Quarterly Commentary

4Q 2022


  • Despite the market’s terrible angst and performance in 2022, the major indices were all higher in the second half of 2022. In Q4, the Russell 2000 Growth returned 4.13% and the S&P 500 returned 7.56%.
  • As anticipated, the Federal Reserve raised interest rates by 75 bps to 3.75 – 4.00% on November 2nd and by 50 bps to 4.25 – 4.50% on December 14th. The Fed has indicated plans to increase rates by another 25bps in February. The Fund’s Institutional (NEAIX) and Retail (NEAGX) classes returned 4.63% and 4.44%, respectively, in 4Q22, outperforming the Russell 2000 Growth’s 4.13% return. As manufacturing continues its process of reshoring to the U.S., over half of the Fund’s top contributors are positioned well to continue to benefit.1 2


  • Economic announcements in 4Q22 went largely as expected. Year-over-year inflation dropped below 8.0% – historically a very high level, but below the level of Q3. Unemployment remained very low, below 4.0%, as it has all year. Manufacturing and healthcare were areas of strength in the labor market. Real GDP increased at an annual rate of 3.2% in Q3 after a negative Q2.3
  • During 4Q22 the dollar was weak. The DXY index, which measures the U.S. dollar versus a basket of foreign currencies, declined by 7.38% during the quarter.4 Foreign central banks spoke of raising interest rates just as the United States is approaching the end of its rate hike cycle. A weak dollar makes it less expensive for customers in foreign countries to buy goods priced in U.S. dollars.
  • We continue to see atrocities from the Russian assault on civilians in Ukraine. Given the conflict does not seem to have an end insight, countries and regions must shorten supply chains and become self-sufficient in energy and manufacturing.


  • The Fund’s Institutional (NEAIX) and Retail (NEAGX) classes returned 4.63% and 4.44%, respectively, in 4Q22, outperforming the Russell 2000 Growth’s 4.13% return.
  • As manufacturing continues its process of reshoring to the U.S., over half of the Fund’s top contributors are positioned well to continue to benefit.
  • The top contributor was long-time holding Super Micro Computer, Inc. (SMCI). Super Micro designs and manufactures servers. It reported very strong Q3 results, sustained by growth from the large internet companies, which operate their own large data centers.
  • PDF Solutions, Inc. (PDFS) was the second-best contributor and is the largest position in the Fund at 7.29% of net assets. PDF Solutions saw strong orders for its Exensio® big data analytics software. Exensio® helps customers across the electronics manufacturing industry improve manufacturing yield. PDF Solutions is benefitting from the resurgence of activity in building semiconductor manufacturing plants in the United States.
  • The Fund’s top detractor was Vacasa, Inc. (VCSA), which manages vacation rental properties. Vacasa reduced its outlook during its 3Q earnings call. Despite reporting losses, Vacasa has a positive cash cycle and has continuously been cash flow positive.
  • Entegris, Inc. (ENTG) was the second largest detractor. Entegris supplies filters, specialty materials, chemicals, and delivery systems used primarily for semiconductor manufacturing. Entegris reported an earnings and guidance shortfall, partially due to the United States’ federal restrictions on trade with China.
  • 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.


  • 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 research and manufacturing to bring these developments to market.
  • The Fund did not add any new positions in 4Q22 but took advantage of market weakness to add to many of our existing positions. We believe the public markets are not adequately recognizing the value in many of our holdings. Many of these stocks were down over 30% in 2022. Here, we highlight some of the largest additions:
    • Adams Resources & Energy, Inc. (AE) owns trucks and storage terminals for transporting liquid chemicals, pressurized gases, asphalt, and dry bulk loads across the South. Its customers include BASF SA (BASFY) and Dow, Inc. (DOW). It also transports crude oil via truck and pipeline from the Eagle Ford to the Gulf of Mexico. Finally, it has entered the environmental remediation business through its acquisition of Phoenix Oil, which collects and repurposes off-spec fuel. In November, the company reduced its share count from 4.2 million to 2.4 million shares by purchasing shares from its then largest holder. We believe this was the latest of a number of astute capital allocation decisions by management. Adams has a $100 million market cap and has no Wall Street coverage or active small cap institutional ownership. We increased our ownership from 49,000 to 90,500 shares.
    • Aspen Aerogels, Inc. (ASPN) was a very disappointing stock in 2022. The company was selected by General Motors Company (GM), Toyota Motor Corp. (TM), and other electric vehicle makers to provide aerogel insulation to prevent fires in lithium ion batteries. However, the company needs to build a plant to meet the demand and needed to raise capital to build the plant. We added 150,000 shares in the company’s secondary stock offering in November.
  • The Fund exited Taiwan Semiconductor Manufacturing Co., Ltd. (TSM). Over the long-term, we think the company may experience challenges as it builds out manufacturing capacity outside of Taiwan. We also trimmed a few other holdings, primarily for tax planning.


  • We continue to see opportunities in the reshoring of manufacturing in the United States. We recommend reading The Titanium Economy: How Industrial Technology Can Create a Better, Faster and Stronger America by Asutosh Padhi, Gaurav Batra, and Nick Santhaman of McKinsey and Company.5 Portfolio holding Clean Harbors, Inc. (CLH) is featured in the book. Over half of the Fund’s top contributors in 4Q22 are part of the industrial technology universe.
  • Many of our largest portfolio holdings have made multi-year investments that we believe positions them to deliver growth and positive returns over the next few years. We believe if these investments succeed, they could provide a hedge against macroeconomic factors, such as inflation.