| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 11.6% | - | 22.0% |
| 2025 |
|---|
| 22.0% |
Davis Opportunity Fund returned 22.02% in 2025, significantly outperforming the S&P 1500 Index's 17.02% return. The fund advocates for active management over passive indexing given stretched valuations in major indexes, with the S&P 1500 trading at nearly 26 times forward earnings and showing extreme concentration reminiscent of the late 1990s bubble. The portfolio trades at a steep discount to the benchmark with a 14.3x forward P/E versus 25.6x for the index, while delivering superior 20.4% five-year earnings growth compared to the index's 18.3%. Key performance drivers included opportunistic healthcare investments in managed care insurers during cost pressures, select technology holdings including Magnificent 7 positions, and unique financial services exposure through Capital One Financial. The fund maintains positions across energy and commodities, reflecting electrification trends. Davis believes active management will prove its value in the coming period, advising clients to reduce passive index exposure and reallocate to actively managed portfolios given the likelihood of falling interest rates making cash suboptimal.
Davis Opportunity Fund offers active management as a solution to navigate today's market environment characterized by stretched passive index valuations and extreme concentration, providing selective security picking and rational diversification while trading at a steep discount to benchmarks despite superior earnings growth.
Davis believes they may be entering a period where active management proves its value over passive management, opposite to the recent decade. They advise decreasing exposure to stretched passive index valuations and reallocating to actively managed portfolios. With likely falling interest rates, they see surplus cash as suboptimal compared to well-chosen equities.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 26 2026 | 2025 Q4 | AMAT, AMZN, COF, CTRA, CVS, DGX, GOOGL, META, MKL, SOLV, TECK, UNH, USB, VTRS, WCC | active management, energy, financials, healthcare, Outperformance, selectivity, technology, valuation |
UNH COF WCC |
Davis advocates for active management over passive indexing given stretched valuations in major indexes. They believe active managers can be selective at the security level and maintain rational diversification, contrasting with passive indexes where weightings are determined by share price momentum. The fund was opportunistic in healthcare throughout 2025, investing decisively in managed care insurers when operating costs surged unexpectedly. They believe these businesses traded at low multiples on depressed earnings with good recovery potential, as small margin improvements can translate into large percentage increases in earnings power. Holdings span social media, online search, cloud computing and e-commerce including select Magnificent 7 positions. They also own semiconductor companies at reasonable valuations, including picks and shovels businesses like Applied Materials with strong competitive positions and long track records of value creation. The portfolio looks different from major passive indexes in financials. Capital One Financial is a core holding with strong consumer finance, deposit-rich banking, and payment processing capabilities. It trades at only 13-14 times forward earnings despite attractive economics and is the fifth-largest holder of AI-related patents among major US companies. The fund owns stakes in energy and commodities companies that they have been quietly building. Coterra represents their energy business holdings, while Teck Resources reflects interest in select commodities like copper that serve as critical inputs to the electrification trend. |
| Jul 30 2025 | 2025 Q2 | - | Balance Sheets, Margin Of Safety, normalization, value, volatility | - | The commentary focuses on value investing in out-of-favor companies with strong balance sheets and recovery potential. Management stresses downside protection, normalized earnings, and disciplined capital allocation amid elevated market valuations. Volatility is viewed as an opportunity to acquire durable businesses at discounts. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
Active ManagementDavis advocates for active management over passive indexing given stretched valuations in major indexes. They believe active managers can be selective at the security level and maintain rational diversification, contrasting with passive indexes where weightings are determined by share price momentum. |
Active Passive Indexing Selectivity Diversification |
EnergyEnergy plays a critical role in AI infrastructure economics, with data centers becoming major electricity consumers. Rising power costs compress margins while grid constraints and regulatory scrutiny influence deployment timelines. The manager emphasizes that unlike software-driven growth, AI compute cannot be scaled independently of physical energy reality. |
Data Centers Grid Power Infrastructure Utilities | |
FinancialsEuropean banks have been rehabilitated after years in purgatory, with returns of 77% in 2025. Return on equity has normalized above 12% following exit from ultra-low rates, while capital positions have been rebuilt. However, supportive factors are well-appreciated by markets, reflected in significant valuation re-rating. |
Banks Return On Equity Interest Rates Capital Valuations | |
HealthcareHealthcare was the strongest relative contributor in the quarter with holdings increasing nearly +16% compared to benchmark returns of roughly +12%. Exact Sciences was acquired for a significant premium by Abbott Laboratories resulting in an +86% return, while other strong performers included Tarsus Pharmaceuticals, Glaukos following approval of a new product, Penumbra, and Repligen driven by strong earnings results. |
M&A Product Approval Earnings Biotech | |
Technology |
||
| 2025 Q2 |
ValueThe manager continues to find attractive value opportunities despite expensive markets, purchasing undervalued companies like Centene, GlaxoSmithKline, Carrefour and PayPal trading at low multiples with strong fundamentals. |
Undervalued Low Multiples Contrarian Opportunistic |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 26, 2026 | Fund Letters | Chris Davis | UNH | UnitedHealth Group Inc. | Health Care | Managed Health Care | Bull | New York Stock Exchange | Cost Normalization, Healthcare services, managed care, Margins, valuation | Login |
| Jan 26, 2026 | Fund Letters | Chris Davis | COF | Capital One Financial Corp. | Financials | Consumer Finance | Bull | New York Stock Exchange | AI, consumer finance, Deposits, earnings yield, rerating | Login |
| Jan 26, 2026 | Fund Letters | Chris Davis | WCC | Wesco International Inc. | Industrials | Electrical Components & Equipment Distribution | Bull | New York Stock Exchange | compounding, Distribution, Execution, Industrials, supply chain | Login |
| TICKER | COMMENTARY |
|---|---|
| AMAT | Top gainers in the Fund this quarter included Applied Materials (+26%). During the quarter, we trimmed the Fund's holding in Applied Materials as it rallied |
| AMZN | One company we own that we think has unique positioning to benefit from both the infrastructure and application layers is Amazon. Amazon's logistical prowess is one of the foremost moats in business today and it can and will be enhanced with AI. The company will do this in multiple ways, with better orchestration of its logistics assets and underlying cargo, as well as the buildout of more capable, sophisticated and robust robotics. Amazon is singularly well positioned to dominate the coordination layer, with AI's help, across its entire logistics network. |
| COF | We added to Capital One Financial Corporation, which was a core new addition in the prior quarter. |
| CTRA | Playing on the continued theme of infrastructure spending, defense and energy sustainability, Coterra added positively to performance |
| CVS | CVS Health represents 2.02% of top holdings |
| DGX | and in lab and diagnostics services (Quest Diagnostics). We see good value in these holdings based on the view that healthcare spend in the U.S. is likely to continue expanding, increasing the addressable market opportunity for our healthcare names. |
| GOOGL | In the third quarter, Google, Kairos Power, and the Tennessee Valley Authority announced a major collaboration centered on a novel power purchase agreement. Google followed this announcement with another significant step forward. On October 27, Google and NextEra Energy announced plans to restart the Duane Arnold Energy Center. |
| META | On January 9, Meta Platforms unveiled a new agreement with Vistra—the largest generator of competitive electricity in the United States—as well as with TerraPower and Oklo. The announcement builds on Meta's agreement last year with Constellation Energy and positions the company to become one of the largest corporate purchasers of nuclear-generated electricity in the United States. |
| 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. |
| SOLV | Medical products and health care IT services company Solventum was spun off from 3M in April 2024. We believe the company will likely show improved growth and margins as a standalone company, as the business has previously been challenged by years of underinvestment and market share losses. Solventum's new management team is focused on improving revenue growth, and we expect to see more fully optimized research and development and improved sales mix from new products moving forward. |
| TECK | Teck Resources and Anglo American announced a merger of equals that would create world's fifth-largest copper miner. Benefits include the ability to integrate Teck's Quebrada Blanca II with Anglo's neighbouring Collahuasi mine. |
| UNH | We also added back a full position in UnitedHealth |
| USB | Select holdings in banking (US Bank) detracted from returns |
| VTRS | Outside of managed care investments currently in the portfolio, we also own certain leaders in generic pharmaceuticals (Viatris) |
| WCC | Electrical products distributor WESCO International outperformed in Q4 after reporting solid Q3 results and raising 2025 guidance. Better-than-expected organic growth was driven by its rapidly expanding data center business, which reached nearly 20% of total revenue. |
| 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% |
| Symbol | Company | Filed By | Filing Date | Filing |
|---|---|---|---|---|
| - | - | - | - | - |
| - | - | - | - | - |
| - | - | - | - | - |
| - | - | - | - | - |
| - | - | - | - | - |
