Quarterly Commentary

2Q 2021


  • In 2Q21, the S&P 500 returned 8.55% and the S&P MidCap 400 returned 3.64%.


  • 10-year U.S. Treasury rates fell from 1.75% to 1.5% after a one-year increase from near 1.0%.  The decrease helped equities in the second quarter.
  • Inflation – Oil rose 18.1% and a basket of other commodities increased 9.4% in Q2. Core CPI rose 0.7% month-over-month in May and 0.9% in April. Labor and inventory shortages and supply chain disruptions are prevalent, supporting the idea that this inflation is temporary as economies recover from COVID-19 shutdowns.
  • On inflation – We note that Milton Friedman said, “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.”
  • At the June 17, Federal Reserve Board Meeting Chairman Powell said, “You can think of this meeting that we had as the ‘talking about talking about’ meeting,” in consideration of a future increase in interest rates.
  • Other than Paul Volcker, we believe that Federal Reserve Board Governors have a history of accommodative policies, which have long provided a tailwind for equities and are unlikely to change.
  • In 2Q21, top-performing industries were technology, energy, and healthcare. The post-pandemic recovery is underway. Approximately 2/3 of U.S. adults are now fully vaccinated.


  • The Fund’s Institutional (NEEIX) and Retail classes (NEEGX) returned 7.44% and 7.32% respectively in 2Q21, outperforming the S&P Mid-cap 400’s 3.64% and underperforming the S&P 500’s 8.55%.
  • The Fund’s 2Q21 underperformance relative to the S&P 500 was primarily a result of sector allocation; the Fund has minimal exposure to financials, energy, and real-estate, all of which outperformed in Q2. Within technology, Microsoft Corporation (MSFT) and Facebook Inc. (FB) were S&P 500 outperformers. With our focus on less-discovered investments, the Fund is not invested in these companies. The Fund’s leading contributors were in the industrial, industrial technology, and technology sectors.
  • The Fund’s top contributor was its largest position as of June 30, 2021 – Aspen Aerogels Inc. (ASPN).  Aspen Aerogels manufactures aerogel-based insulation; in October, it announced a contract to supply its Pyrothin-TM thermal barriers to a major North American automobile manufacturer to prevent thermal runaway in Lithium-ion batteries for Electric Vehicles (EVs).
  • Other top contributors were Entegris Inc. (ENTG), Thermo Fisher Scientific, Inc. (TMO), and Vicor Corporation (VICR). Thermo Fisher reported a strong quarter and guidance for both COVID-19-related revenue and organic revenue growth. It also reported an agreement to acquire PPD, Inc., a leading pharmaceutical contract research organization. Vicor supplies power conversion devices, which reduce power consumption in data centers and other markets, including for EVs.
  • FormFactor Inc. (FORM) was the top detractor as investors reacted poorly to the company’s 2Q21 margin guidance. FormFactor supplies test and measurement equipment for wafer processing. We believe the company is well-positioned for the future.
  • With the decline in interest rates, growth factors outperformed for the first time in three quarters. The Fund’s in-line exposure to growth factors may have hurt relative performance.
  • With 16% turnover, the Fund does not rotate into or out of sectors, but invests in companies we believe can outperform over the long-term.


  • 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 if these investments succeed, they could provide a hedge to macroeconomic factors such as inflation.
  • Vicor, PDF Solutions Inc. (PDFS), Aspen Aerogels, KVH Industries Inc. (KVHI), and Super Micro Computer Inc. (SMCI) are some of the Fund’s major holdings making such investments.
  • We are also optimistic about the short- and long-term opportunities in the semiconductor manufacturing equipment industry, which represents about one-third of the Fund’s investments.
  • The Fund targets investments we perceive to have significant, unrecognized growth opportunities. COVID-19 hastened the revolutionary development in technology & 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.