Quarterly Commentary

4Q 2021


  • The market closed 2021 near its 12-month and all-time highs. In 4Q21, the Russell 2000 returned 2.14% and the S&P500 returned 11.03%. In 2021, the Russell 2000 returned 14.82% and the S&P 500 returned 28.71%.

  • While 2021 was a great year, the start of 2022 is anything but great. Inflation is lasting longer than the FederalReserve previously indicated, and it needs to raise rates sooner and faster in 2022. Core CPI growth of 5.5% in December was the highest in over 30 years.  The market is factoring in higher interest rates, which may result in lower multiples. As of January 21, 2022, the Russell 2000 is down -11.46% YTD.


  • 10-year U.S. Treasury rates ended 4Q where they started at 1.5%. In January, the 10-year has spiked to 1.81%.
  • U.S. unemployment fell to 4.2% in November.  Throughout 2021, the labor force participation rate remained at a level not seen since 1976, before the widespread participation of women in the workforce. Labor and inventory shortages (including semiconductors) and supply chain disruptions remain prevalent. As long-time investors in semiconductor manufacturing technology, we are pleased to see the world recognize the need for investment.
  • The Fed indicated an intention to taper its bond-buying by $15 billion per month and raise interest rates in 2022. Jerome Powell, recently nominated to a second term as Chairman, said “transitory” is no longer an accurate term to describe the current high inflation rate. Other than Paul Volcker, the Fed’s Board Governors have a history of accommodative policies that have long provided a tailwind for equities, and we believe this is unlikely to change.
  • The higher rates anticipated by the markets are still well below inflation, which makes equities a way to earn a real return. To achieve a real return, companies must have pricing power and growth plans.
  • In December, the Omicron variant of COVID-19 ripped around the world, disrupting the holiday season. Fortunately, it is less lethal, although more contagious, than earlier variants. We are hopeful that Omicron’s retreat brings a return to many aspects of pre-COVID life sometime in 2022.
  • A range of industries performed well in 4Q21, including technology, industrials, real estate, utilities, consumer discretionary and staples, and materials.


  • The Fund’s Institutional (NEAIX) and Retail classes (NEAGX) returned 14.42% and 14.24% respectively in 4Q21, outperforming the Russell 2000’s 2.14%. In 2021, NEAIX returned 38.43% and NEAGX returned 37.54%,outperforming the Russell 2000’s 14.82%. It was a quarter and year with gains and few losses.  Years like this are gratifying, but we’ve been around long enough to realize these results are unlikely to occur every year.
  • The Fund’s allocation to technology was a contributor, but stock selection was the dominant reason for the 4Q21 outperformance.
  • Smith-Midland Corporation (SMID) was by far the leading contributor as it reported strong 3Q21 results and the market saw it as a beneficiary of the $1.2 trillion Infrastructure and Jobs Act passed in November. Other leading contributors were some of the Funds’ largest positions – PDF Solutions, Inc. (PDFS), Nova, Ltd. (NVMI), Apple, Inc. (AAPL), Entegris, Inc. (ENTG), and Aspen Aerogels Inc. (ASPN).  These investments, plus VicorCorporation (VICR) were the leading contributors for the year.
  • The Fund’s lack of exposure to the energy sector was a minor detriment to performance in 4Q21.
  • With 12% turnover, the Fund does not rotate into or out of sectors, but invests in companies we believe can outperform over the long-term.


  • 4Q21 was a prolific quarter for new investments – the Fund added five new holdings that we hope will become larger positions. ESI Group SA (ESI FP) was the largest addition.  We took advantage of market weakness to more than double the Fund’s position in Vacasa, Inc. (VCSA) as it completed its SPAC merger.
  • The Fund exited exactEarth. Ltd. (XCT-TSE) upon its sale to Spire Global, Inc. (SPIR), and also sold four of its smallest positions. We trimmed positions in some of the Fund’s top 10 positions to manage position size.
  • We closed the quarter with a 14% cash position as a result of Fund inflows. We plan to carefully deploy this capital.


  • 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.  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, which represents approximately 30% of the Fund’s investments.
  • 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.
  • Greater-than-benchmark exposure to stocks with high quality factors might position the Fund for outperformance in future periods of market weakness.