Quarterly Commentary

1Q 2022


  • In 1Q22, the S&P 500 returned -4.60% and the S&P 400 returned -4.88%. The market was particularly weak in January as inflation hit a 39-year high and U.S. Government bond yields increased.


  • In 1Q22, Russia assaulted Ukraine. The brutality was shocking. It laid bare our assumptions about geopolitical stability and international economic cooperation. Combined with supply chain disruptions, the attack reinforced the need for countries/regions to shorten supply chains and become self-sufficient in energy and manufacturing.
  • Inflation was the second most important story in 1Q22. Year-over-year inflation in December 2021 was 7.0%. The CPI remained at this level through quarter end. While supply chain disruptions may contribute to inflation, Milton Friedman’s observation reminds us, “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
  • In 1Q22, 10-year U.S. Treasury rates rose 69 bps to 2.32%, a level not seen since before COVID-19. At its March meeting, the Federal Reserve increased the Fed Funds rate for the first time since 2015. Fed Governors expect six more increases in 2022. We believe that the Federal Reserve has a history of accommodative policies that have long provided a tailwind for equities, and are unlikely to change.
  • In 1Q22, Energy and Utilities were the only positive performing sectors, while Information Technology, Consumer Discretionary and Communication Services were the worst performing sectors in the S&P 500.
  • Value and Dividend Yield were top performing factors in 1Q22; the Fund has low exposure to both. The Fund was hurt by its high Quality factor, as low leverage and high profitability underperformed. 1 2


  • The Fund’s Institutional (NEEIX) and Retail classes (NEEGX) returned -13.94% and -14.04% respectively in 1Q22, underperforming the S&P 500 and S&P 400.
  • The Fund’s 1Q22 underperformance was primarily a result of some of its largest and longest-term holdings. Aspen Aerogels (ASPN; Industrial Specialties), Vicor Corporation (VICR; Electrical Components), CarMax, Inc. (KMX; Specialty Retail) and Nova, Ltd. (NVMI; Electronic Production Equipment) underperformed. These have all been long-term outperformers for the Fund. The Allocation effect was a negative contributor due to the Fund’s lack of exposure to the positive sectors.
  • Parsons Corporation (PSN) and Alteryx, Inc. Class A (AYX) were the two leading contributors. Other contributors were companies with Industrial Technology businesses and underperforming stock prices over the last three years.
  • With 13% turnover, the Fund does not rotate into or out of sectors, but invests in companies we believe can outperform over the long-term.


  • The market gave us a chance to purchase new investments in four leading semiconductor and semiconductor technology companies: Analog Devices, Inc. (ADI), ASML Holding NV ADR (ASML), Marvel Technology, Inc. (MRVL), and Teradyne Inc. (TER). We also added Bright Horizon Family Solutions, Inc. (BFAM) as it met our target purchase price.
  • We took advantage of market weakness to increase many of the Fund’s positions. Our largest addition was to Laboratory Corporation of America (LH). LabCorp is the leading lab test company and has a large contract business providing new drug studies. Other leading additions were to Telos Corp. (TLS), Parsons Corporation (PSN), Clean Harbors, Inc. (CLH) and ACV Auctions, Inc. (ACVA).
  • The Fund exited two positions with significant operations in Russia: IPG Photonics Corporation (IPGP) and SEMrush Holdings, Inc. (SEMR). We also sold our position in Everbridge, Inc. (EVBG) on a surprise resignation of CEO, David Meredith.


  • Inflation, war, and new geopolitical realities make this a hard time to be an optimist. However, when we think about the innovations in science, engineering and health care that our companies are developing and bringing to market, it is hard to be pessimistic. If our portfolio companies can achieve our growth and profitability expectations, they should create value for shareholders over time.
  • We are also optimistic about the short- and long-term opportunities in semiconductor manufacturing technology, which represents approximately 25% 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. 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.