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Mid Cap Value

Strategy Overview

River Road’s Mid Cap Value Strategy utilizes a fundamentally driven research process to identify attractive purchase candidates from a universe of mid cap stocks. The stock selection process is complemented by a risk averse approach that employs both balanced diversification and a structured sell discipline.


The Mid Cap Value Strategy targets all U.S.-listed securities with market caps between $2 B and $35 B, at the time of initial purchase.

Investment Objective

The Mid Cap Value Strategy seeks to outperform the Russell Midcap Value by 200 to 400 bps gross of fees over a market cycle.

Investment Process

The investment process proceeds through four stages:

I. Idea Generation

River Road employs two research methodologies – Systematic and Dynamic.

Systematic Research: Screening of the firm’s principal databases.

  • Our Watch List (including former portfolio holdings)
  • Quantitative screening through FactSet (proprietary stock screens): Identifies stocks that best exhibit the Strategies’ critical criteria
  • Other research

Dynamic Research: An active search for attractive candidates among a myriad of sources, including:

  • Investment media
  • Industry research
  • Competitor analysis
  • SEC filings (10-K/Qs, 8-Ks, proxy statements, insider trading (Form 4 filings), share repurchases/dividend increases, etc.)
  • Various other contacts and resources established by the portfolio management team

II. Security Analysis

River Road builds portfolios in house, from the bottom up, making security-specific research central to our process. At the core of River Road’s Absolute Value® approach is a systematic method for assessing the ‘risk-to-reward’ characteristics of an investment. The goal of the research process is to formulate two outputs from which an investment decision is made – conviction rating (risk) and discount to value (reward). A stock’s conviction rating combined with its discount to value determine not only whether the stock qualifies for investment, but also how the stock will be sized within a portfolio.

Conviction Rating

The conviction assessment ranks each of the critical criteria, listed below, on a scale of 1 (highest/best) to 5 (lowest/worst), which are then aggregated into an overall conviction rating.

  • Valuation: Confidence in forecast assumptions
  • Attractive business model: Understandable, predictable, and sustainable; high returns on equity and invested capital; and reasonable growth prospects
  • Shareholder orientation: Significant insider ownership/insider buying; opportunistic stock buybacks; accretive transactions; debt reduction; and dividend raises/initiations
  • Financial strength: Liquidity and leverage; hidden assets; and free cash flow yield
  • Environmental, social, and governance (ESG): Practices; policies; and disclosure

Discount to Value

A stock’s discount to its assessed valuation is a proprietary measure that represents the expected upside or available reward within the valuation time horizon of a stock based on our fundamental approach to security valuation.

III. Portfolio Construction

The Portfolio targets 40 to 50 holdings. (The target number of portfolio holdings is a working guideline. The actual number may vary depending on market conditions and other factors.) The stocks purchased are those we believe best meet our selection criteria, offer the greatest potential for appreciation, and provide appropriate portfolio diversification.

The Strategy employs a proprietary sizing model which considers the security’s discount to value, overall conviction, and breadth of value in the Portfolio’s investment universe.

IV. Sell Discipline

We believe that the key difference between a losing strategy and a winning strategy is that losers make big mistakes and winners make small mistakes.

  • Our sell discipline is designed to help keep the inevitable individual mistakes from causing large, permanent losses of capital in the broader portfolio.
  • We do not average down on losing positions.


Mid Cap Value Inception Date: January 1, 2021