The AMG SouthernSun U.S. Equity Fund Rules In The Mid-Cap Blend Category

| About: AMG SouthernSun (SSEIX)

Summary

The AMG SouthernSun U.S Equity Fund is #1 in the MidCap Blend Category with a YTD Return of 12.05%, This YTD Return surpasses its benchmarks greatly.

The fund has an heavy portfolio weight advantage in the industrials sector. These industrial holdings are helping to boost the performance of the fund.

Most of the fund's price multiples are undervalued and the fund has a portfolio weight deficit in the poor-performing financial services and health-care sectors.

The AMG SouthernSun U.S Equity Fund Inst (MUTF:SSEIX) is the top-ranked fund in the Mid-Cap Blend Category with a 12.05% YTD Return. In the meantime, the S&P 500 has an YTD Return of 3.14% while the Mid-Cap Blend Category has an YTD Return of 3.01%.

This marks a remarkable turnaround for a fund who was ranked 92 nd and 88 th in terms of its performance in the Mid-Cap Blend Category.

In terms of market capitalization statistics, one can easily see that the fund differentiates from its benchmark due to the fact that the fund has no portfolio weight in the large-cap category. The fund has slight advantages in the mid-cap and micro-cap sectors.

Market Cap

% of Portfolio

Benchmark

Category Avg.

Giant

0.00

0.00

2.02

Large

0.00

27.15

11.86

Medium

66.48

65.31

55.20

Small

29.43

7.38

30.50

Micro

4.08

0.16

0.42

Click to enlarge

In addition, the fund is poised for further growth as almost every one of its price multiples are undervalued. The AMG SouthernSun U.S Equity Fund Inst's book value has a slight edge over the book value category average. Other than that, the fund's price multiples are undervalued across the board.

Price Multiple

SSEIX Portfolio

Benchmark

Category Avg.

Price/Prospective Earnings*

17.19

19.28

18.25

Price/Book*

2.08

2.25

2.04

Price/Sales*

0.72

1.45

1.04

Price/Cash Flow*

6.50

8.49

6.87

Click to enlarge

It should also be noted that the fund has an advantage in long-term growth %, historical earnings % and sales growth %.

Value and Growth Measure

SSEIX Portfolio

Benchmark

Category Avg.

Long-Term Earnings %

10.95

9.94

10.19

Historical Earnings %

8.16

1.03

-4.06

Sales Growth %

6.00

0.07

-3.41

Click to enlarge

The sector weightings also provide a strong hint into the above-average performance of this fund. The bulk of the fund's weightings is concentrated in the industrial sector. As of today, the Industrial Select Sector SPDR ETF has a 6.8% YTD Return in the U.S Sector Category. In terms of U.S Small-Cap performance, the PowerShares S&P SmallCap Industrials Portfolio ETF (NASDAQ:PSCI) has a 6.4% YTD Return. The industrial sector has been hovering near the middle of the pack in terms of performance among U.S and U.S Small-Cap Sector ETFs.

In the chart below, one can see the fund's enormous advantage in the industrials sector over its benchmarks:

Sector

SSEIX Portfolio

Benchmark

Category Average

Industrials

52.50

15.45

16.30

Click to enlarge

Therefore, it is no surprise that the industrial holdings have boosted this fund's performance tremendously so far in 2016. As you can see below, the fund contains very weighty industrial stocks that have held their own so far this year. Out of 10 industrial stocks listed below, eight stocks have generated an YTD Return. Based on the portfolio weight of these stocks, one can't help but think that the AMG SouthernSun U.S Equity Fund Inst has been dealt a shot in the arm by the industrial sector.

INDUSTRIAL SECTOR HOLDING

PORTFOLIO WEIGHT

YTD RETURN

Darling Ingredients Inc. (NYSE:DAR)

6.14%

40.40%

The ADT Corp (NYSE:ADT)

6.00%

27.96%

Clean Harbors Inc. (NYSE:CLH)

5.60%

25.33%

Chicago Bridge & Iron Co NV (NYSE:CBI)

4.98%

-6.82%

IDEX Corp (NYSE:IEX)

4.89%

12.60%

Flowserve Corp (NYSE:FLS)

4.62%

18.56%

AGCO Corp (NYSE:AGCO)

4.61%

14.83%

The Timken Co (NYSE:TKR)

4.46%

15.95%

Broadridge Financial Solutions Inc. (NYSE:BR)

4.20%

20.66%

Trinity Industries Inc. (NYSE:TRN)

3.51%

-20.07%

Click to enlarge

In addition, the AMG SouthernSun U.S Equity Fund benefits from a lack of exposure to the financial services and health-care sectors. The Financial Select Sector SPDR ETF (NYSEARCA:XLF) is the worst-performing U.S sector ETF with a total YTD Return of -3.1%. The Health Care Select Sect SPDR ETF (NYSEARCA:XLV) is the second worst U.S Sector ETF performer with a total YTD Return of -1.4%.

In terms of U.S Small-Cap sector ETFS, the PowerShares S&P SmallCap Financials Portfolio ETF (NASDAQ:PSCF) is the third worst performer with a 4.2% return while the PowerShares S&P SmallCap Health Care Portfolio is the worst performer with a -3.5% YTD Return.

The fund's portfolio weight deficit in the health-care and financial services sector can be seen below:

Sector

SSEIX Portfolio

Benchmark

Category Average

Financial Services

5.62

11.98

14.58

Healthcare

5.25

8.89

9.49

Click to enlarge

As of their latest prospectus on 02/02/16, the AMG SouthernSun U.S Equity Fund's expense ratio of 0.97%, the fund's expense ratio can be considered average. It is a little more expensive than the fee group comparison median, but not as expensive as the Morningstar category average.

CONCLUSION

I feel that the AMG SouthernSun U.S Equity Fund is definitely worth the investment at this time. The fund has been justified in its strong weighting within the industrials sector. This weighting has translated into a strong performance that has surpassed all funds in its category so far.

In addition, the fund benefits from being undervalued in almost all of its price multiples. Thus, this signifies that the fund has more room for growth ahead.

Additionally, the fund benefits from its lack of exposure to the poor-performing financial services and health-care sector. The proverbial cherry on top is that the fund's expense ratio is readily affordable.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.