Quarterly Commentary

3Q 2021


  • In 3Q21, the Russell 2000 returned -4.36%, and the S&P 500 returned 0.58%. The market was particularly weak in late September, after the Federal Open Market Committee Statement. YTD as of September 30, 2021, the Russell 2000 returned 12.41%, and the S&P 500 returned 15.92%.


  • 10-year U.S. Treasury rates rose 35 bps from their August 2 low to end the quarter where they started at 1.5%.
  • Inflation – crude oil rose 4.5% in the quarter, resulting in a 51.7% YTD increase. Copper fell 4.4%, and CPI growth slowed to 0.1% in August. Labor and inventory shortages (including semiconductors) and supply chain disruptions remain prevalent.
  • On September 22, the Federal Reserve wrote, “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.” Other than Paul Volcker, we believe that Federal Reserve Board Governors have a history of accommodative policies that have long provided a tailwind for equities and are unlikely to change.
  • In 3Q21, top-performing industries were technology, medical equipment and services, and financials.
  • For the quarter, quality factors slightly outperformed, while the small-cap factor was the most significant detractor. In late September, value factors outperformed. For the year, value has been the leading factor, while momentum is the top detractor.


  • The Fund’s Institutional (NEAIX) and Retail classes (NEAGX) returned 2.02% and 1.85% respectively in 3Q21, outperforming the Russell 2000’s -4.36%. YTD as of September 30, NEAIX returned 20.99%, and NEAGX returned 20.39%, outperforming the Russell 2000’s 12.41%. (The Fund’s standardized performance is here.)
  • The Fund’s 3Q21 outperformance was a result of stock selection and the strong performance from concentrated positions in Aspen Aerogels Inc. (ASPN), Vicor Corporation (VICR), and PDF Solutions, Inc. (PDFS). These companies have insignificant weightings in the Russell 2000.
  • The Fund has a high quality factor, and quality factors outperformed in 3Q21.
  • Lack of exposure to the financial sector was a minor detriment to the Fund’s performance. Smith-Midland Corporation (SMID) and KVH Industries (KVHI) were the leading detractors.
  • With 11% turnover, the Fund does not rotate into or out of sectors but invests in companies we believe can outperform over the long-term.


  • We added thredUP, Inc. (TDUP) and TPG Pace Solution Corp. (TPGS) as new investments. thredUP sells lightly-used clothes to consumers and is part of the circular economy. TPG Pace is a SPAC that announced a merger with Vacasa, the vacation property management company. We have known Vacasa for years and wrote about it in Growth Factor Vol. 29 in 2018.
  • We took advantage of market weakness to more than double the Fund’s positions in Sharps Compliance Corp. (SMED), ACV Auctions, Inc. Class A (ACVA), and Parsons Corporation (PSN).
  • The Fund’s only sales were to exit its four smallest positions.


  • Many of our top small-cap portfolio holdings have made multi-year investments that we believe position them to deliver growth and positive returns over the next few years. We believe that if these investments succeed, they could provide a hedge to macroeconomic factors such as inflation.
  • Vicor, PDF Solutions Inc., Aspen Aerogels, KVH Industries Inc., Super Micro Computer Inc. (SMCI), GSE Systems, Inc. (GVP), Oil-Dri Corporation (ODC), and Telcos Corp. (TLS) are some of the Fund’s significant holdings with such plans.
  • 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.
  • Greater-than-benchmark exposure to high-quality stocks might position the Fund for outperformance in future periods of market weakness.