Here’s Why Science Applications International Corp (SAIC) Sold Off in Q3

Fund Performance - The FPA Queens Road Small Cap Value Fund returned 7.46% in Q3 2025, underperforming the Russell 2000 Value Index which returned 12.60% [1] - For the first three quarters of 2025, the Fund achieved a return of 13.77%, outperforming the index's return of 9.04% [1] - The fund's strategy focuses on a diligent, disciplined, and patient approach, expecting to outperform in down markets and lag in speculative markets [1] Company Overview: Science Applications International Corporation (SAIC) - Science Applications International Corporation (SAIC) is a government contractor providing engineering and IT services, with a revenue split of approximately 50% from defense and 50% from civilian agencies [3] - As of November 21, 2025, SAIC's stock closed at $85.17 per share, with a market capitalization of $3.992 billion [2] - The stock experienced a one-month return of -8.63% and a 52-week decline of 30.31% [2] Market Context and Challenges - SAIC's stock has been negatively impacted by government spending cuts promised by the Trump administration, leading to uncertainty among investors regarding the extent of these cuts [3] - The company reported a 3% decline in revenue and reduced fiscal year estimates during its September 4th earnings release, contributing to a significant sell-off of its shares [3] - Current valuation of SAIC is approximately 10 times earnings, which may reflect an overly pessimistic outlook on potential cuts to its programs [3] Investment Sentiment - SAIC is not among the 30 most popular stocks held by hedge funds, with 33 hedge fund portfolios holding the stock at the end of Q2 2025, down from 39 in the previous quarter [4] - While SAIC is recognized for its potential, certain AI stocks are viewed as offering greater upside potential with less downside risk [4]