Investment Team Voices Home Page
Putting Points on the Board Through Fundamental Stock Selection
January 2, 2025
Brandon Nelson, CFA
2024 Performance within Morningstar Category
CTSIX
CTIGX
Past performance is no guarantee of future results. Sources: Calamos and Morningstar. CTSIX: Peer rankings within the Morningstar Small Growth Category. For the period ending 12/31/2024, the fund ranked 6 of 562 funds, 274 of 552 funds, 57 of 547 funds, and 103 of 504 funds for the one-year, three-year, five-year, and 10-year periods, respectively.
CTIGX: Peer rankings within the Morningstar Small Growth Category. For the period ending 12/31/2024, the fund ranked 8 of 562 funds, 79 of 552 funds,40 of 547 funds, and 75 of 537 funds for the one-year, three-year, five-year, and since inception periods, respectively.Summary Points:
- Calamos Timpani Small Cap Growth Fund and Calamos Timpani SMID Growth Fund surpassed benchmarks and peers during the fourth quarter, contributing to strong outperformance for 2025.
- For both the quarter and the year, security selection across sectors drove results, with buyout announcements of five holdings providing an added boost.
- Although stock selection matters most, small-cap asset class strength is always a welcome tailwind. We believe the stage is set for a small-cap earnings acceleration in 2025, while attractive valuations and merger-and-acquisition activity could further buoy small caps.
The fourth quarter was action-packed, including big swings in interest rates, bitcoin buzz, and lots of dramatic stock price reactions to earnings reports—oh, and I almost forgot, a major election whose results are still being processed by the financial markets.
In the end, stocks rose modestly. Large caps led for the quarter, rising 2.75% and outpacing small caps by 242 basis points, as measured by the Russell 1000 Index and Russell 2000 Index, respectively. Small caps did fine for the year, gaining 11.54% but losing to large caps by a whopping 1,297 basis points. Even more shocking, 2024 marks the eighth consecutive year that the Russell 1000 Index outperformed the Russell 2000 Index.
Fortunately, for our investors, Calamos Timpani Small Cap Growth Fund (CTSIX) and Calamos Timpani SMID Growth Fund (CTIGX) did not need small-cap leadership to put points on the board relative to peers and benchmarks.
CTSIX and CTIGX: A Strong Fourth Quarter Caps Outperformance in 2024
Source: Morningstar. Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. Please refer to Important Risk Information. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. All performance shown assumes reinvestment of dividends and capital gains distributions. As of the prospectus dated 3/1/2024, CTSIX’s gross expense ratio is 1.12% and CTIGX’s gross expense ratio is 1.73%.
For the fourth quarter, CTSIX and CTIGX each outperformed their benchmarks by more than 550 basis points. Most of the outperformance came in November, driven by a combination of earnings reports and post-election performance. Small caps surged that month, and although sometimes it’s difficult to outperform during big surges, we were still able to, joining just 18% of small-cap growth managers and 21% of SMID growth managers, according to Lipper data.
Looking back over the quarter and the year, our company-specific focus on fundamental momentum (i.e., fast growth and underestimated growth) and the stock market’s willingness to embrace that fundamental momentum drove the strong results. In other words, stock picking mattered in 2024, and we believe it will continue to play a major role going forward. Our performance was supported by a well-diversified group of stocks—no one-trick ponies here. Additionally, neither fund took on outrageous sector bets.
We had a hunch something like this was coming. One year ago, we wrote: “Stocks with [fundamental momentum] characteristics sometimes lag at critical market turning points but tend to play catch-up as new stock market upcycles mature. We see this scenario playing out once again and thus have high hopes for absolute and relative-to-benchmark returns for both funds in 2024.”
Although this prediction proved prescient, we get even more excited when we consider continued stock picking excellence along with what could happen if the small-cap asset class emerges.
Large caps have had quite a run, and unless interest rates spike, it’s hard to believe that they can extend their leadership over small caps for a ninth year in 2025. To say the rubber band is stretched is likely an understatement. We expect a small-cap earnings acceleration in 2025, driven by easy comparisons, Fed rate cuts, and election results that suggest a pro-US growth backdrop. Continued low valuations for small caps relative to large caps (15th percentile) could also lift the group. Additionally, we expect lots of merger-and-acquisition activity in 2025, with small caps disproportionately benefiting.
Should large caps cede leadership to small caps, our funds’ relatively small asset bases will become an even more important competitive advantage. We’ll have the nimbleness to look further down the market-cap spectrum for ideas and execute on our proven long-term investment process, including in the micro-cap space.
Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. Read it carefully before investing.
*Source: Jefferies, as of December 31, 2024, valuations of small caps versus large caps, lower percentiles indicate more favorable relative valuations for small caps.
Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. Please refer to Important Risk Information. The principal value and return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance reflected at NAV does not include the Funds’ maximum front-end sales load of 4.75%. Had it been included, the Funds’ return would have been lower. All performance shown assumes reinvestment of dividends and capital gains distributions. As of the prospectus dated 3/1/2024, CTSIX’s gross expense ratio is 1.12%, and CTIGX’s gross expense ratio is 1.73%.
Average annual total return measures net investment income and capital gain or loss from portfolio investments as an annualized average. All performance shown assumes reinvestment of dividends and capital gains distributions. Returns of more than one year are annualized
The Russell 1000® Index measures the performance of the large-cap segment of the US equity universe. The Russell 2000® Index measures the performance of the small-cap segment of the US equity universe. The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the US equity universe. It includes those Russell 2000® companies with higher price-to-value ratios and higher forecasted growth values. The Russell 2500® Growth Index measures the performance of the small to midcap growth segment of the US equity universe. It includes those Russell 2500 companies with higher growth earning potential. Unmanaged index returns, unlike fund returns, do not reflect fees, expenses or sales charges. Investors cannot invest directly in an index.
Diversification and asset allocation do not guarantee a profit or protect against a loss. Alternative strategies entail added risks and may not be appropriate for all investors. Indexes are unmanaged, not available for direct investment and do not include fees and expenses.
Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be appropriate for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
Morningstar Small Growth Category funds focus on fastergrowing companies whose shares are at the lower end of the market-capitalization range. Stocks in the bottom 10% of the capitalization of the US equity market are defined as small cap. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields).
Important Risk Information. An investment in the Fund(s) is subject to risks, and you could lose money on your investment in the Fund(s). There can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.
The principal risks of investing in the Calamos Timpani Small Cap Growth Fund and Calamos Timpani SMID Growth Fund include equity securities risk consisting of market prices declining in general, growth stock risk consisting of the potential increased volatility due to securities trading at higher multiples, and portfolio selection risk. The Fund invests in small capitalization companies, which are often more volatile and less liquid than investments in larger companies.
Foreign security risk: As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.
025001d 0125