| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Fiduciary Management continues to emphasize quality investing amid a speculative market environment dominated by AI-related stocks and low-quality companies. The firm notes that 42 AI-related stocks now represent 45% of S&P 500 market cap and have driven 78% of index returns since ChatGPT launched. However, FMI questions the sustainability of massive capital spending by hyperscalers, with capex-to-revenue ratios reaching 29% compared to 5% for traditional industrials like Caterpillar. Quality businesses have significantly underperformed during this junk rally, but FMI believes this represents a historical anomaly. The firm maintains its disciplined approach of buying advantaged businesses with strong balance sheets at discount valuations, citing superior long-term risk-adjusted returns. Current holdings include pool equipment manufacturer Hayward Holdings, IT consultant Accenture, and UK industrial technology company Smiths Group. Despite challenging performance relative to benchmarks, FMI remains confident that quality investing will ultimately prevail as market conditions normalize.
FMI maintains disciplined focus on quality businesses with strong competitive advantages, robust balance sheets, and attractive valuations while avoiding the speculative AI bubble and junk rally that has dominated markets.
FMI maintains confidence that their quality-focused approach will outperform over time despite current headwinds. They view the market's disinterest in quality businesses as a historical anomaly and expect better days ahead for their investment style.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 11 2026 | Q4 2025 | ACN, CAT, HAYW, JPM, MSFT, NVDA, SMIN.L, UNP | AI, Bubble, capital intensity, Quality, small caps, technology, value | - | AI has had a staggering impact on global stock markets, with 42 AI-related stocks representing 45% of S&P 500 market cap and accounting for 78%… |
| Oct 14 2025 | 2025 Q3 | GRG LN | Artificial Intelligence, Defensive, Europe, Global Equities, valuation | GRG LN | The manager notes global equity advances driven by AI enthusiasm and U.S. rate cuts but warns of overvaluation and uneven fundamentals across regions. European and… |
| Jun 30 2025 | 2025 Q2 | 669 HK | currencies, global, International Equities, selectivity, Valuations |
NSIT MAS |
The commentary highlights opportunities in international equities where valuations remain more attractive relative to U.S. markets. The manager discusses how currency movements, regional growth differentials,… |
| Apr 14 2025 | 2025 Q1 | SW FP | - | - | - |
| Dec 31 2024 | 2024 Q4 | ACGL, ICLR | - | - | - |
| Sep 30 2024 | 2024 Q3 | BARN SW, SIE GR | - | - | - |
| Jun 30 2024 | 2024 Q2 | RYAAY | - | - | - |
| Apr 15 2024 | 2024 Q1 | WEIR LN | - | - | - |
| Jan 14 2024 | 2023 Q4 | DGE LN | - | - | - |
| Oct 21 2023 | 2023 Q3 | CCEP | - | - | - |
| Jun 30 2023 | 2023 Q2 | ROG SW | - | - | - |
| Mar 31 2023 | 2023 Q1 | DBS SP, LYG | - | - | - |
| Oct 25 2022 | 2022 Q3 | AKZA NA, BME LN, HWDN LN, SW FP | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| Q4 2025 |
AIThe extended federal government shutdown added volatility during what was otherwise a risk-on environment, with a mid-quarter shift in market behavior for AI-related equities as the exuberant narrative evolved to one more balanced in assessing the technology's enormous potential against staggering capital spending plans and high expectations. The team initiated a position in Credo Technology as a more diversified way to gain exposure to strong trends in AI-connectivity. |
Connectivity Semiconductors Infrastructure Capital Spending |
QualityThe portfolio has shifted toward higher quality businesses with better profitability, lower leverage, and less volatile earnings. Quality stocks underperformed significantly in 2025, creating attractive entry points for value investors. The manager maintains price discipline while seeking quality companies trading at discounts to intrinsic value. |
Quality Profitability Leverage Earnings | |
ValueManager emphasizes investing in controlled companies trading at significant discounts to NAV, with European holding companies showing discounts of 30-68%. The strategy focuses on securities mispricing where real value exists, contrasting with overvalued technology stocks. |
Discounts NAV Mispricing Undervalued Controlled | |
| 2025 Q3 |
AI Spillover |
|
| 2025 Q2 |
GlobalInternational and emerging market equities dominated performance with annual returns above 30%, reinforcing the case for global diversification. Non-US developed markets gained 31.9% while emerging markets gained 33.6% for 2025. |
Diversification International Emerging Markets Outperformance Currency |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 14, 2025 | Fund Letters | Jonathan T. Bloom | GRG LN | Greggs PLC | Consumer Discretionary | Restaurants | Bull | NYSE | Brand, cash flow, expansion, Food, growth, Margins, retail, valuation | Login |
| Jun 30, 2025 | Fund Letters | Jonathan T. Bloom | NSIT | Insight Enterprises Inc. | Information Technology | Electronics & Computer Distribution | Bull | NASDAQ | buybacks, cloud, IT services, Modernization, scale | Login |
| Jun 30, 2025 | Fund Letters | Jonathan T. Bloom | MAS | Masco Corp. | Industrials | Building Products & Equipment | Bull | NYSE | brands, Free Cash Flow, Remodeling, ROIC, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| ACN | Accenture is the world's leading IT consultant, with advantages stemming from their depth and breadth across products, geographies, and industries. Over the last four years, Accenture's valuation has roughly halved. They've faced headwinds in IT spending and suffered from the perception that they are an AI loser. We believe that AI will cause deflationary pressure in parts of their business, but that it will be more than offset by the work required for enterprises to adopt AI. This is recently evidenced by partnerships with OpenAI and Anthropic. |
| CAT | Construction + Mining at low mid-cycle levels; dealer destock largely complete. Non-Residential + manufacturing starts inflecting (manufacturing starts 5X trailing 12-month average in June). Pricing Re-Accelerating, inventories bottoming → classic machinery trough signals. De-Globalization + OBBB tailwinds (bonus depreciation = ~700bps spend tailwind). Five Prior Cycles = ~150% avg alpha vs. S&P 500® Index from trough to peak. |
| HAYW | Hayward Holdings is a leading global pool equipment manufacturer, primarily serving the residential pool market. North America accounts for 85% of sales and over 90% of profits. The company estimates that 80% of total sales come from their existing installed base of pools (50% repair and replacement), making the business relatively resilient to economic cycles. They have a solid balance sheet, strong management team, and reasonable valuation multiple, particularly given their depressed earnings. |
| 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. |
| MSFT | MSFT was a detractor in 4Q25 following its fiscal first-quarter 2026 earnings report released on October 29. While results were better than expected operationally, investor reaction was driven by guidance and capital expenditure intensity rather than headline performance. Revenue grew 17% year-over-year, exceeding consensus expectations, and Azure revenue increased 39% year-over-year, also ahead of estimates. However, management guided to a sequential deceleration in Azure growth in fiscal Q2, signaling some moderation after a period of exceptional demand. |
| NVDA | Capital spending from Google, Microsoft, Amazon, Meta, OpenAI, and more have led to Nvidia becoming the Rrst 5 trillion market cap company. |
| SMIN.L | Smiths is making tangible progress in its transition toward a more focused, higher-performing portfolio of industrial technology businesses. The pro forma company (John Crane and Flex-Tek) is positioned for structurally higher growth, margins, and returns than the legacy conglomerate. Their improved growth and profitability profile is complemented by a pristine balance sheet and substantial shareholder returns. While the shares have performed well recently, Smiths continues to trade at a modest valuation relative to its fundamental outlook and at a discount to its estimated break-up value. |
| UNP | Union Pacific, the largest freight rail operator in the western United States, has announced plans to merge with Norfolk Southern, one of its major eastern counterparts. If approved, the merger would create the first coast-to-coast rail network in the U.S. |
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