Fenimore Asset Management has released its investor letter for the fourth quarter of 2025. The document is available for download. The stock market in 2025 was solid but experienced volatility. Investors balanced enthusiasm for artificial intelligence with economic uncertainty and monetary policy concerns.
A summer rally was fueled by AI-related spending and economic resilience. The fourth quarter saw increased market volatility due to valuation pressures and macroeconomic uncertainty. Large-cap technology and communication services stocks led the market during the quarter, with the S&P 500 Index rising 2.66%.
The firm stated that the trend of AI stocks outperforming high-quality stocks is unsustainable. Fenimore's Small Cap Strategy returned -4.12% in Q4 2025, trailing the Russell 2000 Index, which returned 2.19%. Underperformance was driven by an underweight exposure to low-quality stocks.
The Fenimore Dividend Focus Strategy declined 4.41% in the fourth quarter, compared to the Russell Midcap Index's return of 0.16%. The Fenimore Value Strategy declined 1.17% in Q4, while the Russell Midcap Index returned 0.16%. Investments in the financial and industrial sectors contributed to the strategy's relative underperformance during the quarter.
The firm expects mixed market conditions in 2026. Many AI-related stocks appear expensive, while high-quality companies are trading at multi-year lows, creating opportunities.
In its fourth-quarter 2025 investor letter, Fenimore Asset Management highlighted Ross Stores, Inc. (NASDAQ:ROST). Ross Stores was the top performer in both the Fenimore Value Strategy and the Fenimore Dividend Focus Strategy during the quarter.
Ross Stores, Inc. is an off-price fashion and apparel retailer headquartered in Dublin, California. On January 15, 2026, its stock closed at $193.79 per share. The stock's one-month return was 6.24%, and it gained 29.93% over the last 52 weeks. Ross Stores has a market capitalization of $63.026 billion.
Fenimore Asset Management stated the following regarding Ross Stores, Inc. in its letter: "Ross Stores, Inc. (NASDAQ:ROST) performed the best. ROST posted strong same store sales in its fiscal third quarter. In our estimation, the new CEO is doing an excellent job of reviving growth. We also believe that this off-price retailer is advantaged over traditional apparel companies because of its everyday discounts. In the current economy, where certain consumers are stressed, ROST fills a critical need."