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**Portfolio Update and Market Insights**
In the third quarter of 2024, our portfolio returned 9.0% (8.8% net), closely tracking the 9.2% return of the Russell Mid Cap Index. We’ll review our performance, discuss key contributors and detractors, and provide insights into the current market environment.
**Performance Review**
Our portfolio’s gross return was 9.0%, with a net return of 8.8%. This performance was in line with the Russell Mid Cap Index, which returned 9.2% during the same period. Year-to-date, our portfolio has returned 22.0% (21.4% net), outperforming the Russell Mid Cap Index’s 14.6% return.
**Top Contributors and Detractors**
Fair Isaac Corporation (FICO) was our largest contributor, with a 31% return during the quarter. Climb Global (CLMB) was our second-largest contributor, with a 59% return. On the other hand, Medpace (MEDP) was our largest detractor, with a 19% decline.
**Market Insights**
We believe that interest rate cuts will continue to support small-cap outperformance. The Fed’s easing cycle, which began in September, is likely to benefit small caps over the next nine months. Additionally, faster earnings growth in 2025 and cheap valuations relative to large caps should drive small-cap outperformance.
**New Positions**
We added Altus Group (OTCPK:ASGTF) to our portfolio during the quarter. Altus is a commercial real estate software and services company with a strong track record of growth. We believe the company’s Analytics business has significant upside potential, driven by its dominant market position, growing demand for data and analytics, and potential for margin expansion.
**Outlook**
We remain optimistic about the market’s prospects, driven by the ongoing easing cycle, faster earnings growth in 2025, and cheap valuations relative to large caps. Our portfolio is well-positioned to benefit from these trends, with a focus on high-quality companies with strong growth potential.
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