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Insights into mid cap value


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Insights from a Thrivent portfolio manager into this underappreciated segment of the market.

Podcast transcript

Coming up, we find out how being a back-up basketball point guard influences the [portfolio] manager of Thrivent Mid Cap Value Fund.


From Thrivent Asset Management, welcome to Advisor’s Market360™. A podcast for you, the driven financial advisor.

When senior portfolio manager Graham Wong, CFA was in high school, he was the back-up point guard on the basketball team. When he asked his coach what his role was, the coach told him that his job was to push the starters during practice and scrimmages to make the whole team better. It was a role Wong accepted and a philosophy he uses to this day to make his team on Thrivent Mid Cap Value Fund the best it can be.

We will be hearing from Wong in a moment, but first we wanted to let you know that while this episode focuses on Thrivent Mid Cap Value Fund, it has a lot of information about investing in this space. So, stay tuned as Wong offers up a master class in mid-cap value investing.

(Music transition)

We all know that there are a bunch of mid-cap value funds out there. So, what sets Thrivent Mid Cap Value Fund apart from other offerings? Here’s Wong on his team’s core value philosophy:

“We define value as undervalued companies with higher improving economic returns. So, this differs from some other value managers who might be devalued and only buy things that are cheap without caring about the quality of the companies. We are bottom-up stock pickers, and we don't make market calls. So, we strive to outperform, regardless of if the market goes up or down, by rigorously vetting the companies that we own.”

When asked if he and his team adhere to a particular theme, Wong had a somewhat surprising response…

“So, we don't invest based on themes, but if there is one, we like boring. So, we don't know the headline stocks – things like Tesla, crypto – that's not our area of strength. We tend to avoid it. It's crowded. We try to own high quality companies that are neglected or undervalued. So, we look for stocks with an asymmetric reward/risk profile.

“What this means is first we start with the downside. Can we quantify the downside and is it limited? And usually we define that as around less than 20% downside. On the upside, we look for multiple times of that. So, call it three times more upside to get to the asymmetric reward/risk ratio.”

Another tool in his team’s tool box is modeling. First the team comes up with a thesis for a company and then they model it out.

“So, if our thesis is that ‘we believe this will happen based on our research,’ then we model it out. We project, we forecast. ‘In our view what the earnings power or free cash flow power of this company is and what would people pay for that kind of earnings power.’ And the key there is we use our own proprietary research and modeling and we're not relying on consensus or sell side for that.”

(Music transition)

After the pandemic, we saw different market environments in which growth stocks outperformed, and others in which value outperformed. We asked Wong about the conditions that tend to make value stocks look more attractive…

“We believe that it will continue in an environment where there's high inflation and high interest rates. That tends to benefit more of the value sector, such as financials, materials and energy. Financials, with the banks – where when interest rates are high, they make more of a profit margin. Energies and materials are commodity sectors, so they tend to get more revenues when inflation is higher.”

Based on history, growth-versus-value cycles tend to be long – often ten years or more. That leaves a lot of runway for the current cycle. We wanted to know the reasons why the outlook for mid-cap value stocks in particular seems to be so promising.

“The reason for this is the macro environment is more supportive of the value sectors. Between higher inflation, higher interest rates, they benefit more of the value sectors. On the other hand, when interest rates are high, it hurts expensive companies that don't generate a lot of free cash flow. Regarding mid caps, we really like this box. We think mid caps have better risk profile than small caps. Mid caps tend to be more established. In fact, you can find market leaders in many industries that are mid caps, more niche industries.

“As for versus large caps, we also like mid caps because the fishing pond is larger, there are more companies to look for ideas, and then there's also less market efficiency, so more potential for us to outperform picking stocks.”

Of course, there are many things that may drive stock performance, the least of which are macroeconomic factors. We wanted to learn how Wong and his team weigh those factors.

“When it comes to macro, we think of macro factors more from a risk management perspective. We don't try to win by getting the macro picture right. So when we look at macro factors, we're trying to neutralize this and make sure we don't have any unintended bets. As in the portfolio is not constructed because we have a bullish view of the market or a bearish view of the market. What this means is we really try to take all our risk in the stock selection bucket and win by picking stocks.”

(Music transition)

Now that we have covered why value stocks have so much potential in the coming years, we would be remiss if we didn’t look at some of the potential headwinds. Wong explains:

“So, one thing that we really like to ask is how is this cycle different? And this cycle is different from the last 20–30 years because inflation feels sticky this time around and why is that? One, the labor market is tight. The labor force growth is much lower than previous years. There are fewer workers, so that leads to higher wages.

“We have a lot of headwinds from deglobalization, whereas before we had globalization with international trade and loosening of emerging markets. We're moving the other way between China conflict, Russia conflict and China and Russia are both huge suppliers to market, whether it's components or energy or materials. We also have high commodity inflation because of fiscal spending on energy transition, we're spending on renewables, but the price has to be high enough to stimulate the investment. Lastly, China's new focus on improving pollution and standard of living there also means that we're going to have higher inflation.”

We were also interested in learning about the team’s sell strategy.

“Our sell strategy, it's similar to our buy strategy. We analyze valuation, operations and sentiment. Whenever any of the baskets, we become uncomfortable with, we would trim a little bit. So, valuation: as the stock gets expensive, we would trim. Operating: if the company is not tracking the operating fundamentals, we would trim. And then sentiment: when our thesis become more consensus, we would also trim a little bit. Importantly, we also keep thesis on all the stocks we own, and we sell whenever we believe the thesis has been broken.”

(Music transition)

During the years of the pandemic, Thrivent Mid Cap Value Fund found success. We asked Wong why the Fund performed so well during this period, and if he could give us an example of one company selection.

“No one predicted Covid, obviously. But again, back to what we do is we always ask the question, where do we think we are in the cycle?

“At the time, given that we were in the tenth year of a long economic cycle, it just felt like the right thing to be a little bit more defensive and own later cycle names. And we really benefited from that in the sharp correction in March, April of 2020. At the bottom, we were actually able to follow our valuation process and we noticed that a lot of the cyclical companies were trading at excessive discounts. So, we were able to pivot to those companies that we were stocking. And so, we benefited on the way down, pivoted to more cyclical early cycle companies and benefited on the way up.

“We looked at a company called Sysco, the food distributor – you've seen the trucks out delivering food to restaurants. The question we asked ourselves was, ‘How long could restaurants be completely shut and for Sysco to survive and not have liquidity issues?’ And the answer, after the analysis, was two and a half years. Then our decision at the time was, ‘Do we believe Covid is going to lead to restaurants being closed for more than two and a half years?’ We believed that it wouldn't. We own the stock and has been a fantastic winner for us.”

(Music transition)

At the top of the episode, we talked about how Wong’s role as a back-up point guard on his high school basketball team influenced his professional life. Specifically, how he believes in pushing yourself and your teammates to be their best.

“At Thrivent, we have a lot of strong investment people, and I feel like every day we're pushing each other to be better. We have a strong team of analysts. Specifically, for the small- and mid-cap PM teams, we have 15 analysts supporting the different funds. We collaborate closely with the analyst team, from idea generation to the due diligence process. Because we have been collaborating, we don't need the analysts to write 20-page primer reports. We’re on the calls together asking our questions. So, by the time we meet, we would go through our proprietary financial model together and figure out what we're forecasting, what we're valuing the company to be, and the risk/reward ratio of the company. But we're really at the conclusion phase of, ‘So, what do we all believe in after all this work?’”


Thanks to Graham Wong for taking the time to share with us. Listeners, we hope this episode offered you some actionable insights into mid-cap value investing. More episodes of Advisor’s Market360™ are available wherever you listen to podcasts. Email us at with your feedback, questions and topic suggestions for future episodes. And as always, you can learn more about us at and find other insights of interest to you, the driven financial advisor. Bye for now.


All information and representations herein are as of October 26, 2023, unless otherwise noted.

Investing involves risks, including the possible loss of principal. The prospectus and summary prospectus contain more complete information on the investment objectives, risks, charges and expenses of the fund, and other information, which investors should read and consider carefully before investing. Prospectuses are available at

There are risks associated with the Fund. Medium-sized companies often have greater price volatility, lower trading volume, and less liquidity than larger, more established companies. The Fund’s value is influenced by a number of factors, including the performance of the broader market, and risks specific to the Fund’s asset classes, investment styles, and issuers. The Adviser's assessment of investments may prove incorrect, resulting in losses or poor performance. Securities markets generally tend to move in cycles with periods when security prices rise and periods when security prices decline. These and other risks are described in the prospectus.

Past performance is not necessarily indicative of future results.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC associates. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance

Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.

This podcast refers to specific securities which Thrivent Mutual Funds may own. A complete listing of the holdings for each of the Thrivent Mutual Funds is available on

As of August 31, 2023, the top ten holdings of Thrivent Mid Cap Value Fund were General Dynamics Corporation at 2.52%, Flowserve Corporation at 2.32%, JB Hunt Transportation Services at 2.28%, Celanese Corporation at 2.24%, Pioneer Natural Resources Company at 2.21%, Carlyle Group at 2.19%, Berry Plastics Group at 2.12%, Barnes Group at 2.01%, Laboratory Corporation of America at 1.95%, and Noble Corporation at 1.87%. A complete listing of the holdings for the Fund is available at

Thrivent Asset Management, a division of Thrivent, offers financial professionals a variety of investment products to help meet their clients’ needs. Thrivent Distributors, LLC is a member of FINRA and SIPC and a subsidiary of Thrivent, the marketing name for Thrivent Financial for Lutherans.

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