Artemis Funds (Lux) – US Smaller Companies
Q4 2025 update

Artemis Funds (Lux) – US Smaller Companies is an actively managed fund. The fund's objective is to increase the value of shareholders’ investments primarily through capital growth. The fund invests principally in equities of smaller companies that are listed on a recognised stock exchange in the USA. Typically, these are companies with a market capitalisation of less than $20bn at the time of purchase.  

On 12 January 2026, the market capitalisation restriction limits for the Artemis US Smaller Companies Fund and Artemis Funds (Lux) – US Smaller Companies were amended. The funds now commit to principally invest in shares of smaller companies which, when first acquired, have a market value of less than $20bn, previously $10bn. 

Review of the quarter to 31 December 2025

During the fourth quarter, markets continued to be shaped by political developments, although there was less policy uncertainty.  

Donald Trump threatened additional tariffs on China in October. However, fears of escalation proved short-lived after a meeting between the president and Chinese premier Xi Jinping led to an extension of the tariff truce and a partial rollback of import levies applied to synthetic opioid fentanyl. This helped stabilise risk sentiment into year-end.  

Meanwhile, US labour market data continued to soften through the quarter, with unemployment rising to a four-year high by November, reinforcing expectations that monetary policy had shifted decisively towards easing. The Federal Reserve delivered its third rate cut in quick succession in December, bringing total easing to 75bps since September, which provided a supportive backdrop for equities late in the quarter. 

For markets, the focus was twofold: first the health of the US economy and second a more discerning view of artificial intelligence (AI) and its buildout. Unrelenting optimism turned more cautious as funding for the buildout became more opaque. This will undoubtedly be a key area as we move through 2026.  

Q4 topped off a strange year for the Russell 2000. Concentration of returns is primarily associated with the S&P 500 but was also a feature for the US small-cap index during 2025. While the 20 top-performing stocks only account for 5.2% of the index by weight, they contributed approximately 43% of the index return over the year. This occurred alongside a strong showing from low-quality stocks and micro caps, in which small-cap managers (including us) are typically underweight. The result of all this was one of the poorest years for small-cap active managers in a decade. We managed to keep up with our benchmark in this environment, despite our preference for quality and mid-size smaller companies. 

Over the final quarter of the year, Artemis (Lux) US Smaller Companies made 4.9%, beating its Russell 2000 benchmark’s gain of 2.1%.  

Past performance is not a guide to the future. Source: Lipper Limited/Artemis as at 31 December 2025 for class I Acc USD. *As at 6 Aug 2024 the benchmark changed to Russell 2000 NTR (Standard). Returns up to 6 Aug 2024 reflect those of the Russell 2000 TR. 

Fund 10-year discrete performance

Past performance is not a guide to the future. Source: Lipper Limited/Artemis as at 31 December 2025 for class I Acc USD. 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. *As at 6 Aug 24 the benchmark changed to Russell 2000 NTR (Standard). Returns up to 6 Aug 24 reflect those of the Russell 2000 TR. 

Positives

Coherent: The networking business has been one of our top contributors over the year and returned 75.0% in Q4. This was primarily driven by increased demand for its network cabling as well as margin improvements. For Q3 earnings, it delivered 19% year-on-year revenue growth, as well as a notable 200bps improvement in gross margins, supported by pricing optimisation and operational efficiencies across its industrial and data centre/communications segments. Stronger-than-expected performance in Transceivers, which provides critical infrastructure for high bandwidth AI networking, was a key driver of sentiment.  

Hudbay Minerals: Hudbay’s shares recovered over Q4 2025 as investors looked through a weaker third-quarter earnings print that was affected by well-flagged operational disruptions, including Canadian wildfires and labour strikes in Peru. Copper production and sales volumes came in below expectations, although gold output remained solid and some deferred sales were expected to reverse into the fourth quarter. While full-year production guidance was reaffirmed at the lower end of the range, management delivered a meaningful improvement in consolidated cash-cost guidance, reflecting stronger co-product gold revenues. The market viewed the results as transitory rather than thesis-changing, with Hudbay’s copper-gold mix, favourable operating jurisdictions and leverage to higher commodity prices supporting improved sentiment as the quarter progressed. 

Bloom Energy: This was our top performing name over the year, returning approximately 4 percentage points in relative gains (80bps in Q4). The company’s Q3 results showed a strong year-on-year improvement in product gross profit, supported by increased demand, favourable pricing linked to a hyperscaler joint venture and improved manufacturing efficiency. While the quarter included a $21.8m inventory write-down, this was more than offset by the strength in the core business. Revenue of approximately $519m was around 20% ahead of estimates. This was bolstered by the recent announcement that alternative asset management provider Brookfield plans to invest up to $5bn in data centre infrastructure, with Bloom being the chosen energy provider. As a reminder, the reason for enthusiasm around Bloom is the type of power it can offer: clean, efficient, always on and at scale. This makes it well suited to powering data centres. 

Globus Medical: Globus Medical delivered strong share price performance during Q4, following a robust earnings update that highlighted accelerating profitability and cash generation. The company reported record free cashflow, significant year-on-year earnings per share growth and announced share buybacks, reinforcing confidence in balance sheet strength and capital allocation. It is executing well, driving margins higher, communicating effectively with investors and signalling that M&A activity is paused for now. We have updated our risk/reward framework based on stronger execution and margin performance. 

Hecla Mining: The precious metals miner (largely silver) benefited from higher prices and operational outperformance, with revenue and gross profit rising sharply on increased silver and gold volumes. Earnings and free cashflow results exceeded expectations, supporting confidence in the company’s deleveraging trajectory and the potential to move to a net-cash position. These factors helped offset valuation concerns and drove outperformance during the quarter. 

Negatives

Wolverine Worldwide: The footwear company underperformed despite a moderately better-than-expected third-quarter earnings release, as investors remained cautious around execution risk and balance sheet pressures. While gross margins improved meaningfully, elevated inventory levels and net debt constrained confidence. Ongoing brand repositioning efforts and exposure to tariff headwinds further weighed on sentiment. We sold the position over the quarter.  

Axon: The maker of Taser detracted over the quarter as results showed a modest softening in profitability. Gross margins dipped by 70bps year-on-year to 60.1% as higher tariff costs and a greater contribution from lower-margin platform solutions offset strength in software. Expectations were elevated heading into the print, so this reflects a high bar more than a deterioration in fundamentals. This quarter marked Axon's seventh consecutive quarter of year-on-year growth above 30%, which is exceptional. We remain confident in the long-term trajectory of the business but are more cautious near term and therefore we have not added on weakness. 

Construction Partners: The road builder lagged behind during the quarter as investor focus shifted from headline growth to execution risk. Record results were supported by acquisition activity and strong Sunbelt demand (the south and south-west of the US), but concerns emerged around integration complexity and the capital required to expand into new geographies. The elevated pace of M&A introduced uncertainty around returns and margins.  

Jefferies: The US bank underperformed despite solid revenue growth in its investment banking and equities sectors, as weakness in fixed income trading and mark-to-market losses (exposure to car-parts provider First Brand) in asset management weighed on overall results. We reduced our exposure in light of the more challenged near-term outlook but still hold a position. Deregulation is a more positive outcome of a Trump presidency, the effects of which haven’t fully been felt, and the investment banking sector should benefit from increased M&A activity. 

Activity

In terms of adjustments over the quarter, we trimmed our exposure to some areas that had performed particularly well, especially within our AI exposure. Bloom Energy, Western Digital, Iren and Coherent all fall into this camp. 

We recycled this capital into an eclectic mix of businesses. We added Commercial Metals (steel producer), Elanco (animal health), First Majestic Silver (miner), First Horizon (regional bank) and Wayfair (household goods) to name a few.  

Our top sector bets within the portfolio are industrials, with basic resources now our second-largest exposure on a relative basis. Underweights include financials, consumer discretionary and energy. 

Outlook

The year ahead presents a few interesting themes for those looking at US smaller companies: 

Earnings acceleration: A rebound in profits is expected to place smaller companies at the front of the earnings growth picture. 

Easing financial conditions: The Federal Reserve is expected to cut three times in 2026, which should mitigate refinancing risk for smaller companies which tend to hold a higher level of floating-rate debt.

Capex: Smaller companies growth tends to be highly correlated to capex growth, which is expected to remain robust through the year. 

Deregulation: A recovery in the M&A cycle would work in favour of certain sectors. 

Positioning: US smaller companies remain heavily under-owned by active managers.   

We will continue to follow our tried-and-tested investment process to alight upon businesses with a favourable risk/reward trade-off.