Quarterly Commentary

3Q 2020

Market Review

U.S. equities rallied for the second quarter in a row; S&P 500 returned 8.93% in 3Q20; Russell 2000 returned 4.93%. YTD at September 30, the S&P 500 returned 5.57%; Russell 2000 returned -8.69%.

3Q20 experienced significant improvement in economic activity and a recovery in the U.S. labor market.  Companies were able to navigate and adapt business operations to the challenging environment.  Investors are evaluating the sustainability of the stock market recovery and whether further fiscal stimulus will be required as the threat of a second wave of the virus increases. 

Portfolio Review

In 3Q20, Institutional (NESIX) and Retail classes (NESGX) returned 9.99% and 9.78%, respectively. YTD at September 30, NESIX returned 26.34% and NESGX 25.70%, considerably outperforming the S&P 500’s 5.57% and Russell 2000’s -8.69% YTD results.

The Fund was again recognized in the Wall Street Journal in July, August and September as a top-performing small cap fund.  The Fund was also recognized earlier in the year with two 2020 Refinitiv Lipper 2020 Fund awards for delivering strong risk-adjusted returns over the three-year and five-year time periods in the Small-Cap Core category.  We are excited about these recognitions and appreciate the long-term support of our investors.  Small cap investing requires committed capital with a longer investment horizon, and we believe patience pays off for those investors. 

 The Fund’s top 3Q20 contributions included Cambium Networks Corp. (CMBM), Aspen Aerogels, Inc. (ASPN), Fluidigm Corp. (FLDM), AXT, Inc. (AXTI) and FireEye, Inc. (FEYE).  The Fund did not have any M&A announcements in the quarter as company managements evaluate the risk of closing and ability to integrate new acquisitions during the pandemic.   

We turned cautious on the markets during the summer and raised our cash position.  Employing a flexible investment approach and disciplined risk management, we were rewarded as market volatility created opportunities to deploy capital, and we ended the quarter fully invested. 

Our long term relationships and due diligence process allowed us to remain confident in our best and most concentrated investments.  We added to these positions on market pullbacks.


The U.S. election outcome will likely have significant implications for equity markets. However, an accommodative Federal Reserve continues to support the stock market and expanded multiple valuations.  

The technology sector remains strong, with major secular trends firmly in place to support continued growth.  Industries and long-term themes we continue to like are semiconductors, semiconductor capital equipment, communications infrastructure, 5G devices, wireless connectivity, military modernization, software and security and specialty material manufacturing.   

Significant risks to company success and economic recovery that we continuously evaluate are: potential for a second wave of COVID-19; vaccine success and timing; increased COVID-19 testing; U.S. election outcomes; China trade policy and Huawei impacts; fiscal stimulus amount and timing; labor market strength.    

The automotive industry is experiencing a recovery, which benefits a vast supply chain and new technologies designed for new vehicles.  Electric vehicles will continue to expand market share, which in turn expands traditional supply chain participants.