Quarterly Commentary

2Q 2022


  • In 2Q22, S&P 500 Index returned -16.10%, the S&P 400 Index returned -15.42% and the Russell 2000 Index returned -19.25%.
  • For the half year, the S&P 500 Index’s -19.96% was the worst performance since 1970. The 10-year U.S. Treasury bond market had its worst half-year since 1788.


  • 2Q22 was shocking in many ways. We saw daily atrocities from the Russian assault on civilians in Ukraine. The war reinforced the importance of increased defense spending and the vulnerability of Eastern Europe. Europe’s reliance on Russian natural gas resulted in price spikes as countries started to isolate Russia economically. Countries and regions must shorten supply chains and become self-sufficient in energy and manufacturing.
  • Inflation continued to be a top headline. Year-over-year inflation in June 2022 was 9.1%, the highest level since 1981. The price of gasoline increased 59.9% year-over-year. Our portfolio companies seem to be adapting to inflation after a few difficulties in 4Q21 and 1Q22.
  • In May, the Federal Reserve raised its target interest rate by 50 bps to 0.75-1.00%. June brought a 75 bps increase to 1.50- 1.75%, as the Fed attempts to control inflation by slowing the economy and tightening monetary policy. Another rate hike is expected in July.


  • The Fund’s Institutional (NEEIX) and Retail (NEEGX) classes returned -22.24% and -22.34%, respectively, in 2Q22, underperforming the S&P 500 Index.
  • Many of the Fund’s largest holdings underperformed, including Aspen Aerogels, Inc. (ASPN), Entegris Inc. (ENTG), PDF Solutions Inc. (PDFS) and The Trade Desk, Inc. (TTD).
  • Aspen Aerogels needs to add capacity to provide its PyroThin® aerogel to the EV market. It has plans to build a plant in Georgia but needs capital. In late June, Aspen announced a deal to raise $375 million in a convertible and equity offering. However, the stock fell after the offering was announced, and Aspen elected to not proceed with the deal.
  • Super Micro Computer, Inc. (SMCI) was the leading contributor, although its contribution was insignificant compared to the detractors. Super Micro makes servers and storage systems used in data centers and is gaining market share from its larger competitors.
  • The Fund closed the quarter with 2.2% cash.
  • With 14% annualized turnover, the Fund does not rotate into or out of sectors but invests in companies we believe can outperform over the long-term.


  • We exited a number of small holdings and reduced the number of positions to 68 from 78. We reduced our holdings in a number of companies:
    • Our largest reduction was to Gilead Sciences Inc. (GILD), which we’ve held since 2010. Gilead remains the market leader with its HIV/ AIDS drugs. Gilead is also the market leader in drugs that reverse Hepatitis C. Gilead has been so successful treating these diseases that these markets are no longer growing. Gilead’s third miraculous drug came from its 2017 acquisition of Kite Pharmaceutical. Yescarta is a CAR T-cell therapy for non-Hodgkin lymphoma. Gilead’s growth initiatives are not enough to offset their mature product lines.
    • We also reduced the size of a number of our holdings, including Super Micro Computer Inc. (SMCI), II-VI Incorporated (IIVI), NeoPhotonics Corporation (NPTN) and FormFactor Inc. (FORM).
  • The Fund made few purchases.


  • Many of our top small-cap and mid-cap portfolio holdings have made multi-year investments that position them to deliver growth and positive returns over the next few years. We believe if these investments succeed, they could provide a hedge to macroeconomic factors such as inflation.
  • We are optimistic about the short and long term opportunities in semiconductor manufacturing technology.
    The Fund targets investments that we perceive to have significant, unrecognized growth opportunities. COVID-19 hastened the revolutionary development in technology and life sciences; the Fund is a long-term investor in companies that enable the research and manufacturing to bring these developments to market. Semiconductor manufacturing is an important example.