Fenimore Asset Management has published its investor letter for the fourth quarter of 2025. The stock market in 2025 was solid but volatile, with a summer rally fueled by AI-related spending and economic resilience. The fourth quarter experienced increased volatility due to valuation pressures and macroeconomic uncertainty. Large-cap technology and communication services stocks led the market, with the S&P 500 Index rising 2.66%.
Fenimore's Small Cap Strategy returned -4.12% in Q4 2025, underperforming the Russell 2000 Index, which gained 2.19%. The firm attributed this underperformance to an underweight exposure to low-quality stocks. The Dividend Focus Strategy declined -4.41%, compared to the Russell Midcap Index's 0.16% return. The Value Strategy declined -1.17% against the same benchmark, with investments in the financial and industrial sectors contributing to relative underperformance.
The firm believes the trend of AI stocks outperforming high-quality stocks is unsustainable. It expects mixed market conditions in 2026, noting that many AI-related stocks appear expensive while high-quality companies are trading at multi-year lows, which may present opportunities.
In the letter, Fenimore highlighted Jack Henry & Associates, Inc. (NASDAQ:JKHY) as a top performer in its Dividend Focus Strategy during the quarter. Jack Henry & Associates is a financial technology company that connects people and financial institutions. On January 15, 2026, its stock closed at $191.25 per share. The stock had a one-month return of 3.66% and gained 10.45% over the last 52 weeks, with a market capitalization of $13.897 billion.
Regarding Jack Henry & Associates, Fenimore stated: "Jack Henry & Associates, Inc.'s (NASDAQ:JKHY) earnings results remained consistent. JKHY reported 8.7% organic revenue growth, more than 220 basis points of margin expansion, and a 17% increase in profits. It added another $1 billion+ financial institution to its core client base and expects to exceed last year's 16 multi-billion dollar financial institution wins. Additionally, a major competitor is struggling and announced a rationalization of its core portfolios. This should create a wave of requests for proposals. Given JKHY’s win rate for competitive deals of approximately 50%, this should create opportunities to take market share."