Here’s What Negatively Impacted AutoZone (AZO) in Q4

Core Insights - Fenimore Asset Management's Q4 2025 investor letter indicates a solid yet volatile stock market, influenced by AI enthusiasm, economic uncertainty, and monetary policy concerns [1] - The firm anticipates mixed market conditions in 2026, with many AI-related stocks appearing expensive while high-quality companies are trading at multi-year lows, presenting potential investment opportunities [1] Performance Summary - The S&P 500 Index rose by 2.66% in Q4 2025, with large-cap technology and communication services sectors leading the market [1] - Fenimore Small Cap Strategy returned -4.12%, underperforming the Russell 2000 Index, which returned 2.19% [1] - Fenimore Dividend Focus Strategy declined -4.41% compared to the Russell Midcap Index's 0.16% return [1] - Fenimore Value Strategy saw a decline of -1.17% in Q4, also underperforming the Russell Midcap Index [1] Company Focus: AutoZone, Inc. (NYSE:AZO) - AutoZone, Inc. was identified as a key performance detractor in Fenimore Value Strategy during Q4 2025 [2][3] - The stock had a one-month return of 2.16% and a 52-week gain of 7.34%, closing at $3,465.45 per share with a market capitalization of $57.64 billion on January 15, 2026 [2] - Despite revenue growth, AutoZone faced higher operating expenses and a significant non-cash LIFO inventory charge, impacting earnings negatively [3] - The company opened over 140 new stores and invested in supply chain hubs, which contributed to increased costs but are viewed as strategic long-term investments for market share gains, particularly in the commercial segment [3]