Fenimore Asset Management has published its investor letter for the fourth quarter of 2025. The stock market in 2025 was solid but volatile, with investors balancing AI enthusiasm, economic uncertainty, and monetary policy concerns.
A summer rally was driven by AI-related spending and economic resiliency. The fourth quarter saw increased volatility due to valuation pressures and macro uncertainty. Large-cap technology and communication services stocks led the market, with the S&P 500 Index rising 2.66% for the quarter.
The firm stated that the trend of AI stocks outpacing high-quality stocks is unsustainable. Fenimore's Small Cap Strategy returned -4.12% in Q4 2025, trailing the Russell 2000 Index's 2.19% return. Underweight exposure to low-quality stocks drove this underperformance.
Fenimore's Dividend Focus Strategy declined -4.41% in the quarter, compared to the Russell Midcap Index's 0.16% return. The firm's Value Strategy declined -1.17% in Q4, also against the Russell Midcap Index's 0.16% return. Investments in the financial and industrial sectors contributed to the relative underperformance of the Value Strategy.
Fenimore expects mixed market conditions in 2026. Many AI-related stocks appear expensive, while high-quality companies are trading at multi-year lows, which the firm sees as creating opportunities.
In its letter, Fenimore highlighted Markel Group Inc. (NYSE:MKL) as a stock of note. Markel Group, a financial holding company based in Glen Allen, Virginia, was the top performer in the Fenimore Value Strategy during the quarter.
On January 15, 2026, Markel Group stock closed at $2,084.14 per share. Its one-month return was -3.81%, while its shares gained 17.48% over the last 52 weeks. The company has a market capitalization of $26.37 billion.
Fenimore Asset Management stated the following regarding Markel Group Inc. in its fourth quarter 2025 investor letter: "Our top contributors to performance were Ross Stores (ROST), Markel Group Inc. (NYSE:MKL), and Amphenol Corporation (APH). MKL produced excellent results in its insurance and investment operations. The insurance segment delivered a 93% combined ratio while the equity portfolio benefited from the year-end market rally. MKL’s disciplined capital allocation, including significant stock buybacks, boosted their book value per share growth."