| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 8.3% | 0.1% | 10.7% |
| 2025 | 2024 |
|---|---|
| 10.7% | 13.7% |
The Davenport Core Leaders Fund returned 0.05% in Q4 2025, finishing the year up 10.71%, lagging the S&P 500's 17.88% gain. The underperformance reflects the Fund's disciplined approach to risk management and diversification in a market dominated by AI and technology momentum. While AI-related stocks led by Nvidia continued their explosive gains, the Fund maintained purposeful diversification rather than chasing speculative momentum. Key contributors included Alphabet, which benefited from a narrative shift to AI winner status, and healthcare names like Intuitive Surgical and Vertex Pharmaceuticals. Detractors included Spotify, ServiceNow, and Uber amid sector-specific concerns. The Fund initiated positions in Cintas and Marvell Technology while trimming overvalued tech positions. Management believes their conservative, quality-focused approach will ultimately reward investors, drawing parallels to the late 1990s when looking where others weren't proved successful. The strategy remains grounded in business fundamentals rather than short-term market trends, positioning for various market scenarios ahead.
The Fund emphasizes ownership of high-quality, high-return leaders with enduring competitive advantages and management teams committed to long-term capital allocation, positioned to consistently compound intrinsic value across market conditions.
The managers are optimistic that the Fund is well-prepared for various market and economic scenarios, staying grounded in business fundamentals rather than short-term market trends. They believe their conservative approach will ultimately pay off, having seen similar market dynamics in the late 1990s where it paid to look where other investors weren't looking.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 18 2026 | 2025 Q4 | AAPL, ACN, ADBE, AMZN, AVGO, CTAS, EOG, GOOG, ISRG, META, MRVL, MSFT, NOW, NVDA, ROK, SPOT, UBER, UNH, UNP, VRTX | AI, diversification, large cap, Quality, risk management, technology, value |
GOOG CTAS MRVL |
AI and technology stocks led market gains in 2025, with Nvidia up 38.87% after a 171.17% gain the prior year. A gold rush mindset developed across the AI ecosystem, spreading to speculative corners including MEME stocks and unprofitable AI/tech companies. However, there are risks around massive capital outlays for computing power and unclear paths to returns. The market was dominated by momentum-driven stories with little regard for valuation, particularly in AI and tech sectors. 18 of the top 20 performers in the Russell 3000 from April through November were unprofitable companies. Jumping on momentum bandwagons proved more fruitful than having differentiated perspectives or being valuation sensitive. The Fund emphasizes high return businesses with durable competitive advantages and management teams committed to long-term capital allocation. Strategy holdings are positioned to consistently compound intrinsic value across market conditions, staying grounded in business fundamentals rather than short-term market trends. The Fund remains purposefully diversified despite market leadership being narrow and focused on AI. This discipline reflects commitment to effective risk management and appropriate diversification, which weighed on relative performance but positions the Fund well for various market scenarios. |
| Oct 20 2025 | 2025 Q3 | EA, NVDA, NVO | Artificial Intelligence, healthcare, Large Caps, Robotics, technology |
NVDA NVO |
The funds performance was driven by large-cap technology names like NVIDIA, Alphabet, and Apple benefiting from ongoing AI investment cycles. The managers maintained an underweight in the Magnificent 7 for valuation and risk reasons while adding to Intuitive Surgical, citing long-term growth in robotic-assisted healthcare. Despite lagging the S&P 500, the fund remains focused on disciplined capital allocation and steady compounders. |
| Jul 21 2025 | 2025 Q2 | NVDA, PWR, UNH | Capital discipline, Competitive Advantage, earnings durability, market leaders, Quality |
NVDA PWR |
The letter emphasizes owning a concentrated portfolio of high-quality market leaders with durable competitive advantages. Earnings consistency, balance sheet strength, and long-term demand stability underpin portfolio construction. Volatility is viewed as an opportunity to add to core holdings at attractive entry points. |
| Mar 31 2025 | 2025 Q1 | NVDA, TT | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
DiversificationThe Fund remains purposefully diversified despite market leadership being narrow and focused on AI. This discipline reflects commitment to effective risk management and appropriate diversification, which weighed on relative performance but positions the Fund well for various market scenarios. |
Risk Management Portfolio Construction Concentration | |
Momentum2025 was characterized by extreme momentum dynamics with capital flowing into immediate winners while perceived losers saw unprecedented pressure. Market leadership concentrated in lower-quality, speculative, and cyclically sensitive stocks. The momentum trade has been exceptionally profitable short-term but timing the inevitable reversal remains challenging. |
Cyclical Speculation Leadership Volatility Reversal | |
QualityThe company emphasizes investing in businesses with excellent economics, durable competitive advantages, and high-integrity management. This quality focus is evident in concentrated equity holdings and operating business acquisitions. |
Durable Advantages Management Quality Economic Moats Competitive Position | |
| 2025 Q3 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
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 |
QualityThe company emphasizes investing in businesses with excellent economics, durable competitive advantages, and high-integrity management. This quality focus is evident in concentrated equity holdings and operating business acquisitions. |
Durable Advantages Management Quality Economic Moats Competitive Position |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 20, 2025 | Fund Letters | George L. Smith III | NVDA | NVIDIA Corp. | Information Technology | Semiconductors | Bull | NASDAQ | AI, data centers, Ecosystem, Gpu, growth, Pricing power, semiconductors | Login |
| Oct 20, 2025 | Fund Letters | George L. Smith III | NVO | Novo Nordisk A/S | Health Care | Pharmaceuticals | Bear | NYSE | Competition, Diabetes, GLP-1, healthcare, Obesity, pharmaceuticals, R&D | Login |
| Jul 21, 2025 | Fund Letters | George L. Smith III | NVDA | NVIDIA Corporation | Information Technology | Semiconductors & Semiconductor Equipment | Bull | NASDAQ | AI, CapEx, datacenters, GPUs, semiconductors | Login |
| Jul 21, 2025 | Fund Letters | George L. Smith III | PWR | Quanta Services, Inc. | Industrials | Construction & Engineering | Bull | New York Stock Exchange | backlog, Electrification, Grid, infrastructure, utilities | Login |
| Jan 18, 2026 | Fund Letters | George L. Smith III | GOOG | Alphabet Inc. | Communication Services | Interactive Media & Services | Bull | NASDAQ | advertising, AI, cloud, scale, Search | Login |
| Jan 18, 2026 | Fund Letters | George L. Smith III | CTAS | Cintas Corporation | Industrials | Diversified Support Services | Bull | NASDAQ | buybacks, dividends, Execution, recurring revenue, services | Login |
| Jan 18, 2026 | Fund Letters | George L. Smith III | MRVL | Marvell Technology, Inc. | Information Technology | Semiconductors | Bull | NASDAQ | AI, custom chips, datacenters, Networking, Semi Conductors | Login |
| TICKER | COMMENTARY |
|---|---|
| AAPL | Apple Inc. represents 1.6% of company owned with cost basis of $6,255 million and market value of $61,962 million, providing $280 million in 2025 dividends. |
| 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. |
| ADBE | By looking at their Rnancials, FactSet, PayPal, Adobe, and Salesforce seem to be doing Rne. The market, however, is reading subdued revenue growth as a sign of increased competition on their core oSerings. These companies' outlooks look more di'cult than their past. |
| 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. |
| AVGO | The primary contributors to its performance were our exposures to Broadcom |
| CTAS | During the quarter, we initiated new positions in two companies – Cintas Corp (CTAS) and Marvell Technology Inc. (MRVL). Cintas is the nation's largest uniform rental and facility services provider serving around 1 million customers. We are attracted to the company's strong execution, potential for continued growth in the future, return profile, and current valuation leading us to initiate a new position in the stock. |
| GOOG | From the moment OpenAI hit the scene with ChatGPT 3.5 in the Fall of 2022, Google was a perceived loser and thousands of pontificators warned about the end of search. Fast forward three years and this was Google Search's fastest quarter of revenue growth since Q1 2022, when the reopening and pandemic were still considerable drivers of results. In parallel with the Search re-acceleration, Google has also emerged as a leader in AI itself. This combination has been potent for Google's stock and could not have opened on Search alone, given the terminal value fears. |
| ISRG | ISRG shares appreciated in the fourth quarter after the company delivered strong Q3 results highlighting continued procedure growth and accelerating system placements. Procedure volumes rose in the mid-teens globally, with notable strength in general surgery and urology, while recurring instrument and accessory revenue grew faster than expectations. Management also reported that the early rollout of its next-generation robotic platform was tracking ahead of schedule, with utilization metrics trending positively across beta sites. |
| 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. |
| MRVL | We also initiated a position in Marvell Technology which is a fabless semiconductor company that supplies technology necessary to move, store, process and secure data across various end-markets such as data centers, enterprise networks and telecommunications infrastructure. We believe the risk/reward looks compelling and we elected to start a position on the stock's recent pullback. |
| 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. |
| NOW | In the case of ServiceNow, the stock weakened following reports of a potential large acquisition while the company has also been challenged by bearish sentiment across the software as a service or SAAS segment. |
| NVDA | AI bellwether NVIDIA's very strong set of earnings in late November helped the AI theme re-assert its dominance when investors breathed a sigh of relief following the results. |
| ROK | Rockwell Automation is the pure-play bet on factory digitization. Its moat is sticky, mission-critical automation software and hardware that enable manufacturers to boost efficiency, safety, and uptime. Secular tailwinds—reshoring, labor shortages, electrification, and physical AI-driven industrial automation—give it years of demand runway. With recurring revenue growth, strong pricing power, and capital-light margins, ROK is a high-quality compounder in a world where industrial efficiency is gold. |
| SPOT | Spotify is the world's leading audio streaming platform. Third-quarter results showed continued operating progress, with users increasing 11% to 713 million and subscribers growing 12% to 281 million. Meanwhile, operating income expanded to a mid-teens margin, alongside a record quarterly free cash flow. Despite the momentum, the shares weakened as investors reset near-term margin expectations. Spotify has been a top contributor to long-term Fund performance, and we remain confident that pricing, product innovation, advertising efficiency, and an expanding ecosystem can continue to widen margins over time, as reinforced this quarter by the launch of Spotify recommendations within ChatGPT. |
| UBER | UBER was a detractor in the fourth quarter following its third-quarter 2025 earnings report, which delivered strong operating performance but was met with a muted market reaction. Gross Bookings and adjusted EBITDA both came in near the high end of management's guidance, driven by accelerating demand across both Mobility and Delivery. However, investor focus shifted to commentary around reduced margin expansion as the company steps up investment in growth initiatives, including autonomous vehicle partnerships, platform innovation, and commerce expansion. |
| UNH | We also added back a full position in UnitedHealth |
| 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. |
| VRTX | Top gainers in the Fund this quarter included Vertex Pharmaceuticals (+16%) |
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