Madison Mid Cap Fund Q1 2025 Investment Strategy Letter: Portfolio Decreased 4.15%

Madison Mid Cap Fund reported a 4.15% decrease in Q1 2025, compared to the Russell Midcap Index's 3.40% decrease. Top contributors for the quarter were Brown & Brown, Sysco, National Retail Properties, Enterprise Products Partners, and Genco Shipping & Trading.

The Madison Mid Cap Fund (class I) reported a 4.15% decrease in the first quarter of 2025, compared to the 3.40% decrease in the Russell Midcap Index. This performance was driven by a mix of positive and negative contributors within the portfolio. The top five contributors for the quarter were Brown & Brown, Sysco, National Retail Properties, Enterprise Products Partners, and Genco Shipping & Trading. Conversely, the bottom five detractors were Ross Stores, Gartner, MKS Instruments, Arista Networks, and Thor Industries.

Brown & Brown (BRO) continued to benefit from strong organic growth and margin expansion, as highlighted in the company's recent earnings report. The insurer reported a 17.81% return on equity and a 20.68% net margin during the quarter. Additionally, the company's revenue increased by 11.6% compared to the same quarter last year, despite missing analysts' consensus estimates for earnings per share (EPS) by $0.01 [1].

Sysco, a foodservice distributor, also contributed positively to the fund's performance. The company reported strong sales growth and improved profitability during the quarter. National Retail Properties, which owns and leases retail properties, saw an increase in occupancy rates and rental income. Enterprise Products Partners, an energy infrastructure company, benefited from higher crude oil prices and increased demand for its services. Genco Shipping & Trading, a shipping company, saw improved earnings due to higher freight rates and better vessel utilization.

On the other hand, Ross Stores underperformed due to concerns about a slowdown in discretionary spending among its customer base. Gartner, a technology research and consulting firm, faced headwinds from potential subscription cancellations by the US Federal government. MKS Instruments, which sells instruments and systems to semiconductor and electronics manufacturers, continues to struggle with weak end market demand. Arista Networks, a networking equipment manufacturer, was affected by the technology sell-off during the quarter. Thor Industries, which manufactures recreational vehicles, faced challenges due to affordability issues in the RV market.

The Madison Mid Cap Fund added two new investments in the quarter: Kinsale Capital Group and Trex. Kinsale is an excess and surplus (E&S) insurance company known for its proprietary technology systems and strong underwriting performance. Trex, a manufacturer of composite decking and railing products, was added due to its growth potential in the home improvement market.

In summary, the Madison Mid Cap Fund's performance in Q1 2025 was driven by a mix of positive and negative contributors. Brown & Brown, Sysco, National Retail Properties, Enterprise Products Partners, and Genco Shipping & Trading were the top contributors, while Ross Stores, Gartner, MKS Instruments, Arista Networks, and Thor Industries were the bottom detractors. The fund's performance was also influenced by the addition of two new investments: Kinsale Capital Group and Trex.

References:
[1] https://www.marketbeat.com/instant-alerts/filing-universal-beteiligungs-und-servicegesellschaft-mbh-buys-shares-of-169825-brown-brown-inc-nysebro-2025-05-30/