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Mid Caps Are Where the Action Is

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You hear most investors talking about the security of large caps or the growth potential of small caps in an inflationary environment, but you rarely hear people gush about mid caps -- and that's great.

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Brian Lazorishak: I think that's right. The downside to diversification is what you just hit on. It is that a big, broad company-let's take United Technologies (NYSE:UTX), for instance-is so diversified that results in any one division don't really move the needle.

Whereas, a smaller industrial company, like one of the names we have in the portfolio, Quanta Services (NYSE:PWR). About 70% of their business is electrical transmission related. That's a very fast-growing area, so that business really drives the needle for Quanta. Whereas, even though United Technologies is so big, I assume they have some exposure in the area, it's not enough to grow at the same rate.

Gregg Early: Are you seeing specific sectors where these mid caps are especially dynamic, or can you find them across the board?

Brian Lazorishak: You can really find them across the board. The Russell Mid Cap Growth is our benchmark for the Chase Mid Cap Growth Fund. Some of the heavier weightings in that index are in consumer discretionary and technology.

We're finding plenty of opportunities in those areas, but we're also finding opportunities in other areas like health care and materials and industrials. Really across the board. Again, it seems to me that within the mid cap space you can always find an attractive area.

Gregg Early: Are any of these companies, are they pure growth plays or do some of them carry some dividends with them as well as sort of total return plays over the long term?

Brian Lazorishak: We have a few stocks with dividends, a couple utilities. We've owned one for a very long time, American Water Works (NYSE:AWK). It has a decent yield, and a few other companies have a yield, but it's not really the focus of what we do.

We're really trying to identify growth first and foremost. We do have a valuation component to what we do, but it's not really related to the dividend yield on the companies.

Gregg Early: Do you hold these companies? What's your time frame on that? Are these trades, or are they more long-term holdings?

Brian Lazorishak: No, we look at them as longer-term holdings-investments rather than trades, if you will. Granted, because of the technical component of our process, we have higher turnover. And I wouldn't necessarily consider us a buy-and-hold investor.

No positions in stocks mentioned.
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