Quarterly Commentary

2Q 2022


  • Historic global inflation continued to dominate the headlines in 2Q22. Year-over-year inflation in June 2022 was 9.1%, the highest level in 41 years. The inflation we are experiencing is due to a variety of reasons including supply constraints, component shortages, government regulations, environmental policies, energy supplies, food production costs, and transportation and logistical complications.
  • Energy costs remain one of the largest contributors to inflation; the price of gasoline increased 59.9% year-over year. We have not yet seen the height of food inflation.
  • The Federal Reserve is attempting to control inflation by slowing the economy and tightening monetary policy. The Fed has begun to raise interest rates, which impacts risk assets. The interest rate yield curve has flattened and will begin to invert as the economy slows and future inflation fears abate.
  • The stronger U.S. dollar could affect corporate earnings as exports become relatively more expensive.
  • Economic growth is weakening, and the probability of a recession is increasing.
  • Geopolitical risks will persist for an extended period as the war in Ukraine does not seem to be ending anytime soon. Side effects of this atrocity are higher input costs and disruptions to global supply chains.



  • The Fund’s Institutional (NESIX) and Retail classes (NESGX) returned –26.03% and –26.13% respectively in 2Q22, underperforming the Russell 2000 Growth’s -19.25%.
  • Small cap stocks have been in a bear market since March 2021 and larger cap stocks have been weakening. We are hopeful that this correction is in the later innings; however, we have yet to experience the impacts of monetary tightening, a capitulatory market sell-off, and extreme volatility.
  • The fund’s top five performers were: Photronics Inc. (PLAB), Inogen Inc. (INGN), TTM Technologies Inc. (TTMI), Western Digital Corp. (WDC) and Alteryx Inc. (AYX).
  • The Fund’s bottom five performers were: Standard BioTools Inc (LAB), Benefitfocus Inc. (BNFT), Infinera Corp. (INFN), NLight Inc. (LASR) and Edgio Inc. (EGIO).
  • Given the fund’s under-allocation to the energy sector, we were not able to pick up on the tailwinds of surging oil prices, while also seeing further losses from an overweight in technology.


  • We expect the market selloff may overshoot to the downside and growth at reasonable prices should provide interesting entry points for long term investors to buy high-quality stocks that have good managements, strong balance sheets and earnings and cash flows. Investment patience and conviction are needed in these volatile and uncertain times.
  • Earnings season is soon to begin in July, and the impact of component shortages and overall supply chain challenges remain a significant issue for technology companies. The shutdown of Shanghai in China will have significant near-term impacts on company results.
  • Labor issues, logistical transportation, higher commodity prices and supply chain constraints have hampered earnings and forward guidance for many companies.
  • If supply chain risks can improve combined with lower energy costs, inflation may decline more rapidly than currently projected. If we do see an improvement in these inflationary pressures, it would help to alleviate the monetary actions currently contemplated by the Federal Reserve.
  • Congress needs to pass the CHIPS Act to help accelerate semiconductor development within the US. It has enormous geopolitical benefits to the nation.