Brandon Nelson of Calamos Investments identifies companies primed for sustainable growth and improving profit margins
Mama's Creations is an example of a rapidly growing company held by the Calamos Timpani Small Cap Growth Fund. The company reported a 50% year-over-year increase in revenue for its quarter ended April 30.
Brandon Nelson of Calamos Investments and his colleagues seek to identify small-cap companies with a "unique edge" allowing them to widen their profit margins as they increase revenue quickly. But he also focuses on companies whose "management teams are good at exceeding the expectations that they set."
Over the long term, rising estimates for companies' revenue and profit can drive their stock prices higher. During and after each corporate earnings season, investors can benefit from the "beat and raise" pattern as companies exceed consensus estimates and raise their own guidance for the quarters or years ahead, leading analysts to increase their own estimates.
And if the management team of an otherwise strong company can "manage expectations" properly, an otherwise good growth story can become an even better one, Nelson explained during an interview with MarketWatch.
Nelson has managed the Calamos Timpani Small Cap Growth Fund CTSIX since it was established in March 2011. The fund has grown to $796 million and is rated five stars (the highest rating) within Morningstar's "Small Growth" fund category.
Calamos Investments is based in Naperville, Ill., and manages about $52 billion in assets through various strategies.
It is important to let winners run. Common mistakes are to sell winners too soon and keep losers for too long.Brandon Nelson, Calamos Investments
The Calamos Timpani Small Cap Growth Fund held 90 stocks as of June 30.
Sustainable growth
"We want to see companies ideally that have an open-ended growth opportunity in front of them," for several quarters, or even for several years, Nelson said. "They have some unique edge to allow them to gain market share," while improving profit margins, he added.
Along with the sustainable growth and "operational excellence," Nelson looks for companies for which it appears growth rates are being underestimated. "Underestimated growth comes into play in how you manage expectations as a management team. It is a different skill set," he said.
"If you put up clean numbers, exceed your guidance and raise your guidance," then, over time, more analysts will cover the stock, and the stock will trade at an expanding price/earnings valuation, Nelson said. A stock's forward price/earnings ratio is its price divided by the rolling consensus 12-month earnings-per-share estimate among analysts working for brokerage and research firms. These are known as sell-side analysts, while an analyst working for an asset manager is known as a buy-side analyst.
If a stock beats expectations for earnings per share and that company's management team estimates continuing growth for sales and profits, then analysts are likely to raise their own estimates. Under this scenario, if the stock's forward P/E remains the same, it means the stock price has risen because the valuation denominator has increased. But Nelson expects that if he and his colleagues select a stock early enough in the company's growth cycle, the P/E multiple will increase.
"The company has a track record of doing what they say they will do, and therefore they are not a headache. I will pay a premium for a stock if I think it is not headache," Nelson said.
The Calamos team tries to identify companies at ideal stages of their growth cycles through "a combination of database screens, interaction of company management teams and studying sell-side analysts models and communicating with sell-side analysts."
Nelson also emphasized the importance of sell discipline. "We try to find stocks that have the potential to rerate higher." For example, a stock's forward P/E valuation might be 15 when he purchases it and expand to 35 over the next year and a half. "What triggers us to sell a stock is seeing fatigue in the fundamental growth profile. You don't overstay your welcome."
'We have robust processes in place for finding big winners and letting them run. We are also good at cutting when we see early signs of fatigue.'Brandon Nelson of Calamos Investments
"We have robust processes in place for finding big winners and letting them run. We are also good at cutting when we see early signs of fatigue."
When asked if signs of fatigue might include lengthening collection times after sales are booked, or narrowing gross margins, Nelson said those were good examples. But he named others: "Let's say orders would slow before the income statement changes. It could be a shrinking backlog. Or it might be a blip" because of bad weather.
"You are dealing with imperfect information. So the mindset is to take down the exposure if it is the beginning of the end. We have a short leash on these stocks," he said.
To summarize, Nelson said: "It is important to let winners run. Common mistakes are to sell winners too soon and keep losers for too long." He also said Calamos had back-tested performance data for stocks the team had sold over the subsequent six- and 12-month periods relative to performance benchmarks. "It turns out they persist as losers," he said.
Two examples
Mama's Creations (MAMA) was the seventh-largest holding among the Calamos Timpany Small Cap Growth Fund's top holdings as of June 30. The company has a market capitalization of $825 million and makes prepared deli foods that are distributed through many retailers, including Costco $(COST)$, BJ's $(BJ)$ and Sam's Club, which is a unit of Walmart $(WMT)$.
The food industry is not typically one in which investors expect rapid growth. But for the fiscal quarter ended April 30, Mama's reported revenue of $52.8 million, up 50% from the year-earlier period.
The stock isn't cheap, trading at a forward P/E of 57.3, but all eight sell-side analysts covering Mama's rate the stock a buy, according to LSEG. The company's sales for its current fiscal year ended Jan. 31, 2027, are expected to total $223 million. "They think in a few years they will be at $1 billion in revenue," making for "a lot of open runway," Nelson said. And he added that the company operates in an industry niche - prepared deli food - that has a combined $40 billion in U.S. sales.
He also said that Mama's had been "getting better" at distribution while broadening its product lineup. The company' aggressive sales-growth goal assumes it will continue to make acquisitions. And Nelson expects Mama's, under the direction of CEO Adam Michaels, to continue to be "stingy" in what it pays to roll up competitors.
Another example among the largest holdings of the Calamos Timpany Small Cap Growth Fund is Sterling Infrastructure (STRL), which is based on Texas and does site-preparation work for newly constructed facilities, including data centers and those used for semiconductor plants. The company expanded its capabilities to add electrical work for new facilities when it acquired CEC Facilities in September.
"So they will capture more of the data-center economics than they did previously, because of the electrical expertise," Nelson said. "They have also indicated an appetite to get into mechanical," another phase of data-center construction, he said.
Sterling Construction has a market cap of $20.3 billion. The stock trades at a forward P/E of 31.3. For the first quarter, the company reported revenue of $826 million, up from $431 million during the year-earlier quarter, while its earnings per share increased to $3.13 from $1.29.
Nelson said he expects continuing rapid growth for Sterling, not only from the build-out of data centers but from an "onshoring trend" in semiconductor and pharmaceutical manufacturing.
Top holdings
Here are the Calamos Timpany Small Cap Growth Fund's top holdings as of June 30:
Company % of Calamos Timpany Small Cap Growth Fund as of June 30 Dave 4.7% Lumentum Holdings 4.0% Sterling Infrastructure 3.2% SiTime 3.1% Silicon Motion Technology 3.1% Rush Street Interactive 2.7% Mama's Creations 2.6% Graham 2.5% Ultra Clean Holdings 2.4% Ichor Holdings 2.4% Source: Calamos Investments
Click on the tickers for more about each company.
Performance against competing funds
For peer comparisons, LSEG calculates one-year total returns and average annual total returns for three-, five- and 10-year periods through the most recent month-end. The data provider lists 92 mutual funds as peers to the Calamos Timpany Small Cap Growth Fund that are also benchmarked to the Russell 2000 Growth Index XX:RUO.
After expenses and excluding any sales charges, the Calamos Timpany Small Cap Growth Fund has ranked fourth for one-year total return among the full group of 93 peer funds. It has ranked second among the 93 funds for three-year return, seventh for five-year return and fourth for its 10-year return.
MW This small-cap stock strategy shines by riding the beat-and-raise trend
By Philip van Doorn
Brandon Nelson of Calamos Investments identifies companies primed for sustainable growth and improving profit margins
Mama's Creations is an example of a rapidly growing company held by the Calamos Timpani Small Cap Growth Fund. The company reported a 50% year-over-year increase in revenue for its quarter ended April 30.
Brandon Nelson of Calamos Investments and his colleagues seek to identify small-cap companies with a "unique edge" allowing them to widen their profit margins as they increase revenue quickly. But he also focuses on companies whose "management teams are good at exceeding the expectations that they set."
Over the long term, rising estimates for companies' revenue and profit can drive their stock prices higher. During and after each corporate earnings season, investors can benefit from the "beat and raise" pattern as companies exceed consensus estimates and raise their own guidance for the quarters or years ahead, leading analysts to increase their own estimates.
And if the management team of an otherwise strong company can "manage expectations" properly, an otherwise good growth story can become an even better one, Nelson explained during an interview with MarketWatch.
Nelson has managed the Calamos Timpani Small Cap Growth Fund CTSIX since it was established in March 2011. The fund has grown to $796 million and is rated five stars (the highest rating) within Morningstar's "Small Growth" fund category.
Calamos Investments is based in Naperville, Ill., and manages about $52 billion in assets through various strategies.
It is important to let winners run. Common mistakes are to sell winners too soon and keep losers for too long.Brandon Nelson, Calamos Investments
The Calamos Timpani Small Cap Growth Fund held 90 stocks as of June 30.
Sustainable growth
"We want to see companies ideally that have an open-ended growth opportunity in front of them," for several quarters, or even for several years, Nelson said. "They have some unique edge to allow them to gain market share," while improving profit margins, he added.
Along with the sustainable growth and "operational excellence," Nelson looks for companies for which it appears growth rates are being underestimated. "Underestimated growth comes into play in how you manage expectations as a management team. It is a different skill set," he said.
"If you put up clean numbers, exceed your guidance and raise your guidance," then, over time, more analysts will cover the stock, and the stock will trade at an expanding price/earnings valuation, Nelson said. A stock's forward price/earnings ratio is its price divided by the rolling consensus 12-month earnings-per-share estimate among analysts working for brokerage and research firms. These are known as sell-side analysts, while an analyst working for an asset manager is known as a buy-side analyst.
If a stock beats expectations for earnings per share and that company's management team estimates continuing growth for sales and profits, then analysts are likely to raise their own estimates. Under this scenario, if the stock's forward P/E remains the same, it means the stock price has risen because the valuation denominator has increased. But Nelson expects that if he and his colleagues select a stock early enough in the company's growth cycle, the P/E multiple will increase.
"The company has a track record of doing what they say they will do, and therefore they are not a headache. I will pay a premium for a stock if I think it is not headache," Nelson said.
The Calamos team tries to identify companies at ideal stages of their growth cycles through "a combination of database screens, interaction of company management teams and studying sell-side analysts models and communicating with sell-side analysts."
Nelson also emphasized the importance of sell discipline. "We try to find stocks that have the potential to rerate higher." For example, a stock's forward P/E valuation might be 15 when he purchases it and expand to 35 over the next year and a half. "What triggers us to sell a stock is seeing fatigue in the fundamental growth profile. You don't overstay your welcome."
'We have robust processes in place for finding big winners and letting them run. We are also good at cutting when we see early signs of fatigue.'Brandon Nelson of Calamos Investments
"We have robust processes in place for finding big winners and letting them run. We are also good at cutting when we see early signs of fatigue."
When asked if signs of fatigue might include lengthening collection times after sales are booked, or narrowing gross margins, Nelson said those were good examples. But he named others: "Let's say orders would slow before the income statement changes. It could be a shrinking backlog. Or it might be a blip" because of bad weather.
"You are dealing with imperfect information. So the mindset is to take down the exposure if it is the beginning of the end. We have a short leash on these stocks," he said.
To summarize, Nelson said: "It is important to let winners run. Common mistakes are to sell winners too soon and keep losers for too long." He also said Calamos had back-tested performance data for stocks the team had sold over the subsequent six- and 12-month periods relative to performance benchmarks. "It turns out they persist as losers," he said.
Two examples
Mama's Creations (MAMA) was the seventh-largest holding among the Calamos Timpany Small Cap Growth Fund's top holdings as of June 30. The company has a market capitalization of $825 million and makes prepared deli foods that are distributed through many retailers, including Costco (COST), BJ's (BJ) and Sam's Club, which is a unit of Walmart (WMT).
The food industry is not typically one in which investors expect rapid growth. But for the fiscal quarter ended April 30, Mama's reported revenue of $52.8 million, up 50% from the year-earlier period.
The stock isn't cheap, trading at a forward P/E of 57.3, but all eight sell-side analysts covering Mama's rate the stock a buy, according to LSEG. The company's sales for its current fiscal year ended Jan. 31, 2027, are expected to total $223 million. "They think in a few years they will be at $1 billion in revenue," making for "a lot of open runway," Nelson said. And he added that the company operates in an industry niche - prepared deli food - that has a combined $40 billion in U.S. sales.
He also said that Mama's had been "getting better" at distribution while broadening its product lineup. The company' aggressive sales-growth goal assumes it will continue to make acquisitions. And Nelson expects Mama's, under the direction of CEO Adam Michaels, to continue to be "stingy" in what it pays to roll up competitors.
Another example among the largest holdings of the Calamos Timpany Small Cap Growth Fund is Sterling Infrastructure (STRL), which is based on Texas and does site-preparation work for newly constructed facilities, including data centers and those used for semiconductor plants. The company expanded its capabilities to add electrical work for new facilities when it acquired CEC Facilities in September.
"So they will capture more of the data-center economics than they did previously, because of the electrical expertise," Nelson said. "They have also indicated an appetite to get into mechanical," another phase of data-center construction, he said.
Sterling Construction has a market cap of $20.3 billion. The stock trades at a forward P/E of 31.3. For the first quarter, the company reported revenue of $826 million, up from $431 million during the year-earlier quarter, while its earnings per share increased to $3.13 from $1.29.
Nelson said he expects continuing rapid growth for Sterling, not only from the build-out of data centers but from an "onshoring trend" in semiconductor and pharmaceutical manufacturing.
Top holdings
Here are the Calamos Timpany Small Cap Growth Fund's top holdings as of June 30:
Company % of Calamos Timpany Small Cap Growth Fund as of June 30 Dave 4.7% Lumentum Holdings 4.0% Sterling Infrastructure 3.2% SiTime 3.1% Silicon Motion Technology 3.1% Rush Street Interactive 2.7% Mama's Creations 2.6% Graham 2.5% Ultra Clean Holdings 2.4% Ichor Holdings 2.4% Source: Calamos Investments
Click on the tickers for more about each company.
Performance against competing funds
For peer comparisons, LSEG calculates one-year total returns and average annual total returns for three-, five- and 10-year periods through the most recent month-end. The data provider lists 92 mutual funds as peers to the Calamos Timpany Small Cap Growth Fund that are also benchmarked to the Russell 2000 Growth Index XX:RUO.
After expenses and excluding any sales charges, the Calamos Timpany Small Cap Growth Fund has ranked fourth for one-year total return among the full group of 93 peer funds. It has ranked second among the 93 funds for three-year return, seventh for five-year return and fourth for its 10-year return.
(MORE TO FOLLOW) Dow Jones Newswires
July 27, 2026 11:08 ET (15:08 GMT)
MW This small-cap stock strategy shines by riding -2-
The Calamos Timpany Small Cap Growth Fund's Class I shares have annual expenses totaling 1.05% of assets under management, which means $105 in annual fees for a $10,000 investment. So the fund's net expense ratio is 1.05%, but its full expense ratio is 1.09%. There is a temporary reimbursement of 0.04% of expenses until at least March 1, 2027. There are other funds on the list below with temporary waivers of portions of their expenses. Before you make any investment, make sure you understand exactly how the expenses work and when any waivers might be lifted.
The following performance comparison begins with the Calamos Timpany Small Cap Growth Fund, then the iShares Russell 2000 Growth ETF IWO, an exchange-traded fund that tracks the performance of the fund's performance benchmark index. Then there is the iShares Russell 2000 ETF IWM, which tracks the full Russell 2000 Index. There are the five peer funds with the highest five-year annual returns, among those available currently for direct purchase by new investors. All returns are through June 30, include reinvested dividends and capital-gain distributions, and are net of expenses and net of any sales charges. The funds' net expense ratios are in the right-most column.
Asset Name 1-year return 3-year avg. return 5-year avg. return 10-year avg. return Net expense ratio
Calamos Timpani Small Cap Growth Fund; I 64.8% 34.6% 10.2% 18.3% 1.05%
iShares Russell 2000 Growth ETF 38.6% 18.3% 5.5% 11.9% 0.24%
iShares Russell 2000 ETF 40.6% 18.4% 6.9% 11.5% 0.19%
Needham Aggressive Growth Fund; Retail 89.2% 37.4% 22.7% 23.0% 1.64%
Oberweis Small-Cap Opportunities Fund; Investor 59.4% 24.2% 17.3% 19.5% 1.25%
FullerThaler Behavioral Small-Cap Growth Fund; Institutional 71.2% 31.9% 16.0% 0.0% 1.00%
Carillon Chartwell Small Cap Growth Fund; I 58.5% 31.8% 12.6% 0.0% 0.95%
Voya Small Cap Growth Fund; I 51.1% 22.5% 10.4% 15.7% 0.95%
Source: LSEG
Most of the share classes for mutual funds on this list are institutional share classes. This means they are distributed through investment advisers. The institutional share classes may also be available directly through certain brokerage platforms, and account minimums may vary depending on the relationships between the fund manager or distributor and the advisory or brokerage firm.
Don't miss: As defense spending surges, these stocks could make you the most money
-Philip van Doorn
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 27, 2026 11:08 ET (15:08 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.