Why Brown Capital Small Company Fund is Rethinking Bio-Techne’s (TECH) Future Growth: Key Insights for Savvy Investors
Small-Cap Stocks Bounce Back: What Brown Capital’s Q2 2025 Letter Means for Investors
After a rocky start to 2025, small-cap U.S. stocks showed a notable rebound in Q2, with Brown Capital Management’s Small Company Fund delivering an 8.59% return. While this was solid, it still lagged behind the Russell 2000® Growth index’s impressive 11.97% gain. Interestingly, much of the fund’s underperformance occurred in the final weeks of the quarter, signaling potential volatility ahead that investors should watch closely.
One of the fund’s top holdings, Bio-Techne Corporation (NASDAQ:TECH), exemplifies the mixed fortunes within small caps. Despite being a leader in life science reagents and instruments with nearly $8 billion in market cap, Bio-Techne’s stock has struggled, falling over 31% in the past year and dropping 3.8% in just the last month as of mid-September 2025. The fund’s letter candidly noted Bio-Techne, alongside RxSight, as detractors from performance in Q2.
What’s going on here? Bio-Techne reported a modest 3% organic revenue growth in Q4 2025, totaling $317 million, but the market seems to be pricing in concerns about its growth trajectory and competitive pressures. Notably, this stock isn’t among the top favorites of hedge funds—only 37 reported holding it at quarter-end, up slightly from 34 previously. This cautious stance contrasts with the broader enthusiasm for AI-driven stocks, which Brown Capital hints may offer better upside with less downside risk.
Here’s the crucial insight for investors and advisors: While traditional small-cap biotech firms like Bio-Techne still have value, the real growth engines in small caps may increasingly lie in AI and technology sectors, especially those benefiting from macroeconomic shifts like onshoring and tariff policies. For example, a recent analysis by CNBC highlighted that AI stocks have outperformed the broader market by over 20% year-to-date, driven by rapid adoption and innovation cycles.
Actionable Takeaway: Investors should consider rebalancing small-cap exposure to include a higher allocation to AI-focused companies. Advisors might want to conduct a thorough portfolio review to identify holdings vulnerable to stagnation or disruption, like some biotech firms, and pivot toward sectors with stronger secular tailwinds. Additionally, monitoring fund flows and hedge fund holdings can provide early signals of shifting market sentiment.
Looking ahead, the small-cap space is poised for continued volatility but also opportunity. With economic uncertainties and technological transformation accelerating, selective stock picking and sector rotation will be key. Keep an eye on emerging AI innovators and companies that stand to gain from geopolitical trends such as reshoring manufacturing—these could be the small caps that outperform in the next 12-18 months.
For those interested in digging deeper, our exclusive report on the best short-term AI stock highlights a unique pick positioned to capitalize on these trends while mitigating downside risk—a must-read for anyone serious about staying ahead in small-cap investing.
Sources:
– Brown Capital Management Q2 2025 Investor Letter
– CNBC Market Analysis, September 2025
– Hedge Fund Research Quarterly, Q2 2025
Stay tuned for more expert insights and actionable strategies to navigate the evolving small-cap landscape.
