Fenimore Q4: Mixed Results in Volatile Markets

Fenimore’s Q4 2025 Performance in a Volatile Market

Fenimore Asset Management reported a challenging fourth quarter of 2025, as its core equity strategies lagged their benchmarks despite a generally solid but volatile year for equities. The quarter was characterized by investors balancing AI enthusiasm, economic uncertainty and monetary policy concerns, with a summer rally giving way to valuation-driven volatility and macro uncertainty late in the year.

Large-cap technology and communication services stocks led the broader market, helping the S&P 500 Index gain 2.66% in the quarter. Fenimore’s Small Cap Strategy declined 4.12% versus a 2.19% rise in the Russell 2000 Index, while the Dividend Focus Strategy fell 4.41% against the Russell Midcap Index’s 0.16% gain. The Value Strategy slipped 1.17%, also trailing the same mid-cap benchmark.

The firm attributed much of the underperformance to underweight exposure to low-quality stocks and to specific positions in the financial and industrial sectors. Fenimore stated it believes the trend of AI-related stocks outpacing high-quality companies is unsustainable and expects mixed market conditions in 2026, noting that many AI names appear expensive while higher-quality businesses trade at multi-year lows.

Key Detractors Across Small Cap and Dividend Strategies

Several individual holdings were cited as notable detractors in the quarter. In the Small Cap Strategy, FirstService Corporation, Dream Finders Homes and SPS Commerce were among the largest performance drags. FirstService, a residential property management and services company, faced weather-related softness in the period. Dream Finders Homes, a US home builder, was pressured by housing affordability challenges.

SPS Commerce, a provider of cloud-based supply chain management solutions, also weighed on results following what Fenimore described as a muted outlook. As of January 15, 2026, SPS Commerce shares had fallen 52.23% over the prior 52 weeks, while Dream Finders Homes shares were down 15.87% over the same period. Both remained among Fenimore’s highlighted small-cap positions.

Within the Dividend Focus Strategy, Trane Technologies, Paychex and CDW Corporation were identified as key detractors. Trane Technologies, an HVAC and transport refrigeration solutions provider, declined amid weakness in its HVAC business. Paychex, a human capital management firm serving small and medium-sized businesses, sold off about 10% despite strong earnings, and its shares were down 24.46% over 12 months.

CDW, a major information technology solutions provider, also negatively impacted performance. As of mid-January 2026, CDW’s one‑month return was -5.94%, and the stock had lost 29.91% over the prior year. AutoZone, a retailer of automotive replacement parts and accessories, and Fastenal, a distributor of industrial and construction supplies, were additional detractors in the Value Strategy, with Fastenal’s softness tied to a weaker US industrial manufacturing backdrop.

Notable Bright Spots: Ross Stores, Markel and Jack Henry

Despite the overall drag from several holdings, Fenimore reported strong contributions from select names. Ross Stores, an off-price apparel and home fashions retailer, was the top performer in both the Value and Dividend Focus strategies in Q4. As of January 15, 2026, Ross shares were up 29.93% over the previous 52 weeks, supported by double-digit revenue growth and earnings that beat consensus expectations.

Markel Group, a financial holding company that underwrites insurance products, was the top performer in the Value Strategy during the quarter, benefiting from what Fenimore described as exceptional outcomes from its insurance and investment operations. Markel shares had gained 17.48% over the prior year despite a modest one‑month decline as of mid-January 2026.

In the Dividend Focus Strategy, Jack Henry & Associates, a financial technology company serving banks and other institutions, ranked among the top performers. Its stock advanced 10.45% over the trailing 12 months and delivered a 3.66% one‑month return as of January 15, 2026. Fenimore highlighted Jack Henry alongside Ross Stores as examples of holdings that offset part of the weakness elsewhere in the portfolio.

Positioning and Outlook Heading Into 2026

Fenimore’s Q4 2025 investor letter underscored a cautious stance toward AI-related stocks that led the market and a preference for what it views as high-quality companies that have been marked down. Across its Small Cap, Dividend Focus and Value strategies, the firm emphasized that many of its core holdings, including both recent detractors and outperformers, remain central to its approach.

The firm expects a mixed environment in 2026, shaped by lingering macroeconomic uncertainty and valuation dispersion between AI beneficiaries and other sectors. Fenimore suggested that the current setup creates opportunities in companies it considers high quality, even as near-term performance has been pressured for several of these positions.