In the fourth calendar quarter of 2015, the KEELEY Mid Cap Dividend Value Fund (KMDVX) rose 1.28 percent compared to a 3.12 percent increase for the Russell Mid Cap 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. Although the Keeley Mid Cap Dividend Value Fund posted a positive absolute return during the quarter, we trailed the benchmark. Despite some positive data points for the consumer, the consumer discretionary sector lagged, barely producing a positive result in the fourth quarter. Our overweight to the consumer discretionary sector had a negative impact, but we fortunately offset that negative with good stock selection and consumer discretionary made a positive contribution overall. The largest detractor during the quarter was our stock selection within financials. Technology, which was the best performing sector during the quarter, was our second largest detractor, where our stock selection had a negative impact. Energy continued to lag and was the only sector in the Russell Mid Cap Value Index to produce a negative return. We benefited from an underweight position, but stock selection caused a net detraction for the quarter.
The Fund’s top performing position was Autoliv Inc. (NYSE:ALV) which climbed over 14 percent and added 25 basis points of return to the Fund during the quarter. The company reported better than expected results. Sales were strong across the board as active safety continues to perform well. The company also looks to gain additional market share in the airbag market given the recent struggles of their main competitor. Continue Reading »