SECTOR — GENERAL INVESTING 

TWST: You’re marking the 15-year anniversary of Grandeur Peak this summer. Introduce our readers to the firm, and in particular, tell us why the focus has always been on the small-cap space as well as looking at a global investment universe.

Mr. Gardiner: I’d be happy to do that. I started as a 16-year-old kid at a firm called Wasatch Advisors, and I was there over a time that spanned 30 years. Wasatch was a pioneer in small cap in the U.S. before small cap was even a category. I spent quite a long time there, and was a Principal there. When we left 15 years ago to start Grandeur Peak, we brought our small-cap expertise with us. It will always be our heritage and it’s what we were good at.

The reason we think global investing is such an interesting space is, first of all, it’s an enormous universe to choose from. There are 35,000 listed companies. The S&P 500 or the Fortune 1000 are just a few thousand big companies. The vast majority in our universe are small, micro-cap, and mid-cap, so there’s a huge opportunity set of investments to pick from for us, which is attractive. We’re trying to find the best companies, which I can talk to later, but there are thousands of interesting companies.

The second thing that’s really important is it’s not a very well- followed space for a lot of reasons. These small-cap companies, investment banks can’t really make much money on them unless they’re raising money doing an IPO or a secondary, because they don’t make much money trading and they’re not that liquid. And it’s a lot of work for their analysts, and so a lot of the financial world doesn’t really follow these companies. Our companies have far fewer analysts following them than the bigger cap companies.

If you’re a big mutual fund company, your big funds can’t invest in these small companies because of liquidity. If you’re a big mutual fund company, are you going to put your best talent on the little small-cap fund? They tend not to do so. And so, for a lot of reasons, small and micro-cap are underfollowed and underinvested.

The other interesting thing is that this universe is continually refreshed from the IPO markets. About 3% of the 30,000 come public every year, and so our universe is continually being added to. Think about AI, think how many exciting opportunities are in front of us as the world is changing. Many new, exciting companies may come public. The IPO markets haven’t been great as of late, but that comes and goes, and over the coming decades it will continue to be a source of new ideas.

The picture I would give you is, I’m a backpacker and I like to fish, and it’s a little bit like fishing at a lake that not very many other people are fishing at. It’s one that has a lot of fish in it, and it’s one where the lake is stocked with IPOs. The fishing can be pretty good, and that’s why we’re focused on the micro-to-mid-cap space.

TWST: You mentioned looking for the greatest companies. That’s a good segue to talking a little bit more about the investment approach. Walk us through what your investment process looks like.

Mr. Gardiner: Our focus — and this is what I’ve spent a career of 45 years doing — is pretty much a common-sense kind of philosophy: Find a great small company that’s going to get big.

“What we’re trying to do is find a great small company with a sustainable competitive advantage, with headroom to grow, with a good business model, and a good, honest management team with a good track record. We’re trying to find those before everybody else has recognized them, and so we’re paying an attractive valuation.”

With small companies, one of the other appeals that I didn’t mention is, generally, they can grow faster than big companies. What we’re trying to do is find a great small company with a sustainable competitive advantage, with headroom to grow, with a good business model, and a good, honest management team with a good track record. We’re trying to find those before everybody else has recognized them, and so we’re paying an attractive valuation.

We’re a super bottom-up manager. We’ve probably visited more companies in the last decade than I would say almost any other firm out there. We travel to these countries, including the U.S., and we are just trying to find a great company that we feel can get big.

I will say that the particular fund we’re discussing today, the Contrarian Fund (GPGCX), there’s a little bit of a spin on this particular fund in that for growth companies, the trajectory often isn’t straight up. Sometimes they hit a bump in the road. The Contrarian Fund loves to buy these best-in-class growth companies, but ones that hit a bump in the road and we hope that they can turn it around.

One of the crown pieces of this fund is fallen angel investing — finding a company that hit a bump in the road that can get back on track. Another big category in this fund, and part of our philosophy here, is buying an out-of-favor industry, where the industry might be going through a cyclical issue while the company isn’t really affected.

That, in a nutshell, tells you about the firm’s investment philosophy and a little bit about this fund.

TWST: Is there anything else you would add about the overall strategy of the Contrarian Fund, anything unique, any differentiators that you would note?

Mr. Nielson: I would say the defining characteristic of the Global Contrarian strategy is that we are a value fund inside of a quality, growth-oriented shop.

What I mean by that is, while we prioritize valuation — it’s very important to us — we still have very high standards as it relates to buying quality companies that can grow their earnings. That differentiates us from what you might traditionally think of when you think of a value-oriented strategy.

I can be a little bit more specific as to how we invest.

We categorize our investments in five buckets. The first bucket we would call our undiscovered gem bucket. These are high- growth companies that haven’t been discovered by the market yet. They’re generally compounding their earnings at rates greater than 15%. They’re generally smaller in size and, as Robert mentioned earlier, because of that, they don’t get a lot of attention. But the valuations are attractive enough that we, as value investors, feel comfortable underwriting those strategies.

The second bucket is what we refer to as our boring stalwart bucket. These are best-in-class companies, but they aren’t best-in-class growth. They have great franchises, they have strong competitive advantages, really strong brands, but they’re in the later stages of their growth. Occasionally, they hit a bump in the road and the market throws them away, and we get the opportunity to buy a really great company for a price well beneath its intrinsic value.

The third bucket, Robert alluded to earlier, is our core contrarian bucket. These are quality companies that are cheap because either they’re in an out-of-favor sector or an out-of-favor geography. We’re looking to underwrite these companies at a time when nobody’s looking at them because the general market that they’re operating in is difficult. We can wait patiently for that market to return, and when it does, the stock generally re-rates.

The fourth bucket is our fallen angel bucket. These are great companies that have hit a bump in the road. Specifically, they’ve made a strategic misstep, something of their own doing. Maybe they made a bad acquisition, maybe they’re digesting some competitive issues, something specific to the company. The key here is finding a company where the misstep wasn’t fatal; it’s only temporary in nature.

And then our last bucket is what we call our special situation bucket. This is much more characteristic of traditional value investing. We don’t do a ton of this, but occasionally the market will give you a gift. Maybe there’s a takeout opportunity in a company. Maybe there is a hidden asset inside of a company the market isn’t appreciating. We have a pretty high standard for these types of investments, but we love them when we can find them because they’re true diversifiers to the strategy.

Let me circle back on one last thing. I mentioned the benefit of being a value fund inside of a growth shop. To give an example of what that might look like and why we think it’s a great benefit: We want to buy great companies, and occasionally in the small-cap land, great companies will hit a bump in the road and we have the opportunity to buy them. But what gives us an edge is the rest of our firm is focused on buying great companies, and because of that, a lot of the work to underwrite these companies has already been done.

So, when chaos is introduced into a market that affects stock prices — take the war in Iran, or COVID, or the tariffs of last year — we can move very quickly to buy these companies.

If you study the market declines of the last five or 10 years, they haven’t been prolonged. They generally are very sharp and short- lived, and so the window of time you may have to buy these companies is sometimes just a few days. And so, being a value fund inside of a growth shop allows us to act very quickly.

TWST: What does the portfolio look like today in terms of a breakdown among geographic areas and sectors? Are you overweighting or underweighting any of those right now?

Mr. Gardiner: Our portfolios are put together bottom-up, a combination of what we’re good at but also where the opportunities we see are.

Right now, we’re overweight consumer and we’re overweight healthcare. We have a big underweight in energy and materials, and I would say in real estate as well on the financial side.

In terms of geography, we’re overweight international, including emerging markets, though especially international developed markets, and underweight the U.S.

I can speak to more of that if you want.

“Obviously the tech market has had a huge positive run over the past six, nine months, and so it’s become quite a bit more expensive. That’s why we have moved away from tech and gone to places like healthcare and consumer.”

TWST: Yes, tell us about why that is.

Mr. Gardiner: Obviously the tech market has had a huge positive run over the past six, nine months, and so it’s become quite a bit more expensive. That’s why we have moved away from tech and gone to places like healthcare and consumer.

Healthcare, until the last two months, has been kind of thrown away. Trump has done some things like not funding the National Institutes of Health and other things like that that have put a cloud over it. And, that’s not where the sexy AI story is, and so the market has moved away from healthcare for a couple years now.

The valuations of the healthcare companies just got so exciting to us. The populations across the globe are aging. Healthcare, it’s nice because it’s not really affected that much by AI threat, and we just love it, and so we’ve been overweight. Right now we might be taking a little bit of profits on this big move it’s had in the last month or two, but it’s been a big overweight.

The consumer area is a big overweight for us, with all the tariff issues and a pretty tough economic environment globally, unless you’re in AI. There’s just a lot of value there.

On energy and materials, we don’t feel like we have the greatest expertise on predicting energy prices or commodity prices, and so we tend to avoid those. We have a few positions in servicing companies and some other niche things, but we’re pretty light there, mostly because we don’t feel like we can be that good at it.

Real estate — REITs are not a big growth market. We do own a few. But with our growth heritage as a firm, we’ve always been less invested there.

The U.S. is quite an expensive market relative to any other place. Europe is where we see a ton of value. They’ve been through a lot with the Ukraine situation, and with Iran now they’re more affected by that. We just see an awful lot of really incredible companies there that are selling at great valuations. In the U.S., it’s hard for us to find value.

The other thing I would say on the U.S. is the micro-cap end — the smaller names — has not been as interesting a place to invest, because for a decade or two, the costs of being public in the U.S. have been higher. It started decades ago with the Sarbanes-Oxley legislation, and then the private equity world has gobbled up a lot of the micro-cap kinds of names. And so, the universe in the U.S. isn’t as rich as it is in other places like Japan, Taiwan, and even Europe.

The mid-cap end of the U.S. is exceptionally interesting, it is really great, but on the micro and small end, where there’s a lot of market inefficiency, it’s not as interesting to us in the U.S.

TWST: Can you tell us about a few specific examples of holdings from the Contrarian Fund and what makes them attractive?

Mr. Gardiner: One name that we thought to talk to you about today is a company called IMCD (AMS:IMCD). It’s a Netherlands-based company. They’re the largest specialty chemical distributor in the world. Their specialty chemical distribution has been on a cyclical down for a few years now, in the post-COVID period, and so they’ve faced a headwind as there’s been a bit of an inventory correction in that space and as there’s been a bit of a cyclical downturn as the economy, outside of AI, has not been booming.

This is a company that used to have a very high p/e, and the market’s sort of thrown it away. They have just 4% of the market, even though they’re the largest, and we feel like they can double that and double again over the next decade, which would be like a 15% compound return if they are able to do that.

They’ve been able, over their history, to consistently take market share, growing organically 7% when GDP’s been maybe 3.5%. So, they’ve been able to take market share as the biggest player, and they can offer their customers better service, better capabilities than the smaller players.

The other thing is, this is an exceptionally fragmented market, and this is a company that’s acquisitive. They buy these small, niche specialty chemical distributors across the globe and across many different industries, and they’ve been able to consistently buy up companies. Of that 15% growth, about half of it is organic and half is from acquisitions.

As a firm, we’re really looking for companies that can double and double again. This is a company with a phenomenal track record whose business has been weaker — it’s one of what Dane called “core contrarian” — where their space has been out of favor and business has been a little tougher for them, so the organic growth has been slower and their margins are down a little bit just because of the tough time, but we see that reversing and normalizing, and so we see the market coming back to liking this name more.

We bought it at the bottom, when there was a lot of pessimism, and the numbers are already turning. We think this is just a classic, great company that was thrown away as everybody was buying AI stocks. We think it’s got a great future. It’s a great growth company and we believe it’s going to be a much bigger company in a decade.

Mr. Nielson: I can jump in with one broader area that we’re looking at, without mentioning any specific company. The AI trade has been raging for several years up through the end of June. In July, the AI market pulled back sharply. Korea is a country that’s heavily exposed to AI-related companies. If you look at the composition of their stock market, the two biggest companies make up nearly half of the stock market and both of them are exposed to AI.

Because the market has pulled back in AI, Korea has pulled back very sharply. That’s been made even worse by retail traders introducing leverage into their portfolios. So, as the AI trade retreated, many retail investors have liquidated and been forced to sell other holdings in their portfolios to meet margin calls.

I mention that only to say that Korea is an area where we’ve been looking very closely for opportunities because we’re seeing forced selling in that market.

TWST: In the most recent quarter or the last couple of quarters, where have you seen your biggest contributors and biggest detractors? And have you made any adjustments to the portfolio as a result of that?

Mr. Gardiner: I’m going to talk about semiconductors and Dane’s going to talk about healthcare, and then maybe I’ll follow up with one or two more comments.

A year ago we began to increase our weight in the semiconductor space. We saw the pure-play AI semiconductor companies like Nvidia with sky-high valuations. But there were also a lot of analog semiconductor companies that we really like. The whole industry experienced an inventory correction post-COVID, where inventories built up too high during the COVID period and there was a digestion period there for a few years.

We loaded up on a whole bunch of companies — Silergy (TPE:6415), X-FAB (OTCMKTS:XFABF), Littelfuse (NASDAQ:LFUS), Elmos (OTCMKTS:ELTTF), Melexis (OTCMKTS: MLXSY), just to name a few — that were down because of the semiconductor cycle being down. But the interesting thing is that many of them had data center and AI exposure, but because of the overall macro of the business they were still down. So, we took an overweight position for this fund in that space, and it was kind of a home run. These stocks almost all doubled or more.

We actually timed it quite well. At the top of the semiconductor cycle we realized the valuations had become excessive, and we probably sold two-thirds of our weight in that space. The industry has had a correction here, so we’re inclined to consider adding a little here or there.

Mr. Nielson: Starting in the fall of 2025 we saw several opportunities in healthcare that we felt were very attractive. We started buying, and ended up building a fairly significant position in healthcare. At the peak, our healthcare exposure was approaching 30% of our portfolio.

That was actually a headwind to us from late 2025 through the first half of 2026. But in July, we’ve seen the sector snap back sharply, and it has been a large contributor to our fund’s performance in the last month and a half.

The one comment I’d make on that is, the thing we really liked and still like about our healthcare exposure is we’re buying great companies that are growing their earnings in a defensive industry that’s completely unrelated to AI. And so, while the world is obsessing about artificial intelligence and all the opportunities there, we sleep well at night owning a portfolio full of really great, stable businesses that are growing, and buying them at bottom-quartile valuations relative to their history.

July and August have been a good validation of that trade, and it’s something we continue to like despite it moving some.

Mr. Gardiner: A couple of detractor areas: We had a meaningful weight in some consulting companies. These are really awesome companies whose valuations were very cheap, and we felt like they could navigate the AI threat; we viewed it as much as an opportunity for them as a threat. Yet, those stocks have struggled. The market’s taken a view that it’s more of a threat than it is an opportunity, and so that’s hit a portion of our portfolio.

In this case, we’re starting to agree, and we’ve pulled back. We really love these companies, we think they’ll be able to navigate it, but we’re pruning positions down in that area because we are seeing the threat outweigh the opportunity. So, we’re going to just go to the sidelines and watch closely for a while.

Another area that has hit us quite hard is financial services, capital market-related companies. Anything that is an asset management firm that had exposure to alternatives was hit quite hard for two reasons. One is the worry about private credit having an issue, as well as the worry about private equity firms with exposure to software and other AI-threatened areas.

Frankly, in this space, most of our companies have minimal exposure to this, and yet their stocks have been hammered. These stocks are still down, and we’re for the most part hanging in there and sticking with them. Last night, we were excited because one of our holdings was up nearly 20% as they announced strong earnings. The company had taken a 40% hit on the worries about alternatives, and now it’s recovered 20% back, but it’s still down a lot and there’s still a lot of value there.

So, in this case, we’re sticking with our position because we really don’t see much of an impact, and yet the market hasn’t brought them back to their fair valuation yet.

TWST: You’ve mentioned some themes along sector and industry lines. Are there any other trends or themes that you’re really paying attention to these days?

Mr. Gardiner: The big theme is AI. You have to think of it in two ways. In the negative sense, what companies are going to be affected? And then in the positive sense, what kind of tailwinds can you find? For us, being a value fund, it’s hard for us to find AI plays, however we are finding some hidden companies that play along that theme.

We do play in the things that get hit by AI hard, where we say, “Hey, they’re going to be OK, and the market’s overly pessimistic.”

Those are the biggest things happening today. Much of the portfolio is around those two ideas.

But there are many other themes that we play as well. The aging population across the globe obviously would be a play on the healthcare side. And we’ve got a company we’re excited about, a new name, it’s a play on water infrastructure. There’s an aging water infrastructure globally and in the U.S. There’s a theme that we have multiple investments in.

So, we consider a lot of different themes. We own a restructuring company that does M&A and restructuring. We think there’s a huge amount of pent-up demand for M&A with private equity long in the tooth on many of their investments. We see AI disrupting the world where there will be a lot of need for restructuring for many companies.

We are thematic investors looking for themes to play.

A decade ago, all the rage was the rising middle class of the BRICs and of the emerging markets. Those stocks were selling for 40 and 50 p/e’s. Today, those stocks are selling for 10, 11, 12, 13 times. We were buying a really interesting company in Southeast Asia last night that’s 13 times earnings, and they’re just plugging along growing 10%, 12% and paying a 7%, 8% yield. The market doesn’t care about that theme anymore, but it’s one that I think we still believe in.

We like emerging market consumer staples. We see a lot of great companies, Steady Eddies with big dividends and great businesses that are at deep discounted valuations.

TWST: How do you combine your fundamental analysis at the company level with macro issues? There’s never a shortage of topics and concerns about economies around the world, geopolitics. How do you take that into consideration, and what’s most top of mind for you these days?

Mr. Nielson: We like to say that we are macro aware, but at the end of the day, we’re investors that build portfolios from the bottom up. We’re looking for companies that can grow independent of the environment that they find themselves in.

Of course, we want to be aware, to know, broadly speaking, whether the economy in which a company operates is a headwind or a tailwind to the company’s growth.

I think we would align a little bit with Peter Lynch, who used to joke and say, “If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.” It’s a little bit difficult, but we want to be aware.

One thing I would add to that is, we think being macro aware is a great screening tool. For a contrarian fund, the best operating environment for a fund is a market full of chaos. If you think about the last five years, it’s been one thing after another. When chaos is introduced into the market, inevitably you have asset dislocations.

So, we want to be aware of the global economy, what’s going on, and any time that there’s a large event — again, whether it’s COVID or tariffs or a war — we’re excited about that because it’s giving us opportunities to buy into great companies where other investors may be selling on fear.

Mr. Gardiner: One of the interesting things about small cap is, if you asked us, “What is your macro view of Japan?” I don’t know that we’d make a broad market call. We probably wouldn’t be super optimistic, given their issues of an aging population and so on in terms of the overall macro for Japan.

But when you’re in small cap, the fate of your company is not really tied to the macro nearly as much as it is their own business model. We couldn’t be more excited about the Japanese micro-cap space than we are. We just see massive opportunities. We see great growth opportunities in many different areas, and we see a lot of really great things happening in terms of corporate governance and shareholder friendliness.

So, while we’re not really that optimistic on the macro of Japan, we’re super optimistic on the small-cap niche and the opportunities there, because Japan’s a huge economy and there’s pockets of incredible growth overall in that space, even though the overall economy’s not growing that much.

We do try to be macro aware. For example, one of our analysts, who is a native of Vietnam, shared his bullish view on Vietnam. The political and economic environment is improving there, and the GDP’s accelerating. That is a place we want to be screening when we have that kind of a view.

So, we’re not ignoring the macro, but you should know our specialty is not in making macro calls. You should consider our fund because we have 45 years of experience in finding the best great companies in the world and finding them in off-the-beaten-path places.

TWST: Is there anything else you want to discuss to wrap up?

Mr. Gardiner: This Global Contrarian Fund in my mind is so interesting to somebody that wants some diversity from the U.S. Mag 7 large-cap bet that most people have when they buy an S&P 500 index.

Going back to my fishing and lake analogy, the big-cap big lake where everybody’s fishing at has been a great place to fish in recent years, but there’s all these other little high mountain lakes and streams off the beaten path in many other places where nobody’s fishing and that offer great opportunities to catch fish.

We think this fund of ours is a great way to diversify a bit. Most investors have all moved to that Mag 7 AI tailwind, large-cap bet, and we see global small cap as a great place. Even though we’ve had stiff headwinds to global small caps for five years now, this fund has still done well if you look at the one, three, and five-year performance. We think it’s a great time to add diversity to your portfolio, and this is a great way to do it.

Mr. Nielson: The last thing I would mention, just dovetailing off that point, is, we view the global small-cap space as a fallen angel. We mentioned that as one of our investing buckets. We’ve seen 10 years of U.S. large-cap dominance, and now the AI trade, which is largely a large-cap story, although there’s lots of small-cap opportunities as well.

Here’s a little bit of evidence for why we believe global small cap is an interesting space: When we launched the Contrarian Fund in 2019, the overlap with the other core strategies within Grandeur Peak was maybe 15% to 20% of the portfolio. It was there, but not huge. Today, our overlap with some of the core strategies within Grandeur Peak is closer to 50%.

What does that say? What that tells me is that really great growth companies in the small-cap space are getting forgotten about because all of that money is flowing into AI, Nvidia, and the like. So, I would just add my comments to Robert’s, that we think it’s a really interesting time for investors looking for a little bit of diversification from the AI trade, where they’ve done so well for several years.

Mr. Gardiner: To close, the earnings growth of our portfolio is great, and our companies are growing and doing well. If you think about it, it’s a little bit like a beach ball being pushed down in the water. If the earnings growth is growing, the tide’s rising for these companies, and you can only push the beach ball down for so long before it pops up. We think on international small, global small, that that day’s getting closer, where that beach ball really pops up.

TWST: Thank you. (MN)