Artemis US Select Fund
Q4 2025 update

Review of the quarter to 31 December 2025

During the fourth quarter, markets continued to be shaped by political developments. Donald Trump threatened additional tariffs on China in October. However, fears of escalation proved short-lived after a meeting between the US 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 became more opaque. This will undoubtedly be a key area as we move through 2026.

Returns were positive for the S&P 500 but they lagged behind those of other international markets. Notably, healthcare produced a strong quarter after a difficult period post-Covid, when it had been rocked by supply chain disruptions, inventory build-up and finally Trump’s second term in office.

It was a good quarter in terms of fund performance, with Artemis US Select returning 7.0% compared with 2.7% for the S&P 500 (net of 15% withholding tax) and 2.4% for the IA North America sector average. This leaves 2025 performance just ahead of the index (10.0% compared with 9.6%) and in the top quartile of our peer group. 

The main source of relative returns for the fund was our technology exposure, followed by healthcare and financials. There was no particular sector of note on the detracting side. 

Past performance is not a guide to the future. Source: Lipper Limited/Artemis as at 31 December 2025 for class I accumulation GBP. 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. Classes may have charges or a hedging approach different from those in the IA sector benchmark.

Positives

AMD: The chipmaker’s shares rallied through October after announcing a series of significant AI-related partnerships. Most notable was a multi-year agreement with OpenAI for up to 6GW of Instinct GPUs (graphics processing units), alongside Oracle’s 50,000-GPU supercluster and about $1bn of US government AI supercomputing investments. The market is beginning to appreciate the breadth of AMD’s AI exposure beyond CPUs (central processing units), positioning it as a credible second source alongside NVIDIA.

Cardinal: The healthcare provider produced an excellent set of results over the quarter, reporting adjusted EPS (earnings per share) of $2.55 versus $2.17 expected and raising full-year guidance to between $9.65 and $9.85. Growth was driven by new customer wins worth around $7bn and contributions from recent M&A, including Solaris Health. The market welcomed the beat-and-raise combination and management’s disciplined outlook for the year ahead. 

Micron: Tightening conditions in the memory market continued to benefit the chip provider. The company has sold out of its 2026 high-bandwidth memory supply and is now modelling gross margins above 50% into the 2026 financial year. These factors, combined with growing evidence of AI-driven demand for advanced memory, supported a constructive outlook for pricing and profitability. In the past, discipline around controlling supply was lacking. The industry as a whole has made progress in controlling this element, which reduces the prospect of a supply glut. 

Parker Hannifin: The provider of motion and control technologies was a strong contributor following a record fiscal Q1, with sales up 5% organically and adjusted EPS rising 16%. Management highlighted an increase in orders across the portfolio, supported by stronger aerospace, HVAC (heating, ventilation and air conditioning) and off-highway demand, which enabled an upgrade to the 2026 financial year margin outlook to 29.5%, 100bps ahead of last year. It also announced a deal just after it reported earnings, which the market viewed favourably. Management has an excellent track record of undertaking accretive acquisitions.

Eli Lilly: Expectations for the pharmaceutical’s obesity and diabetes franchise continued to rise, particularly Mounjaro where sales were 20% ahead of estimates. A number of sell-side analysts subsequently upgraded the stock, citing faster Medicare coverage and earlier launch timing. The development of Orforglipron, an oral weight-loss drug, represents another significant opportunity. 

Detractors

Axon: The Taser maker detracted over the quarter as results showed a modest softening in profitability, with gross margins dipping 70bps year on year to 60.1% as higher tariff costs and a greater contribution from lower-margin areas offset strength in software. Margins can be volatile and so long as the company is continuing to invest, we believe the combination of growth plus its highly defensive positioning should reward us over the long term.

Royal Caribbean: There was another strong quarter for the cruise operator, as its adjusted EPS of $5.75 beat expectations and it raised full-year guidance. However, shares softened as investors reacted to an initial 2026 EPS outlook below consensus and a softer Q4 yield guide of 2.2 to 2.7%. While underlying demand remains robust and booking momentum continues, the update prompted a short-term reset in expectations following a period of strong performance.

Live Nation: The ticketing operator delivered a mixed but broadly encouraging update. Q3 revenue grew 9% and EBITDA (earnings before interest, tax, depreciation and amortisation) rose 14%, with strength across concerts (up 9%), ticketing (up 14%) and sponsorship (up 11%). Lead indicators for 2026 remain strong. The softer elements were largely timing-related: EBIT growth for concerts slowed to 8% and fan growth to 2%, but on-site spending and advanced sales continue to track well. With no sign of consumer weakness, strong visibility into 2026 and ongoing structural tailwinds in global live entertainment, the shares’ post-results weakness appears overdone. 

Corteva: A decision to separate Corteva’s seed and crop protection businesses into two listed entities worked against the agricultural company. Although management positioned the move as creating strategic focus, investors were unsettled by the retention of legacy DuPont liabilities and a credit-rating watch from Fitch. Shares fell around 9% as the market sought greater clarity on the capital structure and governance of ‘New Corteva’. The separation may create long-term value, but near-term uncertainty dominated trading in October. We sold out of the position on the more uncertain outlook.

Activity

In terms of adjustments over the quarter, we sold out of Coca-Cola, power management company Eaton and disk-drive manufacturer Western Digital. We recycled this capital into a diverse group of names, opening positions in IQVIA (healthcare) and Applied Materials (semiconductor wafer fabrication equipment) and adding to Eli Lilly and nVent Electric (electrical infrastructure) among others.  

The largest change at a sector level involved increasing our exposure to pharmaceuticals and, to a lesser extent, semi-conductors. We made reductions in media & entertainment (Meta) and capital goods. This leaves the portfolio balanced, with underweights to technology and energy and overweights in industrials and healthcare. 

Outlook

We are excited about a number of themes as we move through 2026. While the market has become more discerning around the AI trade, we feel this should reward us on a relative basis. Over the past three years, we have displayed the ability to analyse and identify the outsized winners within this area. 

Beyond AI, we expect market breadth to increase, which opens up more opportunities for active stock selection. Healthcare is a sector we are bullish about and one we have been building exposure to following an extended period of underperformance. Meanwhile, we expect falling rates alongside deregulation (the effects of which have not fully been felt) to be a boon to certain areas of financials and in other sectors where M&A has stalled.