providers saw a stock price boost. The company maintained positive momentum into February with promising fourth-quarter results, although Aetna, a subsidiary, faced losses that were less severe than anticipated. This overall market reaction was largely favorable despite the challenges."
A Cautious Yet Promising Outlook
CVS Health’s recent performance suggests both resilience and volatility; however, it’s noteworthy that CVS is not among the top 30 most popular stocks held by hedge funds. By the end of Q4, 74 hedge fund portfolios included CVS, up from 63 in Q3, reflecting a growing interest despite broader market uncertainties.
In Q1 2025, CVS reported a revenue of $94.59 billion, representing a solid 7% year-over-year growth. While CVS Health presents an attractive investment opportunity, we at Extreme Investor Network firmly believe that AI stocks are positioned to deliver even higher returns in a shorter time frame. For instance, we’ve uncovered an undervalued AI stock trading at less than five times its earnings that shows massive growth potential.
For those seeking to diversify their portfolios while capitalizing on the AI boom, our in-depth report on this stock is a must-read.
Conclusion
As investors navigate the complexities of current market conditions, focusing on companies like CVS Health is essential. Yet, it is crucial to remain open to emerging sectors, particularly AI, to enhance return potential. Stay tuned with Extreme Investor Network for tailored insights that keep you ahead in your investment journey.