| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 12.3% | 1.3% | 0.0% |
The iMGP Small Company Fund gained 1.33% in Q4 2025, lagging the Russell 2000's 3.26% return, with flat full-year performance at 0.01% versus the benchmark's 12.81% gain. The year was marked by AI-driven market leadership, with significant volatility from Chinese AI competitor DeepSeek in January and expansive tariff policies in April that caused a 9% S&P 500 drop. The fund's underperformance was primarily driven by style factors, including underexposure to momentum and high-beta stocks during speculative market periods. Biotech's 25% Q4 rally from M&A activity was a key detractor given the managers' avoidance of the sector. Key contributors included Antimony Corporation, which won a $245 million defense contract, and Perimeter Solutions, the largest portfolio position. Looking ahead to 2026, managers expect small-cap tailwinds from Fed rate cuts and fiscal stimulus, while maintaining their commitment to high-quality growth companies with strong management teams and strict valuation discipline.
The fund focuses on investing in high-quality growth companies with talented and ethical management teams, believing this approach leads to superior long-term risk-adjusted returns, while maintaining strict valuation discipline and seeking management teams that can drive inflection in return on invested capital through self-help strategies.
Looking ahead to 2026, managers see several positives emerging that should benefit small-cap stock performance, including consumer boost from tax breaks and more aggressive Fed rate cuts. However, they acknowledge geopolitical risk can emerge at any time. The managers remain committed to their long-term investment approach focused on high-quality growth companies with talented management teams, maintaining valuation discipline regardless of short-term market trends.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Mar 1 2026 | 2025 Q4 | AAP, AMKR, APPF, MANH, NVDA, PRM, RBC, UAMY | AI, Biotech, defense, growth, healthcare, Quality, small caps, technology | - | AI remained a significant driver throughout 2025, with AI-related stocks recovering after initial volatility from Chinese competitor DeepSeek and becoming the dominant theme again in… |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
BiotechBiotech companies rallied over 25% in the fourth quarter, driven by a series of high-profile biotech acquisitions by large pharma buyers. The managers generally avoid biotech stocks due to their highly binary nature, though they participate through investments in companies that sell products and services to biotech customers. |
Biotechnology Pharmaceuticals M&A Healthcare Binary Risk | |
DefenseThe team initiated a position in Curtiss-Wright, believing the company is entering a period where multiple near-term growth drivers are converging, including rising defense budgets, commercial aerospace production ramps, nuclear power plant life extensions and new builds, and submarine production. |
Defense Budgets Aerospace Nuclear Submarines |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| AAP | At the individual name level, the largest detractor during the quarter was Consumer Discretionary holding Advance Auto Parts Inc. (AAP). AAP is undertaking a significant turnaround under new leadership. Although we are seeing ROIC enhancing decisions and actions, earnings have yet to inflect. As we have discussed in the past, the current market continues to view only real-time results as those that deserve credit. AAP remains one of our highest convictions long-term ROIC opportunity holdings, but the timing of a larger inflection has been slightly pushed out by inflation dynamics and consumer behavior. |
| AMKR | Amkor Technology Inc. (AMKR) was the top performer. AMKR saw a re-rating that centered around AI/Advanced Packaging excitement, which is being driven by significant demand for AI compute. This was bolstered in November when NVIDIA Corp. (NVDA) cited AMKR has an Advanced Packing partner as part of a broader investment cycle we are seeing to reshore and expand chip production capacity in the U.S. |
| APPF | AppFolio, Inc. (APPF) is a cloud-based software, data, and services provider to the real estate industry with a focus on small to medium-sized property managers. Results in the quarter were negatively impacted by a bonus accrual impact that caused margins to contract in 2025. This was a surprise. Our understanding is that this bonus accrual was partly driven by new units added. Long-term, this is a good problem to have. Every new customer APPF adds should have an extremely high lifetime value. We attended APPF's Investor Day intra quarter and came away more confident in APPF's ability to add solutions that further build that lifetime value. We view APPF management as disciplined operators and would argue that appropriately compensating employees for new business is important. We suspect that the stock was also negatively impacted by concerns around AI. APPF has a direct AI native competitor for certain modules – EliseAI. APPF is introducing comparable solutions in 2026. We're positive on AI for APPF long-term as APPF controls their own destiny as a system of record, serves SMBs, already has unit-based pricing rather than seat-based pricing, and has generally executed well on product, including AI. |
| MANH | Manhattan Associates, Inc. (MANH) is a leading provider of warehouse management systems and related supply chain software. The stock underperformed in 4Q, in part driven by 3Q results that included weaker-than-expected bookings, interrupting any momentum that was rebuilding. Some weakness in the retail sector and still-poor market sentiment in software did not help the stock, either. As for MANH's results, bookings are inherently volatile and the yet-to-be-reported 4Q results should be more important seasonally. Following last year's disappointment and CEO transition, it appears to us the market is still looking for consistency to regain confidence in the stock. We continue to have conviction in MANH's competitive position and the growth opportunity ahead of it. We are also growing increasingly positive on new CEO Eric Clark's potential to improve growth, which we believe could become more evident in the coming quarters, especially as a significant customer renewal cycle builds into late 2026 and 2027. |
| NVDA | AI bellwether NVIDIA's very strong set of earnings in late November helped the AI theme re-assert its dominance when investors breathed a sigh of relief following the results. |
| PRM | Perimeter Solutions Inc (PRM) is the sole supplier of aerially deployed fire-retardant chemicals used to prevent or slow the spread of wildfire. The stock outperformed in 4Q as the market continues to gain confidence in the business which, in our view, was grossly undervalued at the start of the year. When we initially invested in PRM in 2022, two of our most significant critiques of the business were that 1) its monopoly status was being challenged by a new entrant and 2) the business was inherently volatile due to the unpredictability of wildfire activity. In 2025, PRM's would-be competitor shuttered its business and PRM signed a new five-year agreement with the U.S. Department of Agriculture, locking in its position for the next several years. In addition, PRM's 3Q results reported in October demonstrated significant progress in reducing the volatility of the business. PRM grew its fire retardant revenue despite acres burned in the U.S. declining by -60% year-over-year. That better-than-expected result was a function of the government's more aggressive attack posture to suppress fires (especially in light of high-profile events such as the Palisades fire) as well as PRM's efforts to improve the mix of recurring services revenue in its contracts. The competitive clarity and improved revenue mix should improve the multiple investors are willing to place on PRM's earnings, which are growing considerably. Lastly, we were encouraged to see the company deploy capital to acquire a substantial new business platform which, given our trust in management and their track record with the legacy PRM businesses, we expect will generate strong returns for shareholders. PRM remains the largest position in the portfolio. |
| RBC | RBC Bearings, Inc. (RBC) manufactures engineered precision bearings and related products for customers in the aerospace, defense, and industrial markets. It is a market leader with a strong reputation for technical capabilities, product quality, and on-time delivery. RBC outperformed in 4Q as its quarterly results beat consensus estimates on both revenue and EPS. Its Aerospace and Defense business (A&D, 44% of total revenue) was particularly strong, essentially 'firing on all cylinders.' Management expects strong growth in its A&D backlog and is in the process of adding capacity to meet demand. Growth in its Industrial business (56% of total revenue) remains sluggish, but management has significantly improved the profit margins of this business and is now in the process of implementing growth initiatives. We continue to like RBC's leadership team, well-established strategic playbook, as well as its opportunities for growth and capital deployment. |
| 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. |
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