Fenimore Asset Management has published its investor letter for the fourth quarter of 2025. The document is available for download. In 2025, the stock market showed strength but experienced volatility. Investors grappled with enthusiasm for artificial intelligence, economic uncertainties, and monetary policy concerns.
A summer rally was fueled by AI-related spending and economic resilience. The fourth quarter, however, saw increased market swings due to valuation pressures and macroeconomic uncertainty. Large-cap technology and communication services stocks led the market during the quarter. The S&P 500 Index rose 2.66%.
The investment firm stated that the trend of AI stocks outperforming high-quality stocks is not sustainable. Fenimore's Small Cap Strategy returned -4.12% in Q4 2025. This trailed the Russell 2000 Index, which returned 2.19%. An underweight position in low-quality stocks contributed to the underperformance.
Fenimore's Dividend Focus Strategy declined 4.41% in the quarter. The Russell Midcap Index returned 0.16% over the same period. The firm's Value Strategy declined 1.17%, also compared to the Russell Midcap Index's 0.16% return. Investments in the financial and industrial sectors led to the strategy's relative underperformance for the quarter.
Looking ahead to 2026, Fenimore anticipates mixed market conditions. Many AI-related stocks appear expensive, while high-quality companies are trading at multi-year lows, presenting opportunities.
In its letter, Fenimore highlighted CDW Corporation. The information technology solutions provider, headquartered in Vernon Hills, Illinois, was a detractor to the performance of the Dividend Focus Strategy. On January 15, 2026, CDW stock closed at $132.29 per share. Its one-month return was -5.94%, and it lost 29.91% of its value over the past 52 weeks. The company has a market capitalization of $17.338 billion.
Fenimore Asset Management stated the following regarding CDW Corporation in the letter: "CDW Corporation was the second-worst performer. The IT industry continued to suffer from the pull forward of spending during COVID; however, we saw some momentum with the Windows 11 refresh and all of CDW’s business lines had solid growth except for education. Despite this, overall earnings growth only exhibited modest improvement."