For the quarter ended September 30, 2025, the Fund outperformed the Index on a NAV basis, due to stock selection. Positive stock selection in the technology, financials, and consumer staples sectors were the leading contributors to outperformance. An overall negative allocation effect, specifically cash, modestly detracted from performance for the period.
Top individual contributors included Tower Semiconductor Ltd., Lumentum Holdings, Inc., and Applied Digital Corp.
Tower Semiconductor Ltd. (TSEM) a specialty manufacturer of customized analog semiconductors used in diverse industries including automotive, medical, consumer, and industrial markets. Tower Semiconductor reported 2Q25 revenue of $372.1 million, a 6% year-over-year increase, exceeding estimates. TSEM’s exposure to the continuing artificial intelligence infrastructure buildout, combined with a solid balance sheet and history of developing profitable strategic partnerships makes the stock a solid holding with a meaningful weight in our portfolio, although we are mindful of the valuation expansion.
Lumentum Holdings, Inc. (LITE), a provider of optical and photonic products utilized in cloud, networking and industrial applications, saw its stock price rise over 70% during the third quarter and was on our list of top-performers yet again. LITE’s Cloud Light data center unit, which supports technologies critical for AI and cloud infrastructure, continued to grow and LITE exceeded company guidance for the fiscal fourth quarter (June 2025) and gave initial 2026 guidance that exceeded consensus estimates. Although we continue to hold the stock and believe LITE is well positioned for continued near and mid-term growth from solid demand, we have trimmed the position given the substantial valuation expansion and higher expectations.
Applied Digital Corp. (APLD), a company that engages in the development and operation of data centers which provide computing power to both crypto mining, High Performance Computing (HPC) and AI customers, was a top contributor for the third quarter. After adding to the position in early July, the stock more than doubled as expectations of another HPC agreement by the end of the year for its 280MW Harwood, ND site seemed imminent. As APLD continues to reduce build time and pull from an increasingly knowledgeable labor force, we believe the company is well positioned to build additional marketable sites and expand their pipeline. We continue to hold our position.
Top individual detractors to performance included Bloom Energy Corp., Kura Sushi USA, Inc., and CAVA Group, Inc.
Bloom Energy Corp. (BE) manufactures and installs solid oxide fuel-cell based power generation platforms which converts standard low-pressure natural gas or biogas into electricity. The stock represented a 1.07% weighting within the Russell 2000 Growth benchmark at the end of the quarter and the stock continued to re-rate up based on strong demand and positioning within the AI power generation segment. We bought the stock during the quarter however our relative underweight (0.76% versus 1.07% at the end of the quarter) detracted from performance during the quarter. We continue to hold the name and recognize the near-term strong demand trends in power generation benefitting BE.
Kura Sushi USA, Inc. (KRUS), an operator of sushi restaurants emphasizing technology to create a unique customer experience, underperformed for the quarter. Negative sentiment across the restaurant sector coupled with tariff concerns and comparable sales headwinds impacted KRUS stock performance during the quarter. We continue to believe unit development will remain Kura’s most meaningful driver of revenue growth, with annual expansion in excess of 20% square footage growth. However, given the current overall consumer weakness, investor patience has waned. At quarter end we held our position and are monitoring accordingly.
CAVA Group, Inc. (CAVA) an operator of Mediterranean inspired fast-casual restaurants and producer of select dips, spreads, and dressings, was a detractor. Following disappointing 2Q25 results that saw comparable sales and revenue miss analyst estimates, CAVA cut its full year same-store sales growth forecast. This provided insight into potential 3Q25 softness and investors sold the stock as a result. We trimmed our position during the quarter and continue to hold the name on a short leash.
Actively managed small cap growth strategy driven by bottom-up fundamental research seeking stocks with superior revenue and earnings potential and sustainable valuations.
Key takeaways
Portfolio review
For the quarter ended September 30, 2025, the Fund outperformed the Index on a NAV basis, due to stock selection. Positive stock selection in the technology, financials, and consumer staples sectors were the leading contributors to outperformance. An overall negative allocation effect, specifically cash, modestly detracted from performance for the period.
Top individual contributors included Tower Semiconductor Ltd., Lumentum Holdings, Inc., and Applied Digital Corp.
Tower Semiconductor Ltd. (TSEM) a specialty manufacturer of customized analog semiconductors used in diverse industries including automotive, medical, consumer, and industrial markets. Tower Semiconductor reported 2Q25 revenue of $372.1 million, a 6% year-over-year increase, exceeding estimates. TSEM’s exposure to the continuing artificial intelligence infrastructure buildout, combined with a solid balance sheet and history of developing profitable strategic partnerships makes the stock a solid holding with a meaningful weight in our portfolio, although we are mindful of the valuation expansion.
Lumentum Holdings, Inc. (LITE), a provider of optical and photonic products utilized in cloud, networking and industrial applications, saw its stock price rise over 70% during the third quarter and was on our list of top-performers yet again. LITE’s Cloud Light data center unit, which supports technologies critical for AI and cloud infrastructure, continued to grow and LITE exceeded company guidance for the fiscal fourth quarter (June 2025) and gave initial 2026 guidance that exceeded consensus estimates. Although we continue to hold the stock and believe LITE is well positioned for continued near and mid-term growth from solid demand, we have trimmed the position given the substantial valuation expansion and higher expectations.
Applied Digital Corp. (APLD), a company that engages in the development and operation of data centers which provide computing power to both crypto mining, High Performance Computing (HPC) and AI customers, was a top contributor for the third quarter. After adding to the position in early July, the stock more than doubled as expectations of another HPC agreement by the end of the year for its 280MW Harwood, ND site seemed imminent. As APLD continues to reduce build time and pull from an increasingly knowledgeable labor force, we believe the company is well positioned to build additional marketable sites and expand their pipeline. We continue to hold our position.
Top individual detractors to performance included Bloom Energy Corp., Kura Sushi USA, Inc., and CAVA Group, Inc.
Bloom Energy Corp. (BE) manufactures and installs solid oxide fuel-cell based power generation platforms which converts standard low-pressure natural gas or biogas into electricity. The stock represented a 1.07% weighting within the Russell 2000 Growth benchmark at the end of the quarter and the stock continued to re-rate up based on strong demand and positioning within the AI power generation segment. We bought the stock during the quarter however our relative underweight (0.76% versus 1.07% at the end of the quarter) detracted from performance during the quarter. We continue to hold the name and recognize the near-term strong demand trends in power generation benefitting BE.
Kura Sushi USA, Inc. (KRUS), an operator of sushi restaurants emphasizing technology to create a unique customer experience, underperformed for the quarter. Negative sentiment across the restaurant sector coupled with tariff concerns and comparable sales headwinds impacted KRUS stock performance during the quarter. We continue to believe unit development will remain Kura’s most meaningful driver of revenue growth, with annual expansion in excess of 20% square footage growth. However, given the current overall consumer weakness, investor patience has waned. At quarter end we held our position and are monitoring accordingly.
CAVA Group, Inc. (CAVA) an operator of Mediterranean inspired fast-casual restaurants and producer of select dips, spreads, and dressings, was a detractor. Following disappointing 2Q25 results that saw comparable sales and revenue miss analyst estimates, CAVA cut its full year same-store sales growth forecast. This provided insight into potential 3Q25 softness and investors sold the stock as a result. We trimmed our position during the quarter and continue to hold the name on a short leash.
Current strategy and outlook
Small cap stocks have rallied with the Russell 2000 Growth posting a gain of over 43% since the April 8, 2025 lows, through the end of the third quarter. Even in the face of continued tariff threats, investors and company managements appear to have gained comfort with several tariff deals now in place, although there is still an uncertain outcome with China. In the face of mixed inflationary data that saw a brief reacceleration of headline Consumer Price Index (CPI) and core CPI holding steady in August, several economic reports during the quarter were indicative of a slowing economy. None was more telling than the latest jobs report showing fewer openings and jobs added. This forced the U.S. Federal Reserve to consider their dual mandate and ultimately led to a 25 basis points reduction in the fed funds rate in mid-September, the first since the start of the easing cycle last December.
As it stands today, we believe small caps are poised to continue their move upwards. A Fed easing cycle typically leads to an acceleration in earnings for small caps. Projected earnings growth for small caps is expected to surpass large caps in 4Q25, 2026 and 2027. This favorable backdrop coupled with substantial discounted valuations relative to large caps have ignited a strong small cap rally over the last several months.
We continue to focus on individual company fundamental factors and seek to identify companies that can grow revenue, expand margins and produce solid cash flow and earnings, all while seeking sustainable valuations. The momentum factor resulting from the ongoing AI theme, combined with Fed easing, has elevated many stock prices and valuations. In this environment, we remain cognizant of the risk versus reward balance within the portfolio and at the individual company level. However, we are starting to see the early signs of a favorable backdrop for some of our more cyclical oriented holdings that can provide substantial “earnings torque” and are currently trading within an attractive valuation bandwidth.
As mentioned last quarter, we continue to witness unprecedented dynamics within our Russell 2000 Growth benchmark that we have not seen in the last 30 years of managing small cap growth.
Holdings detail
Companies mentioned in this report—percentage of portfolio investments, as of 09/30/25: Tower Semiconductor Ltd. 2.65%, Lumentum Holdings, Inc. 1.19%, Applied Digital Corp. 1.11%, Bloom Energy Corp. 0.89%, Kura Sushi USA, Inc. 0.74%, and CAVA Group, Inc. 0.33%; 0% indicates that the security is no longer in the Fund. Portfolio holdings are subject to daily change.
Related Resources
Voya Small Cap Growth Fund Fact Sheet
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