In the fourth calendar quarter of 2015, the KEELEY Small Cap Dividend Value Fund (KSDVX) rose 2.87 percent compared to a 2.88 percent increase for the Russell 2000 Value Index. After a challenging third quarter, equity markets rebounded to post positive gains in the fourth quarter. However, many of the factors that weighed on markets throughout 2015 remain, and will most likely play a key role in 2016. The volatility in energy prices continued, and the situation may become even more volatile as companies succumb to the pressure of sustained low energy prices. China’s slowing growth is also having a spillover effect on the global economy and has placed additional pressure on the beleaguered energy sector. The decision by the Federal Reserve to finally end their run of monetary excess was welcomed by the markets, and we hope the decision will allow investors to finally place greater focus on company fundamentals going forward. One bright spot in recent years has been the U.S. consumer. Many factors point to continued momentum from the consumer, as employment growth, strength in housing, improving balance sheets, and an uptick in consumer confidence were all positive elements in the fourth quarter. The Small Cap Dividend Value produced results that were basically in-line with the Index during the quarter. Despite some positive data points for the consumer, the consumer discretionary sector was one of only two sectors that produced a negative return during the quarter. The sluggish energy sector was once again the worst performer. Technology, a leader in recent years, rebounded nicely in the fourth quarter and was the best performing sector in the index. The industrial sector had the best impact on our results during the quarter, where both sector allocation and stock selection made a positive impact. Despite an underweight to health care, which was the second best performing sector in the index, strong stock selection allowed that sector to make a positive contribution to our results. The consumer discretionary sector proved to be one of the few detractors, as both an overweight and stock selection detracted during the quarter.
The Fund's top performing position was National Storage Affiliates Trust (NYSE:NSA) which climbed over 26 percent and added 47 basis points to our results. The company reported better than expected earnings on higher revenue driven by new properties and strong operating performance. Same-store net operating income (SSNOI) grew low double digits during the quarter surpassing peer results. Occupancy improved but the company has work to do there as they still lag peers in this metric. As a result of these strong numbers the company raised full year guidance which also had a positive impact on the share price during the quarter. Continue Reading »