| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 17.0% | 6.4% | 11.9% |
| 2025 |
|---|
| 11.9% |
Next Century Growth Investors' Micro Cap Growth strategy returned 6.38% in Q4 2025 and 11.94% for the full year, underperforming the Russell Microcap Growth Index which gained 21.84% annually. The underperformance was primarily driven by the market's preference for lower-quality stocks, particularly in biotechnology and pharmaceutical sectors which contributed 10 points to index returns but represent areas where NCG maintains minimal exposure. The firm's quality-focused approach faced headwinds as companies with negative earnings and unproven business models significantly outperformed. However, NCG experienced improved relative performance in Q4 as speculative areas pulled back and their holdings benefited from strong business fundamentals. Looking forward, the firm sees improving conditions for small cap performance with positive earnings growth expected to accelerate in 2026, supportive Fed rate cuts, and small caps trading at attractive relative valuations. NCG remains committed to their disciplined approach of investing in the fastest growing and highest quality companies, believing this strategy will drive long-term outperformance as demonstrated by their since-inception track record.
Next Century Growth Investors maintains their conviction in investing in high-quality growth companies with proven business models and sustainable growth drivers, believing this approach will lead to long-term outperformance despite near-term headwinds from market preference for lower-quality stocks.
The firm believes the environment could be improving for small cap stock performance, with positive earnings growth expected to continue and potentially accelerate in 2026. They see pro-growth policies from the administration and Fed rate cuts as supportive factors. While acknowledging current market highs, they remain focused on their core investment philosophy of owning high-quality growth companies.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Dec 31 2023 | 2023 Q4 | ACVA, ALKT, AUGX, CSS, CSTL, DCBO, ENFN, PDFS, SEMR, TNDM, VCYT | - | - | - |
| Mar 31 2025 | 2025 Q1 | - | - | - | - |
| Aug 7 2025 | 2025 Q2 | - | fundamentals, growth, market inefficiency, Micro Caps, volatility | - | The letter highlights inefficiencies in the micro-cap universe where fundamental growth is often overlooked. Management stresses intensive research, management access, and long time horizons. Micro-cap… |
| Oct 24 2025 | 2025 Q3 | - | AI Infrastructure, industrials, Micro Caps, Rate Cuts, semiconductors | ATRO | The team notes powerful rallies in speculative micro-cap areas (bitcoin miners/HPC power, nuclear, critical minerals) while software/IT services derated. They stay focused on high-quality growth… |
| Jan 21 2026 | 2025 Q4 | AAOI, AGX, AII.TO, ALKT, AMPX, AMSC, ATEC, AVPT, AXGN, BLND, INOD, INTA, PHAT, PL, PSNL, TATT, TCMD, UAMY, UTI | active management, Biotechnology, growth, Microcap, Quality, small caps, underperformance | - | The firm emphasizes investing in high-quality growth companies with proven business models and sustainable growth drivers. They note that quality factors worked against active managers… |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q2 |
MicroCap |
|
| 2025 Q3 |
AIThe extended federal government shutdown added volatility during what was otherwise a risk-on environment, with a mid-quarter shift in market behavior for AI-related equities as the exuberant narrative evolved to one more balanced in assessing the technology's enormous potential against staggering capital spending plans and high expectations. The team initiated a position in Credo Technology as a more diversified way to gain exposure to strong trends in AI-connectivity. |
Connectivity Semiconductors Infrastructure Capital Spending |
Small CapsThe fund invests in a portfolio of competitively advantaged small and medium-sized businesses, which remained out of favor for most of the quarter. The strategy of owning leading small-cap businesses has been the foundation since inception, delivering 354 basis points of annual outperformance over the benchmark since inception despite recent headwinds. |
Growth Outperformance Benchmark Russell Businesses | |
| 2025 Q4 |
BiotechnologyBiotech delivered its best quarter in five years, benefiting from improving interest rates, easing regulation enabling more M&A activity, and excitement around AI's promise in drug discovery. The portfolio nearly doubled its biotech exposure during the quarter as more opportunities presented themselves in this improving environment. |
Drug Discovery M&A Interest Rates Regulation Pharmaceuticals |
QualityThe portfolio has shifted toward higher quality businesses with better profitability, lower leverage, and less volatile earnings. Quality stocks underperformed significantly in 2025, creating attractive entry points for value investors. The manager maintains price discipline while seeking quality companies trading at discounts to intrinsic value. |
Quality Profitability Leverage Earnings | |
Small CapsThe fund invests in a portfolio of competitively advantaged small and medium-sized businesses, which remained out of favor for most of the quarter. The strategy of owning leading small-cap businesses has been the foundation since inception, delivering 354 basis points of annual outperformance over the benchmark since inception despite recent headwinds. |
Growth Outperformance Benchmark Russell Businesses |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 24, 2025 | Fund Letters | Tom Press | ATRO | Astronics Corporation | Industrials | Aerospace & Defense | Bull | NASDAQ | Aerospace, backlog, Contracts, Defense, electronics, leverage, manufacturing, Margins, recovery, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| AAOI | We added 8 new positions in Q4: one each in telecommunications (Applied Optoelectronics), industrials (TAT Technologies) |
| AGX | Argan is a construction company that, among other things, constructs gas-fired power plants. In recent years the company has benefited from a growing backlog of projects to construct power plants that supply electricity to data centers running AI workloads. Specific to the period, Argan announced two new major contract wins in the Texas market—one for a 1,350-megawatt combined-cycle power plant and the other for a 860-megawatt natural gas-fired power plant. Argan appears to be well positioned to capitalize on a multi-year investment cycle to build out power infrastructure as companies race to bring data centers online. |
| AII.TO | We added 8 new positions in Q4: two in basic materials: Almonty Industries, United States Antimony |
| AMSC | Top 3 detractors to absolute performance: UTI, INOD, AMSC |
| ATEC | Alphatec's shares rose and contributed to performance after a strong earnings report highlighted accelerating sales, market share gains in the spine segment and improved profitability. |
| AXGN | New to the strategy was Axogen, Inc., which develops technologies for peripheral nerve regeneration and repair from injuries caused by trauma, chronic conditions, or surgical procedures. Its flagship product, Avance Nerve Graft, is a decellularized human nerve allograft that preserves native nerve microarchitecture while eliminating immune rejection risk. It is the only FDA-approved implantable biological nerve allograft on the market. |
| INOD | Top 3 detractors to absolute performance: UTI, INOD, AMSC |
| INTA | Commvault® Systems , PAR Technology, Descartes Systems Group Inc., and Intapp were off more than 30% on average |
| PHAT | We added 8 new positions in Q4: four in health care: Axogen, Phathom Pharmaceuticals, Personalis, Tactile Systems Technology |
| PL | Top 3 contributors to absolute performance: ATEC, PL, AGX |
| PSNL | We added 8 new positions in Q4: four in health care: Axogen, Phathom Pharmaceuticals, Personalis, Tactile Systems Technology |
| TATT | We added 8 new positions in Q4: one each in telecommunications (Applied Optoelectronics), industrials (TAT Technologies) |
| TCMD | We added 8 new positions in Q4: four in health care: Axogen, Phathom Pharmaceuticals, Personalis, Tactile Systems Technology |
| UAMY | Antimony Corporation (UAMY) was a top contributor. UAMY has taken advantage of the export restrictions of antimony for military use out of China by winning a $245 million five-year sole source contract to rebuild the U.S. antimony supply. Given the volatility in the name and the speed at which it appreciated, along with further announcements of new antinomy processing investments by other players, we exited the name. |
| UTI | Top 3 detractors to absolute performance: UTI, INOD, AMSC |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
