Core Insights - Software companies, particularly SaaS firms, are experiencing significant stock declines following the launch of Anthropic's AI tool, Claude Cowork, which aims to replace existing software solutions [1][2]. - The market reaction reflects a mix of overreaction and legitimate concerns regarding AI's potential to disrupt various software sectors [2][3]. Software Industry Analysis - Major software companies like Shopify, Monday.com, and Fastly have seen stock drops of 23%, 15%, and 16% respectively, indicating a broader trend of declining investor confidence in the sector [1]. - The software market is categorized into three groups: 1. Large, financially robust companies (e.g., Microsoft) that are less likely to be affected by AI disruptions. 2. Ecosystem companies that are critical to their customers' operations (e.g., Shopify). 3. Companies that provide niche solutions which could be easily replaced by AI alternatives (e.g., HubSpot, Atlassian) [1][2]. AI Impact on Software - The emergence of AI tools like Claude Cowork is seen as a pivotal moment, similar to last year's DeepSeek moment, raising questions about the sustainability of certain software companies [2]. - The ongoing trend suggests that while some software will be replaced by AI, mission-critical software is likely to remain resilient [2][3]. Job Market Insights - Recent job numbers indicate a decline in job openings to the lowest level since 2020, with layoffs peaking at levels not seen since January 2009, raising concerns about the overall economic health [8][9]. - Entry-level tech jobs are particularly affected, with AI contributing to this trend, although unemployment rates remain within historical averages [9][10]. Investment Opportunities - CrowdStrike (CRWD) is highlighted as a strong investment due to its essential cybersecurity services, which are unlikely to be replaced by AI [4]. - Toast (TOST) is noted for its entrenched position in the restaurant ecosystem, making it less vulnerable to AI disruption [5]. - Zscaler (ZS) is recognized for its potential growth in the cybersecurity market, driven by increasing AI technology demands [18]. - GoDaddy (GDDY) is considered undervalued, with a strong business model that combines software and physical infrastructure [19]. Company Performance Metrics - Powell Industries (POWL) reported a 63% increase in net new orders year-over-year, indicating strong demand in the industrial sector [17]. - Zscaler's stock has recently hit a 52-week low, presenting a potential buying opportunity in the cybersecurity space [18].

Company Overview - Robinhood's fourth quarter revenue missed expectations, leading to an almost 8% decline in after-hours trading [1] - The stock was already down about 40% from its all-time high in October, raising concerns about its performance during the current crypto downturn [4] Financial Performance - Key metrics showed deceleration, particularly in net deposit growth, which continued to decline into January [2] - Despite the topline miss, management's commentary on future business growth and transaction volumes was constructive, indicating a decent outlook [3] Crypto Market Impact - Crypto revenue has decreased from over 20% to an expected near 10% of total business, with a potential 50% haircut to current trading volumes during a crypto winter [6] - This scenario would only result in a manageable 10% hit to Robinhood's EBITDA [6] Business Diversification - Robinhood is better positioned during the current crypto downturn due to its diversified product lineup, including a significant increase in net interest income and new offerings like retirement accounts and banking products [9][10] - The company is evolving into a more comprehensive financial app, which enhances its resilience compared to previous downturns [8] Options Trading Growth - Options trading, which constitutes about 25% of Robinhood's revenue, is expected to see significant growth, potentially up to 40% due to increased penetration and new product offerings [12][14] - The options market is less cyclical, allowing for trading in both up and down markets, which supports long-term growth for Robinhood [13] Prediction Markets - Robinhood's entry into prediction markets is seen as a potential growth area, leveraging its strong distribution capabilities despite increasing competition [15] - The company has announced a partnership that enhances its control over economics and product innovation in this space [16]

Group 1 - The S&P 500 is projected to achieve a 13% increase in earnings per share for the fourth quarter, marking the 10th consecutive quarter of annual earnings growth and the fifth consecutive quarter of double-digit growth [1] - Prior to the reporting period, analysts had anticipated an 8.3% increase in earnings per share, which was a decrease from the third quarter's 13.6% growth rate [3] - Recent adjustments in earnings expectations have been particularly favorable for tech companies, which have been significant contributors to earnings growth in recent quarters [3] Group 2 - Major capital expenditures by Big Tech are influencing the AI trade, alongside ongoing themes such as artificial intelligence, tariff policies from the Trump administration, and a K-shaped consumer economy [4] - Upcoming earnings reports from notable companies include Coca-Cola, Spotify, Robinhood, Lyft, Ford, Rivian, Moderna, Airbnb, and Coinbase, which will provide further insights into market trends [4]

Company Overview - Proactive is a financial news publisher that provides fast, accessible, informative, and actionable business and finance news content to a global investment audience [2] - The company has a team of experienced and qualified news journalists who produce independent content [2] Market Focus - Proactive specializes in medium and small-cap markets while also covering blue-chip companies, commodities, and broader investment stories [3] - The content delivered includes insights across various sectors such as biotech and pharma, mining and natural resources, battery metals, oil and gas, crypto, and emerging digital and EV technologies [3] Technology Adoption - Proactive is recognized for being a forward-looking technology adopter, utilizing decades of expertise and experience among its content creators [4] - The company employs automation and software tools, including generative AI, while ensuring that all published content is edited and authored by humans [5]

Group 1 - Monday.com's stock dropped over 19% following the release of weak guidance amid concerns about AI disrupting the software business model [1] - The company projected revenue between $338 million and $340 million for the current quarter, below the $343 million expected by analysts [2] - For the full year, monday.com forecasted revenue between $1.452 billion and $1.462 billion, compared to a FactSet estimate of $1.48 billion [2] Group 2 - The iShares Expanded Tech-Software Sector ETF (IGV) has decreased by 22% this year, while monday.com shares have lost half their value [3] - During an earnings call, management defended the company's market position and emphasized new AI capabilities being implemented to enhance conversion and engagement [3]

Core Insights - The software provider reported earnings that exceeded market expectations, indicating strong performance in the current financial period [1] - However, the company provided a disappointing outlook for 2026, suggesting potential challenges ahead [1] Financial Performance - The earnings reported were better than anticipated, reflecting robust operational efficiency and possibly increased demand for the company's software solutions [1] Future Outlook - The outlook for 2026 was characterized as disappointing, which may raise concerns among investors regarding future growth and profitability [1]

Group 1 - Futures for the Dow Jones Industrial Average and other major stock indexes rose in premarket action following a key vote that advanced a deal to end the government shutdown [2] - UnitedHealth Group (UNH) experienced a decline in the stock market after comments made by President Donald Trump regarding health insurers [2] - Monday.com reported earnings that exceeded Q3 estimates, but the stock price fell due to revenue guidance that was below expectations [2][3] Group 2 - Trump's comments on health insurers have positively impacted S&P 500 health care stocks, indicating a potential shift in market sentiment towards this sector [5] - The stock market has shown resilience with weekly gains despite the ongoing government shutdown, suggesting investor confidence in the broader market [5]

Government Shutdown and Market Impact - The Senate voted 60-40 to advance a bill aimed at ending the government shutdown, with a final vote yet to be scheduled [1][8] - The reopening of the government is expected to provide clarity on economic data necessary for Federal Reserve interest rate decisions, contributing to a positive market sentiment [2][12] - US stock futures are showing strength, particularly in the NASDAQ, which is projected to gain about 1.5% at the open [6][18] Earnings Reports and Company Performance - Disney is anticipated to report its first quarterly adjusted earnings drop in over two years, with earnings expected at $1.14 per share, down from $1.14 a year ago, and revenue projected to rise by only 1% to $22.8 billion [22][23] - Coreweave is expected to report strong results following deals with OpenAI and Meta, despite facing a 22% stock decline last week amid an AI-driven sell-off [3][18] - Pfizer has won a bidding war for obesity startup Metsa, agreeing to pay up to $10 billion, while Monday.com has narrowed its revenue forecast, causing its shares to plunge [30][31][32] Market Sentiment and Future Projections - UBS forecasts the S&P 500 could reach 7500 by the end of 2026, driven by an AI tech rally and corporate earnings growth [19][20] - Morgan Stanley also predicts that corporate earnings will fuel the US stock rally, with the S&P 500 expected to post a nearly 15% jump in third-quarter profits [20][21] - Analysts are cautious about the sustainability of current market momentum, with concerns about potential deceleration in growth rates and the impact of a bubble in AI-related stocks [39][42]

Core Insights - The Optimist Fund achieved a return of +9.1% in Q3 2025, significantly outperforming its benchmark [5] - The fund's year-to-date return stands at 44.5%, compared to the benchmark's 11.1% [5] - The fund anticipates continued growth opportunities over the next three and a half years, similar to recent performance [4] Fund Performance - The fund's performance over various periods shows significant volatility, with a notable recovery from a -51.4% return in 2022 to 82.9% in 2023 [5] - Compound returns as of September 30, 2025, indicate strong performance across 1-year (61.2%), 2-year (65.6%), and 3-year (61.9%) periods [5] Top Contributors - **Wayfair**: Revenue increased by approximately 5% year-over-year to $3.27 billion, marking its fastest growth since Q1 2021. Adjusted EBITDA reached $205 million, indicating a margin above 6% for the first time since Q2 2021 [7][8][9] - **ThredUp**: Revenue rose 16% year-over-year to $77.7 million, with adjusted EBITDA increasing by around 100%. Active buyers grew by 17% to 1.47 million [10][11][12] - **Carvana**: Retail units sold increased by 41% year-over-year to 143,280 vehicles, with total revenue rising 42% to $4.84 billion. Adjusted EBITDA reached $601 million, reflecting a 12.4% margin [13][14][15] Top Detractors - **Monday.com**: Despite a 27% increase in revenue, the company reduced its second-half 2025 revenue guidance due to weaker performance marketing trends, causing investor concerns [20][21][22] - **Fiverr**: Results were below expectations, leading to a reduction in position size despite maintaining an attractive risk/reward profile [25][26] Portfolio Composition - The top 10 holdings comprise approximately 85% of the portfolio, including ThredUp, Monday.com, Carvana, Uber, Wayfair, DoorDash, First Advantage, Fiverr, Latham Group, and Medpace [27] Notable Changes - The fund exited positions in HelloFresh and Revolve due to management changes and reduced confidence in growth prospects, reallocating capital to more promising opportunities [29][30] Company Insights - **Medpace**: A leading contract research organization (CRO) focused on small and mid-sized biotech companies, showing strong revenue growth of 14.2% year-over-year to $603.3 million [31][18][35] - The company has a disciplined capital allocation strategy, with a history of share repurchases during market downturns, enhancing long-term growth potential [34][35]

Market Overview - SMID cap growth equities saw significant gains in Q3 2025, with the Russell 2500 Growth Index increasing by 10.7% [2] - The supportive policy backdrop included a Federal Reserve rate cut, a reconciliation/tax bill, and trade deals that reduced tariffs compared to April levels [2] - The performance of SMID growth equities was comparable to large cap peers, with the Russell 1000 Growth Index rising by 10.5% and the Russell 2000 Growth Index returning 12.2% [2] Policy Environment - The policy environment became more predictable and supportive for consumers and businesses, leading to renewed confidence in capital allocation and investment decisions [3] - This shift positively impacted sectors like industrials and health care, where balance sheet strength and visible growth pipelines are key differentiators [3] Investment Landscape - Despite an improved environment, investors remained selective, particularly in consumer-sensitive industries and those facing AI disintermediation risks [4] - Many small- and mid-cap growth companies are still navigating a bottoming process, with uneven demand trends and cost pressures acting as headwinds [4] Portfolio Performance - The ClearBridge SMID Cap Growth Strategy underperformed its benchmark in Q3, with strong contributions from health care and select industrials offset by weakness in information technology and consumer discretionary sectors [5] - Notable performers included Medpace, Insmed, and Doximity in health care, while Chewy and Wingstop faced challenges in consumer discretionary [7] Portfolio Positioning - The strategy focused on adding innovative growth companies with large addressable markets, initiating positions in Avidity Biosciences and Kratos Defense [9][10] - Exited positions included Globant due to geopolitical concerns and volatility from AI adoption risks [11] Outlook - SMID cap growth stocks face near-term headwinds from consumer spending and technological advances favoring mega-cap AI beneficiaries [12] - However, Fed easing and greater policy clarity create a more constructive environment for growth execution [12] - The potential for re-acceleration in depressed subsegments of the SMID growth market is anticipated, with a focus on innovative businesses with strong balance sheets [13] Portfolio Highlights - The ClearBridge SMID Cap Growth Strategy had positive contributions from seven of the ten sectors invested, with industrials and health care being the largest contributors [14] - Stock selection in IT, consumer discretionary, and materials sectors detracted from performance, while consumer staples and health care sectors provided benefits [15] Individual Stock Performance - Key contributors to relative returns included Bloom Energy, Medpace, Comfort Systems, and Insmed, while detractors included Wingstop and Monday.com [16] New Positions - New positions initiated included CG Oncology in health care, Karman and Rocket Lab in industrials, and Credo Technology in IT [17]