Artemis US Smaller Companies Fund
Q2 2025 update

Fund objective

The fund’s objective is to grow capital over a five-year period. 

Performance 

The fund returned 8.5% over the quarter, beating its benchmarks the Russell 2000 index¹ and IA North American Smaller Companies sector², which both returned 2.1% (all in sterling terms).

For full five-year calendar year performance, see below. Please remember that past performance is not a guide to the future.

Calendar year performance (%)

Past performance is not a guide to the future. Source: Artemis/Lipper Limited, class I accumulation units, GBP to 30 June 2025. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. Our benchmark index is the Russell 2000 TR. *As at 31 Oct 24 the benchmark changed to Russell 2000 NTR (WHT 15%) GBP. Returns up to 31 Oct 24 reflect those of the Russell 2000 TR.

Market review

In the second quarter of 2025, despite sweeping US tariffs (taxes on imports), escalating tensions in the Middle East and growing concerns over US debt sustainability, global stock markets delivered strong returns: the S&P 500, the index tracking the leading companies in the US, climbed 10.8% (in dollar terms)³.

It began with a sharp sell-off of shares following the announcement of "reciprocal" tariffs by the US on 2 April; however, markets rebounded strongly after the US administration delayed enforcement⁴. Investor sentiment was further buoyed by robust economic data, including April’s jobs report⁵ and softer-than-expected inflation⁶. 

However, credit ratings agency Moody’s downgraded the US’s ability to repay its debt and long-dated Treasury yields (interest paid on US bonds with more than 10 years until maturity) edged higher (bond yields have an inverse relationship with prices)⁷. 

Despite these challenges, the resilience of economic activity, combined with the absence of any tariff-induced inflation, provided a supportive backdrop for shares. However, the US dollar saw broad-based weakness, recording its worst H1 performance since 1973⁸.

Positives

Comfort Systems: We added to the building-and-service provider on weakness caused by DeepSeek (a Chinese artificial intelligence research company which, when first launched earlier this year, was seen as posing a threat to the US’s dominance in this area) and tariffs (taxes on imports). Management cited strong demand persisting across tech/data centres, healthcare and semi fab (the factories where semiconductors are made) markets, with no current signs of slowdown in capital expenditure or customer activity. 

Axon: The maker of Taser and police body-cameras continues to perform extremely well⁹. We believe its suite of AI products including AI assistance, document drafting and real-time translation for officers in the field will likely continue to benefit from a more intense focus on border security under US President Donald Trump. The company announced Draft One (the AI police-report drafter) is the fastest-adopted software product in its history. 

Mirion Technologies: The radiation detection, measurement and monitoring business reported strong order growth. Overall, we believe the long-term growth case looks good and the risk/reward trade-off remains attractive.

Core Scientific: The company builds and operates data centres. Towards the end of June, news was released that Core Scientific was in talks to be acquired by CoreWeave¹⁰.

Negatives

Bellring Brands: We sold out of the premier protein-shake producer as we became concerned about competition, even though current trends remain strong.

Globus Medical: The company reported temporary disruptions in its musculoskeletal segment (dealing with issues related to bones, joints, muscles and nerves) and slower-than-expected robotics deal closures. We believe that while some challenges persist, most operational issues have been resolved and the company can meet its targets. 

First Industrial Realty: The real estate investment trust announced revenues came in below expectations, but said it expects to meet full-year profit targets. 

CBIZ: The provider of professional services, including accounting, benefits and insurance, reported towards the beginning of the quarter, when it lowered its revenue target for the full year. 

Purchases

On the purchases side, we added industrial products company Crane, construction and engineering company Primoris, medical laboratories company Quest Diagnostics and topped up our holding in investment banking and capital markets firm Jefferies.

Sales

As mentioned, we sold out of Bellring Brands, took profits in Axon and Comfort Systems and reduced our holding in genetic testing and diagnostics company Natera on what we felt was a lower risk/reward outlook. 

Outlook

With smaller companies in the US having fallen significantly during the turmoil in the first half of the year¹¹, we now seem to be in a more supportive environment. Fears of the sharp deterioration in economic data have been unfounded¹². 

Looking forward, we believe there are reasons to be optimistic. US smaller companies are relatively cheap¹³, earnings are set to accelerate¹⁴ and they provide a spread of risk to what one would obtain though exposure to the S&P 500¹⁵.