The small-cap Paradigm Value Fund (PVFAX) returned 11.31% in the first quarter of 2012, trailing the surging Russell 2000 Value by 28 bps. It is typical that our low-beta, low-volatility approach will lag slightly or just barely keep up in such strong up markets.
The fund continues to outperform over the trailing 1, 3, 5, and since-inception periods. To underscore PVFAX’s consistency in different market environments, the fund continues its track record of outperforming the benchmark Russell 2000 Value over every rolling quarterly three-year period since inception (see attached).
Consumer Discretionary was the top-performing sector in the Russell 2000 Value in the quarter, up 17.15%. Paradigm’s holdings in the sector appreciated 19.76%, though we were slightly underweight the sector.
The fund’s positions in the Information Technology sector were the main drivers of performance due to strong stock selection, contributing 129 bps of relative performance.
The Financials sector was the largest stock detractor in the quarter, with the portfolio’s holdings in the sector lagging the benchmark by just under 2%. Cash was actually the largest detractor, with the fund’s 6.59% cash position detracting 69 bps from relative performance in markets that Portfolio Manager Jason Ronovech describes as “vertical.
Despite the strong market and fair valuations on a broad basis, we are still finding attractively valued opportunities. In the first quarter we added to a longtime health care holding when it sold off during the Supreme Court debate. We also acquired two new consumer names.