Mid-Cap Equity


Inception: April 1, 1999

Investment Philosophy

Incepted in 1999, the Mid-Cap Equity Strategy utilizes a disciplined, fundamental bottom-up, valuation-based process to select companies that are inefficiently priced relative to the earnings growth outlook over the next three to five years. We have a preference for companies with products or services that make their customers more efficient or profitable, and are critical to their success. We look for a compelling business model, experienced management, financial strength and attractive valuation.

Investment Process

The investment process includes in-depth internal research, enabling us to identify financially sound companies that offer solid growth prospects, while selling below what we believe is their intrinsic value. Ideas are generated from a variety of sources including SEC filings, industry publications, conferences, sell side research, screens, talking to industry leaders, user experience and competitors of existing holdings. The portfolio managers investable universe includes primarily U.S. companies with market capitalizations similar to the U.S. mid-cap indices.

We use a combination of quantitative screens and qualitative fundamental research to narrow the initial universe of approximately 1,100 securities to the 40-50 securities held in the portfolio. We screen on the following quantitative criteria: top line growth, Price/Earnings, Price/Revenue, Price/Cash Flow and low leverage; all relative to the company’s own history, competitors and the market.

In addition to quantitative measures, we look for companies with the following characteristics:

  • Industry leaders in focused businesses with the ability to grow market share
  • Proven, effective management

An integral part of our investment analysis is interaction with management teams. Meetings and conference calls with management typically focus on issues related to the business outlook, market share/competitive positioning, and company strategy.

The Mid-Cap Advantage

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as of September 30, 2020

Top Ten Holdings*

  1. Mattel
  2. Tegna
  3. Corning
  4. Molson Coors Beverage
  5. Juniper Networks
  6. Agilent Technologies
  7. Lions Gate Entertainment Cl A
  8. National Instruments
  9. Northern Trust
  10. Varian Medical Systems

Portfolio Construction

Additional portfolio characteristics include:

  • Concentrated portfolio of 40-50 stocks
  • 30% maximum sector weight
  • 6% maximum position per holding


Thyra E. Zerhusen
CEO & Chief Investment Officer

  • Swiss Federal Institute of Technology, MS
  • University of Illinois, MA in Economics

44 years industry experience

Frances E. Tuite, CFA
Portfolio Manager

  • University of Cincinnati, BBA
  • Miami University, MBA

38 years industry experience

Brian M. Washkowiak, CFA
Portfolio Manager

  • Illinois State University, BA

26 years industry experience


Returns (%) as of 09/30/2020 3Q2020 1YR 3YR 5YR 10YR SI
Fairpointe Mid-Cap* 5.64 -7.99 -4.44 3.94 7.38 9.90
S&P 400 MidCap Index 4.77 -2.16 2.90 8.11 10.49 9.38
S&P 500 Index 8.93 15.15 12.28 14.15 13.74 6.59
S&P 600 Index 3.17 -8.29 -0.33 7.20 10.57 9.32

*Net of Fees


Mid-Cap Equity – 3Q 2020 Review

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as of September 30, 2020

Holdings By Sector*

Sectors % of
% of
S&P 400
Communication Services 16.5 1.7
Consumer Discretionary 17.0 16.0
Consumer Staples 8.0 4.0
Energy 0.0 1.2
Financials 10.6 13.7
Health Care 12.6 11.2
Industrials 14.9 17.5
Information Technology 20.4 15.8
Materials 0.0 5.9
Real Estate 0.0 9.3
Utilities 0.0 3.8


  • 2021 Calendar P/E  17.1
  • P/Revenue (forward 1-year)  1.1
  • Long Term Debt/Capitalization  33%
  • Return on Equity – 5-year Average  13%
  • Long-Term Earnings Growth Rate (5-years) 9%
  • P/E to Long-Term Earnings Growth Rate  1.8
  • Average Mkt Cap ($mil)  $10,890
  • Dividend Yield  1.3%
  • Turnover (3-year annualized)  21.4%
  • Beta (5-year)  1.14


* The above information is based on a representative account.

The Mid-Cap Composite contains fully discretionary equity accounts that follow the mid-cap style. The Mid-Cap Composite represents portfolios that seek long-term total return through capital appreciation by investing primarily in mid-cap stocks. For comparison purposes the composite is measured against the S&P MidCap 400 and Russell MidCap indices. The S&P MidCap 400 is a market value weighed total return index that represents the performance of the medium-capitalization sector of the U.S. Securities market. The Russell MidCap is a market value weighed total return index that represents the mid-cap segment which measures the performance of the 800 smallest companies in the Russell 1000 index. Both indices are representative of the types of equity assets invested by Fairpointe Capital. Market indices are unmanaged and do not reflect the deduction of fees. You cannot invest in an Index and the performance of the index does not represent the performance of any specific investment. The minimum account size for this composite is $2.5 million. Prior to May 1, 2011 the account minimum was $5 million. Effective March 31, 2013, the account minimum has gone back to $5 million. The Mid-Cap composite was created January 1, 2005. Performance presented prior to May 1, 2011 occurred while the Portfolio Management Team was affiliated with prior firms and the Team was solely responsible for selecting the securities to buy and sell.

Fairpointe Capital is an independent registered investment adviser.

The firm maintains compliant presentations and a complete list of composite descriptions which are both available upon request. Please send inquiries to or call 312-477-3300.

Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Past performance is not indicative of future results. Market, economic, company, and industry specific conditions are considered during the investment selection process. This was a period of generally rising security prices.

The U.S. Dollar is the currency used to express performance. Returns are presented net of management fees and include the reinvestment of all dividends, capital gains, and other earnings. Net of fee performance is calculated using actual fees.

Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request