| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 6.6% | 1.9% | 0.2% |
| 2025 |
|---|
| 0.2% |
The Aristotle Small Cap Equity Fund returned 1.96% in Q4 2025, underperforming the Russell 2000 Index's 2.19% return. The fund maintains an optimistic long-term outlook on small-cap equities, citing compelling valuations with the Russell 2000 trading near multi-decade lows relative to large caps. Key contributors included MACOM Technology Solutions, which benefited from strong semiconductor demand in data centers and 5G applications, and Haemonetics, which reported strong earnings in blood management products. The fund added positions in regional banks like Atlantic Union Bankshares, viewing DOGE-related concerns as creating attractive entry opportunities. Portfolio positioning reflects bottom-up security selection with overweight allocations in industrials and information technology, while maintaining underweight positions in healthcare due to biotechnology binary risks and consumer discretionary due to retail sector challenges. Potential catalysts include deregulation, lower corporate tax rates, increased M&A activity, and continued U.S. manufacturing reshoring, though risks remain from inflation, geopolitical tensions, and potential economic weakness.
Small-cap equities offer compelling long-term value with the Russell 2000 trading at multi-decade low valuations relative to large caps, supported by potential tailwinds including deregulation, lower corporate tax rates, increased M&A activity, and continued U.S. manufacturing reshoring.
We continue to remain optimistic about the long-term potential for the small-cap segment of the U.S. market. Valuations remain compelling relative to large caps, with the Russell 2000 Index trading near multi-decade lows on a relative basis.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 4 2026 | 2025 Q4 | ACHC, AEIS, AER, ATR, AUB, CCRN, CNS, EHTH, GTLS, HAE, HURN, IDA, ITRI, LKQ, MTSI, NUS, PRGO, PTEN, TITN, WWW | Deregulation, Energy Transition, healthcare, M&A, Regional Banks, semiconductors, small caps, value | - | The fund focuses exclusively on small-cap equities with valuations remaining compelling relative to large caps, with the Russell 2000 Index trading near multi-decade lows on… |
| Nov 4 2025 | 2025 Q3 | ALE, AZEK, COLB, CRI, DLB, FLWS, HAE, HGV, JHX, KNX, MRCY, MTSI, OGS, REI, RRC, SUPN, WNC | consumer, industrials, Recovery, small caps, valuation |
SUPN MRCY MTSI COLB |
The fund emphasized high-conviction small-cap holdings with strong fundamentals and improving earnings visibility amid an easing policy backdrop. Despite market volatility, management sees opportunities in… |
| Jul 22 2025 | 2025 Q2 | ACIW, ALIT, BHLB, CHE, CMCO, DY, FLS, GRDN, IPAR, JBGS, MNRO, MTSI, SMG, TROX, VRRM | Balance Sheets, fundamentals, Inefficiency, small caps, Valuations | CHE | The letter emphasizes disciplined small-cap investing focused on companies with durable business models, strong balance sheets, and consistent cash generation. Management highlights valuation inefficiencies in… |
| Mar 31 2025 | 2025 Q1 | ADC, AGI CN, CMCO, HURN, MTSI, ONB, VECO, VVV | - | - | - |
| Jan 23 2025 | 2024 Q4 | ACHC, AMTM, ASC, AXTA, AZPN, COLD, GTLS, HXL, INFN, SUM, TROX | - | - | - |
| Sep 30 2024 | 2024 Q3 | ACHC, ACIW, ASC, BWIN, FIBK, NVRI | - | - | - |
| Jul 10 2024 | 2024 Q2 | ASC, AZZ, CRI, CRNC, DY, GTLS, LFUS, PWSC | - | - | - |
| Apr 15 2024 | 2024 Q1 | ATNI, AZEK, CPLP, ITRI, MODV, PWSC, QDEL, SP | - | - | - |
| Jan 13 2024 | 2023 Q4 | BDC, CHRS, CUBI, NOG, OII, SP | - | - | - |
| Oct 19 2023 | 2023 Q3 | - | - | - | - |
| Jul 28 2023 | 2023 Q2 | ADEA, CRNC, DY, GXO, ITRI, MODV, MRCY, STHO | - | - | - |
| Mar 31 2023 | 2023 Q1 | ACHC, AIMC, HASI, NSIT, PACW, SBNY, STAR, WWE | - | - | - |
| Jan 31 2023 | 2022 Q4 | ADEA, AIMC, ASC, CALM, DBI, EHAB, SAF, VVI, XPER | - | - | - |
| Sep 30 2022 | 2022 Q3 | ACHC, CCRN, MRCY, PETQ | - | - | - |
| Jun 30 2022 | 2022 Q2 | AZPN, CUBI, HURN, STAR, SUM, UTL, WWW | - | - | - |
| Mar 30 2022 | 2022 Q1 | AZEK, CALM, FLWS, JBGS, MTSI, NEX, OHI | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
Energy TransitionEnergy transition themes are reflected through infrastructure investments and companies positioned for the global push toward renewable energy, including exposure to energy services and LNG infrastructure where long-term dynamics look positive. |
Renewables Infrastructure Clean Energy Sustainability Climate |
HealthcareFund focuses exclusively on healthcare sector with concentrated portfolio of small-cap companies. Investment approach targets special situations within healthcare including spin-offs, asset sales, business model pivots, and new product launches. Portfolio includes pharmaceutical, medical device, biotechnology, and healthcare IT companies. |
Pharmaceuticals Medical Devices Biotechnology Healthcare IT Special Situations | |
Regional BanksFirst Citizens Bancshares was a contributor with solid results exceeding consensus expectations. Loans and deposits grew healthily while management continues steady share repurchases. The manager believes it's a high-quality regional bank with strong management that can unlock sustained long-term value. |
Banking Deposits Loans Buybacks Quality | |
SemiconductorsTaiwan Semiconductor represents the dominant manufacturer for leading fabless chip designers including NVIDIA, Apple, and Broadcom. The global arms race to develop artificial general intelligence will support multiple years of robust growth for foundries with leading-edge capabilities. |
Foundries Advanced Process AI Chips Manufacturing Technology Leadership | |
Small CapsConcentrated portfolio of small-cap companies with limited sell-side coverage and institutional ownership. Invests where most institutional managers cannot or will not participate, allowing for asymmetric return potential. 44% of Russell 2000 stocks have zero Wall Street coverage, creating mispriced opportunities. |
Russell 2000 Limited Coverage Institutional Asymmetric Mispriced | |
ValueBlue Tower focuses on value investing with international diversification. The manager notes that the valuation spread between cheap and expensive stocks is one of the greatest in market history, creating a favorable environment for their value-oriented approach. |
Value International Cheap Expensive Valuation | |
| 2025 Q3 |
Small CapsConcentrated portfolio of small-cap companies with limited sell-side coverage and institutional ownership. Invests where most institutional managers cannot or will not participate, allowing for asymmetric return potential. 44% of Russell 2000 stocks have zero Wall Street coverage, creating mispriced opportunities. |
Russell 2000 Limited Coverage Institutional Asymmetric Mispriced |
| 2025 Q2 |
SmallCaps |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Nov 4, 2025 | Fund Letters | Dave Adams | MTSI | MACOM Technology Solutions Holdings Inc. | Information Technology | Semiconductors | Bull | NASDAQ | 5G, Connectivity, data centers, Margins, Optical, Rf, semiconductors | Login |
| Nov 4, 2025 | Fund Letters | Dave Adams | COLB | Columbia Banking System Inc. | Financials | Banks | Bull | NASDAQ | banking, Capital, dividends, efficiency, EPS growth, merger, synergies | Login |
| Jul 22, 2025 | Fund Letters | Dave Adams | CHE | Chemed Corp. | Health Care | Health Care Services | Bull | NYSE | capital allocation, cashflow, Demand, Demographics, Hospice, leverage, Regulation, services, valuation | Login |
| Nov 4, 2025 | Fund Letters | Dave Adams | SUPN | Supernus Pharmaceuticals Inc. | Health Care | Biotechnology | Bull | NASDAQ | cash flow, CNS, growth, healthcare, innovation, pharmaceuticals, profitability | Login |
| Nov 4, 2025 | Fund Letters | Dave Adams | MRCY | Mercury Systems Inc. | Industrials | Aerospace & Defense | Bull | NASDAQ | Aerospace, backlog, Computing, Defense, Government, growth, Security | Login |
| TICKER | COMMENTARY |
|---|---|
| ACHC | Acadia Healthcare is a behavioral healthcare and substance abuse treatment services company. Shares sold off following mixed third quarter earnings results. While earnings beat estimates, management reduced forward guidance, causing the stock to sell-off. The company expects to reduce capex plans and focus on improving the operational strength of the business, which should improve free cash flow. We continue to believe the company is well positioned to be an important part of the solution to an unfortunately growing need for behavioral health services. |
| AEIS | Advanced Energy is helping its customers meet an insatiable demand for reliable computing capacity with its power management products for the data center. Other segments are also generally performing well. |
| AER | Airline leasing business AerCap contributed 1.4% to the Fund's returns |
| ATR | Aptar, a specialist in drug-delivery and consumer-dispensing solutions, experienced reduced demand from pharmaceutical customers due to inventory normalization in nasal decongestants |
| AUB | Atlantic Union Bankshares is a Virginia-based, bank holding company serving the Virginia, District of Columbia, Maryland and North Carolina markets. Concerns about the potential negative impact to banking customers in their served markets from DOGE-related cuts created an opportunity to build a position in the company. Given the company's diversified customer base, growing market share from increased scale following a meaningful market expanding acquisition and solid balance sheet, we believe that the DOGE-related overhang presents an attractive opportunity to own a high-quality bank led by a strong management team that should drive capital appreciation for shareholders. |
| CCRN | Our largest purchases in the quarter were PDEX, CCRN and NRC. We are revisiting the nurse staffing company we first owned back in 2019 and sold when COVID comps turned negative. At $8 / share and with 32M shares out, the company has a $260M market capitalization. At its most recent quarter, the company had $99M in net cash and no debt. In December it received a $20M termination payment following its failed $615M acquisition by AYA. This leaves it with over 40% of its market cap in cash and a pro forma enterprise value of $140M. |
| GTLS | Chart Industries Inc. makes specialized equipment for storing, transporting and processing gases for the LNG and hydrogen industries. GTLS was in the process of combing with Flowserve in a merger of equals. But on July 29, Baker Hughes agreed to acquire GTLS for $210.00 per share in cash – topping the Flowserve merger. |
| HAE | HAE entered the quarter with very low expectations, which helped drive a strong stock reaction following earnings. Guidance increased due to improving margins from initiatives. HAE will likely reach its long-term margin targets outlined at its prior investor day. While some parts of the business are still improving, strength in other areas has helped offset those challenges. Buybacks increased at these depressed valuation prices, enhancing shareholder value. Overall, we believe the setup remains attractive, supported by the company's underlying quality. |
| IDA | IDACORP is an Idaho-based, vertically integrated electric utility that provides service to customers in southern Idaho and eastern Oregon. Strong industrial load growth and robust population migration into its service territory, combined with critical regional transmission opportunities, underpin the company's robust five-year capital plan and double-digit rate base growth outlook. We believe this expansion, facilitated by a constructive regulatory environment and a proven management team, should drive consistent earnings growth and long-term capital appreciation for shareholders. |
| ITRI | Itron (Smart & Efficient Grids, US) had a disappointing quarter having lowered expectations for its order intake for the year at its Q3 results. This created uncertainty and reduced visibility for the market. |
| MTSI | At the beginning of the quarter, we added to our position in MACOM Technology, an analog semiconductor solutions provider. Later, the company bested expectations for revenues and earnings, with management increasing its guidance for the next quarter. That lifted its shares by 38%, and we trimmed our position at later peaks. |
| PRGO | Perrigo, an over-the-counter (OTC) pharmaceuticals manufacturer, saw shares decline following weak results in its infant formula and European OTC businesses. Long term, the company is conducting a strategic review of its infant formula business and will refocus on consumer-oriented operations by expanding the range of products offered alongside its store-brand OTC portfolio, actions we view positively. |
| WWW | The stock fell 32% this quarter, returning to our initial entry price. This business has two key footwear brands, Saucony in running and Merrill in outdoor. Saucony is an extremely strong brand among elite runners. The challenge for the company is translating that brand halo to casual runners and lifestyle consumers. Saucony sales grew 27% in the most recent quarter and over 40% the quarter before. An expansion of their retail footprint has helped. At 13x 2025 earnings, the risk-reward calculation is compelling and we have increased our position. |
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