Wedgewood Partners, an investment management firm, issued its investor letter for the fourth quarter of 2025. The firm expressed a more moderated outlook, anticipating increased market volatility in the coming years. The Wedgewood Composite returned -1.8% net for the quarter, while the S&P 500 gained 2.7%, the Russell 1000 Growth Index returned 1.1%, and the Russell 1000 Value Index returned 3.8%. Year-to-date, the Composite is up 4.3%, compared to 17.9%, 18.6%, and 15.9% for those indices, respectively.
The letter attributed the underperformance to poor stock selection, a portfolio of past strong performers due for valuation correction, and a structural underweight position in AI stocks. It noted that crowded AI investments and stretched valuations in 2026 are creating pressure on prudent investment decisions. The firm's focus on high-quality stocks, a strategy effective since 1992, did not work in 2025.
In the letter, Wedgewood Partners highlighted Amazon.com, Inc. (NASDAQ:AMZN). Amazon provides consumer products, advertising, and subscription services through online and physical stores. On January 16, 2026, Amazon stock closed at $239.12 per share. Its one-month return was 4.68%, and it gained 5.83% over the last 52 weeks. The company has a market capitalization of $2.556 trillion.
Regarding Amazon, Wedgewood Partners stated: "We have followed Amazon.com, Inc. (NASDAQ:AMZN) for many years – and owned its stock in the past. The stock has lagged the broader indices for the past five years, and valuation multiples have reverted lower despite cash flow returns on investment rebounding to near-record levels. Current management is more focused on managing capacity and costs after prior management spent several years aggressively building out both the e-commerce and AWS footprints. For example, the Company's EV/EBITDA multiple is trading around 13X for 2026, well below its pre-COVID-19 levels of 25X and the 10-year average of 17X. Meanwhile, cash flow returns have rebounded to more than 20%, driven by record margins. The current management team has done well to grow the businesses into their current overcapacity and better match that capacity to demand. We expect Amazon should be able to grow at double-digit rates, driven by increasing penetration of e-commerce and infrastructure as a service (IaaS), while expanding margins as they better manage capacity to demand."
Amazon.com, Inc. (NASDAQ:AMZN) is ranked first on a list of 30 Most Popular Stocks Among Hedge Funds. According to database information, 332 hedge fund portfolios held Amazon at the end of the third quarter of 2025, up from 325 in the previous quarter. In Q3 2025, Amazon reported $180.2 billion in revenue, a 12% year-over-year increase excluding foreign exchange impacts.