Alger Dynamic Opportunities Fund Q3 2025 Portfolio Review

The Alger Dynamic Opportunities Fund underperformed the S&P 500 in Q3 2025, primarily due to detractions from short positions despite positive contributions from long holdings. Key long performers included AppLovin, benefiting from AI-powered growth and S&P 500 inclusion; Nebius, an AI infrastructure provider securing a significant Microsoft deal; and Talen Energy, an independent power producer capitalizing on data center demand. Conversely, major detractors were James Hardie, impacted by soft housing demand; Netflix, due to investor concerns over H2 profitability and FX-driven revenue; and TransDigm, which saw slower commercial aftermarket sales.

Analysis

The Alger Dynamic Opportunities Fund underperformed the S&P 500 Index in Q3 2025, with an average long exposure of 82.16% and short exposure of -33.76%. While long positions, particularly in Information Technology and Industrials, contributed positively to performance, aggregate short positions detracted, leading to the overall underperformance. This indicates challenges in short selection or timing despite some successful long bets.

Key long contributors included AppLovin (APP), driven by its AI-powered software engine and S&P 500 inclusion, and Nebius (NBIS), an AI infrastructure provider benefiting from a landmark multi-year agreement with Microsoft for GPU infrastructure. Talen Energy (TLN) also contributed positively, leveraging its PJM market position and Cumulus platform to capitalize on rising data center demand and reaffirmed full-year guidance. These successes highlight strong secular tailwinds in AI and energy infrastructure.

Conversely, significant detractors included James Hardie (JHX), impacted by softer housing demand, affordability challenges, and a cautious outlook following disappointing Q1 results. Netflix (NFLX) declined due to investor focus on tempered H2 profitability expectations and FX-driven revenue growth, despite strong Q2. TransDigm (TDG) underperformed due to slower commercial aftermarket sales and inventory destocking, overshadowing better defense sales.

Key Decisions for Investors

• Investors should prioritize companies with strong exposure to secular AI growth, particularly those providing infrastructure (NBIS) or leveraging AI for competitive advantage (APP), given their demonstrated positive catalysts.
• Maintain caution on sectors sensitive to housing market dynamics (e.g., James Hardie), as macro headwinds and inventory challenges continue to impact outlooks.
• Scrutinize forward guidance and profitability projections, as seen with Netflix and TransDigm, where investor focus shifted from past performance to future margin and demand expectations.
• Consider independent power producers like Talen Energy that are strategically positioned to benefit from increasing data center demand and have clear long-term growth catalysts.