216-292-2950 [email protected]

Shaker Investments Small Cap Growth Update – 2Q 2024

The momentum in the equity markets persisted into the second quarter. The theme of a broadening rally played out in the first quarter of the year but quickly fizzled this quarter. The market was led almost entirely by the largest market capitalization technology stocks. Small caps continue to underperform as the belief that the Federal Reserve would keep interest rates “higher for longer” has been a constant drag on small cap equity investing for some time. But we are finally seeing a glimpse of sunshine on the horizon. Inflation has continued its downward trajectory and while not there yet, is moving towards 2%. We are now anticipating two rate cuts this year.


While the economy continues to show strength, there are some concerns that we are continuing to monitor. The US Economy grew at a solid pace as GDP registered an annual rate of 2.8% in second quarter. The Federal Reserve Bank of Atlanta is now forecasting 2.5% GDP growth in the third quarter of 2024. Job growth in July came in a bit disappointing as 114K new jobs were created, and unemployment increased from 4.1% to 4.3%. Up until now, the increase in unemployment reflected more people entering the workforce, rather than job losses. While inflation has eased substantially over the past year, it remains above the Feds objective of 2%. We will continue to monitor these metrics closely.

Discussion of Second Quarter Performance and Positions

For the quarter, the Shaker Small Cap Growth Strategy outperformed its benchmark by over 1% (net of fees). The strategy declined 1.8% versus the benchmark’s decline of 2.9%. Much of this outperformance can be attributed to our individual stock picks as well as our broad diversification across all sectors.

Sectors that lead performance during the quarter were financials, consumer staples, and consumer discretionary while technology, industrials, and real estate detracted most from returns. Stock specific contributors and detractors are shown below.

We continue to look for great companies at reasonable valuations that meet our criteria. The index reconstitution shook things up, but we are digesting and deploying research efforts appropriately.

Top Contributors

Sprouts Farmers Market (SFM) – On the top contributor list for the second quarter in a row, SFM is one of the nation’s fastest growing grocers with a unique open layout experience that inspires wellness.

Kirby Corp (KEX) – KEX is the nation’s largest barge transportation company along the Mississippi.

Ollie’s Bargain Outlet Holdings (OLLI) – Operating a chain of closeout retail stores, OLLI sells a variety of discounted items and is operating at pre-pandemic levels.

Camtek Ltd. (CAMT) – Camtek is a provider of advanced inspection and metrology systems which include integrated hardware & software. These systems are used in semiconductor and flat panel display manufacturing to improve yields, quality and reliability.

Napco Security Systems (NSSC) – NSSC manufactures and designs electronic security devices, cellular communication services, and school safety solutions.

Top Detractors

Qualys Inc (QLYS) – QLYS is a leader in the cybersecurity space with a core focus on software vulnerability management, identifying and remediating vulnerabilities to prevent cybersecurity breaches.

CoStar Group (CSGP) – CSGP is a leading global provider of commercial and residential real estate information, analytics, and online marketplaces.

Dexcom (DXCM) – DXCM is a pioneer in the continuing glucose monitoring system technology, developing innovating technology that transforms how people manage their diabetes.

Installed Building Products (IBP) – IBP is one of the best insulation contractors for residential and commercial builders.

DoubleVerify Holdings Inc (DV) – DV provides authentication & verification services for digital advertising, making the digital advertising environment stronger and more secure.

Changes in the Portfolio

During the quarter we initiated on six new companies and exited nine. Two of our new positions came in the technology sector, Axcelis Technologies (ACLS) and Veeco Instruments (VECO). Axcelis designs, manufactures and services ion implantation and other process tools used to fabricate semiconductor chips. Veeco is a global provider of semiconductor capital equipment. Semiconductors, also known as microchips or integrated circuits, are the fundamental building blocks of the digital world and are essential for almost any device with an on/off switch. Both technology companies are positioned to accelerate growth as AI continues to develop.

We exited two technology companies during the quarter: Super Micro Computer (SMCI) and ON Semiconductor (ON). A strong long-term holding, ON had benefited from strong demand in their auto EV battery business. Our analysts saw some weakness in the company’s growth prospect and ultimately felt there were better opportunities in technology. SMCI was a name we had owned due to its rapid growth in AI. Due to its rapid growth, the company grew out of the small-cap indices, and we sold the position.

Another portfolio upgrade this quarter was a name we had owned a few years ago, Argan Inc. (AGX). AGX specializes in building energy and industrial bases in three main segments: power industry, industrial construction, and telecommunications infrastructure. With energy projected to surge with the rise of AI and electric vehicles, demand for AGX’s services should accelerate.
Although we have encountered obstacles with negative returns this quarter, we remain positive about the future as managers specializing in small cap growth. Our team’s dedication and hard work have been truly remarkable, evident in their perseverance and commitment to our process. We eagerly anticipate overcoming the challenges this quarter presents and continuously enhancing our portfolio throughout the journey.

Download PDF Here

It's a Popup Test

Andrew Frye

Research Analyst

Andrew first joined Shaker in 2022 as an intern on the research team. Following his internship, Andrew accepted a full-time position with Shaker Investments as a Research Analyst. Andrew’s primary role is to work with the Portfolio Managers on monitoring existing ideas, tracking competitors, and new idea generation. Andrew brings an analytical approach to modeling companies.

Prior to joining Shaker Andrew worked as a summer analyst intern with Progressive Insurance in the Real Estate Control Group. Andrew received his BA in Economics, Political Science, and Business Management and his Masters of Business Analytics and Intelligence from Case Western Reserve University.

Email Andrew Frye

Ashley Arsena, CFP®

Senior Business Development and Client Service Officer

Ashley's journey with Shaker began in 2016 where she quickly established herself to be an integral part of the team. From handling operations to executing trades and providing top-notch client services, Ashley has showcased her versatile skill set. Currently, a vital member of the Business Development and Client Services team, she dedicates her days to building strong relationships with both existing and potential clients.

Ashley is a CERTIFIED FINANCIAL PLANNER™ professional. She has earned a Certificate in Financial Planning from New York University School of Professional Studies and received her BA in Business Management from Baldwin Wallace University with a minor in Human Resources.

Ashley was recognized on AdvisorHub's 100 Women Advisors to Watch in 2024 (#29) and Top 50 Woman Advisors to Watch in 2023 (#48). She has also been recognized as a Five Star Wealth Manager by Five Star Professional in 2024.

Ashley currently serves on the board of Hope for Kids Geauga. She is also an active member of CFA Society of Cleveland, serving as a member of the Women's Advisory Committee.

Ashley lives in Bainbridge with her wife Jessica and young children Connor and Avery.

Email Ashley Arsena
*Participating in the ranking is free and AdvisorHub received no compensation from participating advisors. To read more about Advisor Hub's methodology and to view the full list please click here.

Chris Hemmelgarn

Portfolio Manager and Research Analyst

​Chris is a Portfolio Manager and Research Analyst at Shaker Investments. He is responsible for researching new and existing investments as well as portfolio management at Shaker Investments. He joined Shaker in 2017 and covers a range of companies and sectors with a focus on technology, financial services, energy, and utilities.

Prior to joining Shaker Investments, Chris worked in Sell-Side Research as a Vice President at Barclays covering Semiconductors. His primary responsibilities included company and market analysis and forecasting, publishing research, client marketing, and relationship management of company and industry contacts. He also worked as an Associate at Morgan Stanley developing and analyzing business management metrics.

Chris earned his MBA (with Distinction) specializing in Finance and Corporate Finance at the NYU Stern School of Business. He also received his BSFS in International Politics from Georgetown University.

Chris is an avid golfer and cook, and is learning the joy of maintaining a 100-year-old home after a decade plus in Manhattan apartments.

Email Chris Hemmelgarn

Sasha A. Kostadinov, CFA

Portfolio Manager and Research Analyst

Sasha is co-manager of the Small Cap Portfolio and conducts research on consumer discretionary, consumer staples, materials, and health care sectors for all of the portfolios at Shaker Investments. He has spent more than twenty years working in the equity markets, the last nineteen with Shaker Investments.

Prior to joining Shaker Investments, he was a research analyst at Clarion Group, a Cleveland, Ohio-based long-short hedge fund. Prior to that, he was a research analyst at KeyBanc Capital Markets (formerly McDonald Investments). Prior to that, Sasha was a Financial Consultant at Smith Barney.

Sasha is a holder of the Chartered Financial Analyst designation and received his BA in Economics and Political Science and MA in Economics at Cleveland State University.

He and his wife, Ruthann, reside in Lakewood with his guitars.

Email Sasha A. Kostadinov, CFA

Raymond J. Rund

Managing Director, Senior Research Analyst

Ray is the Senior Research Analyst and has been covering the technology and industrials sectors since joining Shaker Investments in 1996. 

Prior to joining Shaker Investments, Ray was a General Partner in an early-stage venture capital partnership for nine years, where he organized the first round of venture funding for RF Micro Devices and served on their board for six years prior to the company’s IPO. In 2015 RF Micro merged with Triquint Semiconductor to become Qorvo, a leading supplier of integrated circuits used in wireless communications.  Ray also headed marketing at Keithley Instruments, was a consultant at McKinsey & Company, and worked in engineering and marketing for Intel. Early in his career Ray worked as an engineer for Combustion Engineering and Westinghouse Electric in Pittsburgh.

Ray currently serves on the Investment Committee of the Harvard Business School Club of Northeast Ohio, is a member of the Finance and Investment Committee of the Jewish Federation of Cleveland, and serves on and was former chair of the Retirement Fund Committee for the Jewish Federation of Cleveland.

Ray earned his BS, magna cum laude in Engineering & Applied Science at Yale University, an MS in Electrical and Computer Engineering at Carnegie Mellon University, and an MBA from Harvard University.

Ray is a long time Clevelander, and an avid Lake Erie sailor. He and his wife Jeanne live in Shaker Heights where they enjoy being close to their three adult children and grandson. 

Email Raymond J. Rund

Kacie Wick

Chief Compliance Officer

Kacie joined Shaker Investments in 2011 as the company’s controller. In 2022, Kacie was promoted to Chief Compliance Officer. She brings over 20 years of professional experience in operational and financial management for various for-profit and non-profit organizations in Boston and Cleveland.

Prior to joining Shaker Investments, she was Director of Clinical Research Administrative Operations in the School of Medicine at Case Western Research University where she managed a research grant portfolio of over $40 million. She has also worked as the Director of Finance for the Weatherhead School of Business at Case Western Reserve University, Director of Operations at Village Preparatory School; Operations Manager at Northeast Ohio Council on Higher Education; and Center Financial Manager at Education Development Center.

Kacie received her Masters of Accounting from Case Western Reserve University, where she graduated magna cum laude and her BS in Management from Babson College in Wellesley, MA. Kacie is currently working towards her Investment Advisor Certified Compliance Professional (IACCP) designation.

Kacie currently serves as a trustee for the Tod Homestead Cemetery in Youngstown, Ohio and is a former treasurer for her local girl scout Troop 70204 and the Onaway PTO. She lives in Shaker Heights with her two daughters.

Email Kacie Wick

Brandon A. Hemmelgarn

Co-Chief Investment Officer and Portfolio Manager

Brandon is the co-Chief Investment Officer at Shaker Investments. With over 14 years of industry experience, Brandon leads the investment team at the firm. He is also responsible for researching new and existing investments and portfolio management for all three of the firm’s strategies. Prior to being promoted to co-Chief Investment Officer in 2020, Brandon was a Portfolio Manager and Research Analyst at the firm for 8 years. He covers a range of companies and sectors including technology, consumer products and services, industrials, and materials.

Prior to joining Shaker, Brandon worked on the investment team at Audax Group, a Boston-based private equity firm focused on growing middle market companies.

Brandon is a former board member of the Washington Association of Money Managers and the Private Equity Association of Boston.

Brandon received his BA, summa cum laude, in Economics from Princeton University and is a Registered Investment Advisor Representative (FINRA Series 65). He and his wife, Shelby, reside in Arlington, Virginia, with their sons Thomas and Ted. When time permits, Brandon still enjoys lacing up his skates and taking to the ice rink.

Email Brandon Hemmelgarn

Bradley Wheeler

President

Brad Wheeler is the President of Shaker Investments.  With more than twenty-five years of experience in the financial service industry, he is responsible for overseeing the firm’s strategy, business development and operations.  Prior to being named President, Brad served as Vice President and Head of Business Development for Shaker.  He has spent over twenty years in the financial service industry calling on endowments, pension funds and institutional investors.

Prior to joining Shaker Investments, Brad was a founding partner at Cleveland Research Company where he developed institutional relationships with clients in Boston and opened the firm’s London office.  Prior to that, Brad was a partner with FTN/Midwest Research and worked at US Bank in commercial banking.

Brad is currently a member of the Association for Corporate Growth in Greater Cleveland.  He is the prior President of the Shaker Youth Hockey Association and Shaker Heights High School Sports Boosters.

Brad received his BA in Public Finance from Miami University and an MBA from Case Western Reserve University, Weatherhead School of Management.

He and his wife, Laura, reside in Shaker Heights and have two adult children.

Email Bradley J. Wheeler

Edward P. Hemmelgarn

CEO & Co-Chief Investment Officer

Edward Hemmelgarn is the CEO and Co-Chief Investment Officer at Shaker  Investments. Edward’s primary focus is leading the investment team as well as portfolio management for all three of Shaker’s strategies. His research focus includes healthcare, financial services, and real estate.

Prior to founding Shaker Investments in 1991, Edward was the Chief Financial Officer of Retail Banking at Ameritrust Corporation (now KeyBank). Prior to that, Edward worked at Ernst & Young focusing on mergers and acquisitions and strategic and financial management consulting.

He received a BA in Chemistry and a MBA from the Case Western Reserve University, where he also served as an instructor for numerous courses. Mr. Hemmelgarn is a former CPA.

Edward is currently a board member at the Cleveland Museum of Art. Edward is also on the Visiting Committee of Case Western Reserve University’s College of Arts and Sciences. He is a past recipient of the Outstanding Alumni Award from Case Western Reserve University’s Weatherhead School of Business. He was named Accounting Alumnus of the Year in 2003, and a recipient of Case Western Reserve University’s Department of Chemistry’s Distinguished Alumnus Award in 2016.

Edward and his wife, Jan, reside in Shaker Heights.

Email Edward P. Hemmelgarn