Fenimore Asset Management has published its investor letter for the fourth quarter of 2025. The document outlines the firm's performance during a period marked by stock market volatility.
The S&P 500 Index rose 2.66% in the quarter, with large-cap technology and communication services stocks leading. Fenimore's Small Cap Strategy returned -4.12%, trailing the Russell 2000 Index's 2.19% gain. Its Dividend Focus Strategy declined -4.41%, and the Value Strategy fell -1.17%, both underperforming the Russell Midcap Index's 0.16% return.
In the letter, Fenimore identified Brown & Brown, Inc. as a significant performance detractor for its Value Strategy. The insurance broker, headquartered in Daytona Beach, Florida, operates across Retail, Programs, Wholesale Brokerage, and Services segments.
On January 15, 2026, Brown & Brown stock closed at $79.75 per share. It posted a one-month return of -0.87% and has lost 24.70% of its value over the past 52 weeks. The company's market capitalization stands at $27.122 billion.
Fenimore stated, "Our underperformance versus the Russell Midcap was attributable to our choice of investments in the financial and industrial sectors. Our allocation to those sectors was a net neutral. Brown & Brown, Inc. and Fastenal Co. weighed most heavily on our relative performance. BRO is a commercial insurance broker that serves small and midsized companies. Their organic growth rates slowed as property casualty rates declined. Investors also reacted to a decline in pre-tax margins, largely due to integration costs from a recent merger."
The firm believes the trend of AI stocks outpacing high-quality stocks is unsustainable. It expects mixed market conditions in 2026, noting that many AI-related stocks appear expensive while high-quality companies trade at multi-year lows.