| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 12.0% | - | 29.3% |
| 2025 |
|---|
| 29.3% |
Davis Financial Fund returned +29.29% in 2025, significantly outperforming the S&P Financials Index (+15.02%) and S&P 500 Index (+17.88%). The fund's outperformance was driven by payments and consumer lending companies (Capital One, American Express, Rocket Companies), foreign banks (Danske Bank, DBS Group, DNB Bank), select U.S. banks (JPMorgan Chase, Wells Fargo), and capital markets companies (BNY Mellon, Julius Baer). Banking stocks benefited from multiple tailwinds including stable credit trends, widening interest spreads as fixed-rate assets roll over at higher yields, expense control through technology investment, and a more favorable regulatory environment. Financial stock valuations have reset higher with price-to-tangible book multiples expanding over 70% in three years, though the portfolio still trades at approximately 13x earnings, a significant discount to broader markets. The managers trimmed bank exposure given strong performance and redeployed capital into property & casualty reinsurers, payments companies, and holding companies. Despite the valuation reset, they believe the portfolio remains positioned for attractive returns over the next decade given the quality of franchises and continued discount to intrinsic value.
Davis Financial Fund invests in durable, well-managed financial services companies at value prices for long-term holding, based on the principle that financial companies can be growth companies in disguise despite their earnings volatility.
The managers remain consistent in their approach of looking for companies with durable competitive advantages coupled with competent and honest managements priced at a discount to intrinsic value. They invest presuming they will own companies through business cycles and do not attempt to build a portfolio around particular speculative forecasts. The portfolio is diversified across leading franchises earning above-average returns on capital in banking, payments, custody, wealth management and property & casualty insurance.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 26 2026 | 2025 Q4 | AXP, BAER.SW, BK, BRK-A, CB, COF, D05.SI, DIS, FI, FITB, JPM, MKL, PNC, RE, RKT, RNR, USB, WFC | Banking, capital, financials, insurance, regulation, returns, value |
COF WFC CB |
Banks continue to represent the majority of holdings with strong tailwinds across credit, spreads, expenses, and regulation. Interest spreads have begun widening as fixed rate assets roll over at higher yields, revealing attractive economics of low-cost deposit franchises. Many banks are generating returns on tangible equity in the mid-to-high teens with management targets suggesting sustainability in the medium term. Capital markets firms were among the drivers of S&P Financials Index performance and contributed to fund outperformance. The regulatory environment has been moving in a favorable direction with capital rules being finalized that are far less onerous than under the prior administration. Regulators are more willing to consider M&A transactions with relief on certain supervisory limitations. Property & casualty reinsurers were added to the portfolio as capital was redeployed from trimmed bank positions. Pricing trends in insurance markets have been strong in recent years. Chubb has consistently generated returns on equity comfortably ahead of the industry owing to advantaged lines of business with disciplined underwriting and operating culture. Payments and consumer lending companies were the biggest contributors to relative performance including Capital One, American Express and Rocket Companies. Capital One's transformational acquisition of Discover Financial closed with anticipated annual cost synergies of $1.5 billion and network synergies of $1.2 billion from transitioning card volumes into Discover's networks. Financial stock valuations have begun to reset higher with price-to-tangible book value multiples expanding by over 70% on average in the past three years. The portfolio in aggregate is valued at approximately 13x this year's earnings, representing a significant discount to both the broader S&P 500 Index and S&P Financials Index. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
BankingEuropean banking sector produced strong outperformance led by Bank of Ireland, Lloyds Banking Group, and CaixaBank. Sector returns supported by interest rate stabilization and yield curve steepening. The market is transitioning toward improving organic loan growth after fifteen years of stagnant credit activity. |
Regional Banks Money Center Banks European Banks |
Capital MarketsExchanges operate as essential high-margin toll roads for the economy with immense operating leverage. They benefit from trading volume flowing directly to profits with minimal extra cost and have natural inflation hedging through transaction values. |
Exchanges Nasdaq CBOE Trading Fees Market Data | |
P&C InsuranceProperty & casualty reinsurers were added to the portfolio as capital was redeployed from trimmed bank positions. Pricing trends in insurance markets have been strong in recent years. Chubb has consistently generated returns on equity comfortably ahead of the industry owing to advantaged lines of business with disciplined underwriting and operating culture. |
Reinsurance P&C Insurance Underwriting Pricing Returns | |
PaymentsWise represents the most asymmetric investment in the portfolio, taking market share from legacy correspondent banking through cheaper, faster, and more transparent infrastructure. The company is evolving from a remittance app into a global financial services platform with three reinforcing routes to market: Consumer, Business and Platform. |
Cross-border Fintech Infrastructure Platform SME | |
ValuationsEquity valuations remain elevated with the S&P 500 trading near 23x forward earnings, well above its long-term average of 15.6x. High valuations may increase market sensitivity to earnings disappointments and tend to constrain longer-term returns, reinforcing the importance of selectivity. |
Multiples Premium Earnings Risk Selectivity |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 26, 2026 | Fund Letters | Chris Davis | COF | Capital One Financial Corp | Financials | Consumer Finance | Bull | New York Stock Exchange | credit cards, Payments, ROE, synergies, valuation | Login |
| Jan 26, 2026 | Fund Letters | Chris Davis | WFC | Wells Fargo & Co | Financials | Diversified Banks | Bull | New York Stock Exchange | Asset Cap, banking, buybacks, efficiency, tangible book | Login |
| Jan 26, 2026 | Fund Letters | Chris Davis | CB | Chubb Ltd | Financials | Property & Casualty Insurance | Bull | New York Stock Exchange | Defensiveness, Insurance, Pricing power, ROE, underwriting | Login |
| TICKER | COMMENTARY |
|---|---|
| AXP | American Express Company represents 22.1% of company owned with cost basis of $1,287 million and market value of $56,088 million, providing $479 million in 2025 dividends. |
| BK | Bank of New York Mellon, the largest financial custodian in the world, advanced amid strong earnings results. America's oldest bank is an early leader in the adoption of AI, with a multiyear partnership with OpenAI. |
| BRK-A | Miles mentioned that he had been a long-term shareholder of Berkshire Hathaway and had never sold his shares. Over roughly twenty-five years, his investment compounded at about 10.9% annually. The first dollar he invested became approximately thirteen dollars. Since around 1990, Berkshire has only marginally outperformed the S&P 500. By Buffett's own historical standards, this period could be described as mediocre. And yet, admiration for Buffett has not faded—if anything, it has intensified. |
| CB | Chubb is one of our core property & casualty insurance holdings. It is well-diversified across products and geographies. The company has consistently generated returns on equity comfortably ahead of the industry owing to a combination of running advantaged lines of business with a disciplined underwriting and operating culture. Pricing trends in the insurance markets have generally been strong in recent years, and consequently Chubb has been earning returns on tangible equity in the low 20s. While competitive forces may in time push that back toward a normalized level a few points lower, Chubb we believe would still be valued at 10–11x earnings looking out a few years. |
| COF | We added to Capital One Financial Corporation, which was a core new addition in the prior quarter. |
| D05.SI | We have followed the company for many years, but aside from occasional trades, we had not felt compelled to build a meaningful position in a business—even one that is an industry leader—whose business is traditionally mainly asset-based lending and whose earnings are still meaningfully influenced by interest-rate cycles. Over the previous two years, we have been increasingly impressed by the extent to which DBS has converted scale and technology into a structural economic moat. |
| DIS | We sold our long-term holding in Disney, reflecting our view that consumer discretionary spending could remain under pressure if cost-of-living conditions stay tight, especially at a time when the company is spending significantly on Parks and Resorts. |
| FI | Notable detractors from performance came from Fiserv (-43bps absolute and -39bps relative) |
| FITB | We continued to harvest gains by trimming Fifth Third (FITB) to 6% NAV. While we remain constructive on the sector's ability to steadily generate 10%+ earnings yield, valuations have expanded, and credit underwriting standards are gradually easing. |
| JPM | JPMorgan (JPM) has identified 42 AI-related stocks in the S&P 500, which today represent 45% of the index's market cap. They estimate that these stocks have accounted for 78% of S&P 500 returns, 66% of earnings growth, and 71% of capital spending growth since ChatGPT launched in November 2022. As it relates to the impact on the U.S. economy, JPM estimates tech sector capital spending contributed 40%-45% of U.S. GDP growth through the first 9 months of the year, up from less than 5% during the same period in 2023. |
| MKL | MKL produced excellent results in its insurance and investment operations. The insurance segment delivered a 93% combined ratio while the equity portfolio benefited from the year-end market rally. MKL's disciplined capital allocation, including significant stock buybacks, boosted their book value per share growth. |
| PNC | We initiated a preferred perpetual security in this bank holding company due to its robust capital position. |
| RE | In many ways we have come full circle with Everest Group – it is an old friend. We owned Everest RE, now called Everest Group, for 11 years in our Small Cap strategy during which it grew into a large cap, and we purchased it in our Large Cap program as well. We sold it out of both portfolios in 2020 to reallocate capital to companies with larger margins of safety. In the third quarter of 2023, we repurchased Everest Group in our Large Cap strategy. Despite steady value per share growth, Everest Group's stock price declined in 2024 and 2025 so we were able to buy it again in our Small Cap strategy. Everest Group is one of the top reinsurance companies in the world. They also have a meaningful primary insurance segment. Everest Group's quarterly numbers can be volatile, but over a cycle the company produces positive underwriting results. An underwriting loss is the cost of funds from premiums paid to an insurance company. An underwriting profit means that those funds do not have a cost. In fact, it means the insurance company is being paid to keep your money. They are able to invest these funds and earn investment income. Insurance companies that produce underwriting profits should trade at a meaningful premium to tangible book value. Everest Group, on the other hand, trades at a discount to tangible book value. The company realizes that its shares are significantly undervalued and is using its free cash flow to repurchase stock which positively impacts our value per share growth. We are thrilled to have the opportunity to own this well-managed leading insurance company again. |
| RKT | Rocket Companies, a fully integrated mortgage provider which we received shares of following the recent closing of its acquisition of Mr. Cooper, underperformed due to evolving market expectations surrounding the path of interest rates, which is key driver of its mortgage originations business. Rocket Companies, following its 2025 acquisition of Mr. Cooper, became a combined company with a market capitalization exceeding $50 billion. As a result, the position moved well beyond our small-cap mandate, and we exited the position. |
| RNR | RenaissanceRe (Finance & Investment, US) outperformed during the period as the market rewarded impressive quarterly results and aggressive share buybacks. |
| USB | Select holdings in banking (US Bank) detracted from returns |
| WFC | and money center banks Citigroup and Wells Fargo, all following strong performance |
| Ticker | Put/Call | Company Name | Industry | Value (M) | Shares | Weight % | Shares Purchased/Sold | Change in Share % | Market Cap (M) |
|---|---|---|---|---|---|---|---|---|---|
| COF | - | Capital One Financial Corp. | Financials | 2,087.9M | 8,614,766 | 9.4% | -8,145,468 | -48.6% | 133,659.8M |
| USB | - | U.S. Bancorp | Financials | 1,176.1M | 22,041,759 | 5.3% | -16,821,365 | -43.3% | 91,332.9M |
| META | - | Meta Platforms, Inc., Class A | Communication Services | 1,157.1M | 1,752,974 | 5.2% | -1,678,054 | -48.9% | 1,614,716.5M |
| AMAT | - | Applied Materials, Inc. | Information Technology | 1,079.7M | 4,201,298 | 4.9% | -6,906,686 | -62.2% | 291,446.6M |
| CVS | - | CVS Health Corporation | Health Care | 1,012.7M | 12,760,511 | 4.6% | -10,046,771 | -44.1% | 98,863.5M |
| MGM | - | MGM Resorts International | Consumer Discretionary | 978.7M | 26,820,202 | 4.4% | -21,086,702 | -44.0% | 10,196.3M |
| GOOGL | - | Alphabet Inc., Class A | Communication Services | 976.2M | 3,118,760 | 4.4% | -2,422,428 | -43.7% | 3,657,769.9M |
| VTRS | - | Viatris Inc. | Health Care | 973.3M | 78,177,984 | 4.4% | -60,513,306 | -43.6% | 18,373.3M |
| MKL | - | Markel Group, Inc | Financials | 892.5M | 415,160 | 4.0% | -331,896 | -44.4% | 26,241.1M |
| CTRA | - | Coterra Energy, Inc. | Energy | 856.4M | 32,537,508 | 3.8% | -7,229,454 | -18.2% | 23,869.2M |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| Financials | 48.38% | 33.17% | -15.21% |
| Health Care | 21.83% | 15.20% | -6.63% |
| Communication Services | 19.46% | 13.48% | -5.98% |
| Consumer Discretionary | 16.14% | 11.12% | -5.03% |
| Information Technology | 13.12% | 8.60% | -4.52% |
| Consumer Staples | 6.01% | 4.61% | -1.40% |
| Energy | 5.64% | 4.61% | -1.03% |
| Materials | 4.03% | 2.76% | -1.26% |
| Industrials | 3.56% | 2.50% | -1.05% |
| Other | 2.46% | 2.43% | -0.03% |
| Real Estate | 2.31% | 1.53% | -0.78% |
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