Group 1 - The London Company Mid Cap Strategy reported a portfolio return of 3.2% in Q4 2025, outperforming the Russell Midcap Index which increased by 0.2% [1] - The Russell 3000 Index rose by 2.4% in Q4 2025, marking the third consecutive quarter of higher returns for US equities [1] - Stock selection and sector exposure were significant contributors to the portfolio's relative performance during the quarter [1] Group 2 - Pool Corporation (NASDAQ:POOL) experienced a one-month return of -15.95% and a 52-week decline of 37.52%, with a market capitalization of $8.108 billion [2] - In Q4 2025, Pool Corporation's total sales reached $982 million, which is 1% lower than the previous year's level [5] - The company is facing cautious investor sentiment due to concerns around discretionary home improvement spending, despite stabilizing new pool construction and growth in building materials [3]

Core Viewpoint - The article discusses the recent investment activities of Berkshire Hathaway in Pool Corporation, highlighting the challenges faced by the company and the broader implications for the U.S. economy, particularly in relation to consumer spending and market dynamics [2][10]. Group 1: Investment Activities - Berkshire Hathaway began investing in Pool Corporation in Q3 2024, acquiring 404,057 shares at an average price of approximately $345.95 [5]. - By Q4 2024, Berkshire increased its holdings by 48.17%, bringing the total to 598,689 shares [6]. - In Q1 2025, the stock price declined significantly, prompting Berkshire to increase its position by 144.53%, resulting in a total of 1,464,000 shares [7]. - The company continued to buy aggressively in Q2 2025, adding 1,994,885 shares, reaching a peak holding of 3,458,885 shares, representing 8.24% of Pool's total shares [7]. - However, in Q4 2025, Berkshire reduced its position by selling 390,000 shares, marking a shift in strategy as the stock price fell to an average of $259.34 [8][9]. Group 2: Pool Corporation's Financial Performance - Pool Corporation's Q4 2025 earnings report revealed revenues and earnings per share (EPS) below Wall Street expectations, leading to a significant stock sell-off [10]. - The company's net sales for 2025 were $5.289 billion, a decline from $5.311 billion in 2024, while net profit decreased by 6.4% to $406.4 million [11]. - Despite a slight improvement in gross margin, the overall financial health of Pool Corporation showed signs of deterioration, with operating cash flow dropping 44% to $365.9 million [12]. Group 3: Broader Economic Implications - The struggles of Pool Corporation reflect broader economic vulnerabilities in the U.S., particularly in consumer spending patterns, where the top 10% of earners account for nearly 49% of total consumer spending [13]. - The article highlights a concerning trend where the bottom 80% of earners have seen their spending power stagnate, contributing to a fragile economic environment [13]. - The reliance on stock market performance to drive consumer spending among the wealthy raises concerns about the sustainability of this economic model, especially in light of potential market corrections [15].

Core Insights - Vanguard Industrials ETF (VIS) provides concentrated exposure to the industrial sector with 97.4% of its assets allocated to over 500 holdings, including major companies like GE, RTX, and Caterpillar [1] - The ETF has achieved a year-to-date gain of 12.51%, closely mirroring the performance of its main competitor, the Industrial Select Sector SPDR Fund [1] - Manufacturing value-added reached $2.95 trillion in Q3 2025, showing a growth acceleration of 3.2% after a period of cyclical weakness [1] ETF's Intended Portfolio Role - VIS serves as a precise tool for sector allocation, focusing solely on industrials and eliminating exposure to other sectors, which allows investors to capitalize on cyclical recovery themes [1] - The fund's holdings include key subsectors such as aerospace and heavy equipment, providing diversification within the industrial theme [1] - With a dividend yield of only 1.02%, VIS is positioned as a growth-focused investment rather than an income-generating vehicle [1] Performance and Returns - VIS has successfully captured the industrial sector's cyclical upswing, benefiting from its exposure to leading companies in aerospace and heavy equipment [1] - The ETF's low fees enhance its attractiveness, allowing investors to fully benefit from the industrial recovery without incurring high expenses [1] Tradeoffs and Considerations - The cyclical nature of the industrial sector introduces significant risk, as evidenced by the year-to-date gains occurring alongside rising jobless claims and a contraction in manufacturing [1] - The lack of defensive exposure means that during economic downturns, VIS offers no protective buffer against losses [1] - Active monitoring of economic indicators and cycle positioning is essential for investors, as the industrial sector can experience rapid shifts in performance [1]

Covington, Louisiana-based Pool Corporation (POOL) is the world's leading independent distributor of swimming pool supplies, equipment, and related leisure products. With a market cap of $9.5 billion, Pool operates in nearly 450 locations through its distribution networks and serves over 125,000 customers worldwide. Pool stock has plummeted 35.9% over the past 52 weeks and 4.5 on a YTD basis, compared to the S&P 500 Index’s ($SPX) 11.7% gains over the past year and marginal surge in 2026. More News from ...

Conestoga Capital Advisors, an asset management company, released its fourth-quarter 2025 investor letter. As many believe, US equities experienced solid returns in 2025, with double-digit gains across all major indices, yet underlying conditions revealed extreme volatility and market leadership. A copy of the letter can be downloaded here. In Q4 2025, Conestoga Capital Advisors SMid Cap Strategy trailed the Russell 2500 Growth Index, returning -2.71% vs. 0.33% for the Index. Relative performance fluctuated ...

Core Insights - The company expects stable revenue of $5.3 billion for 2025, driven by resilient maintenance demand, which compensates for a mid-single-digit decline in new U.S. pool construction [1] Revenue and Construction - New pool starts have declined to approximately 60,000 units, marking a 40% drop from 2022 levels, attributed to broader macroeconomic pressures affecting discretionary construction activity [1] Gross Margin and Operational Focus - Gross margin expanded to 29.7%, supported by disciplined pricing strategies, supply chain efficiencies, and growth in higher-margin exclusive brands [1] - The operational focus has shifted from rapid facility expansion to 'capacity absorption', emphasizing value extraction from the existing network of 456 sales centers [1] Digital Transformation - Digital transformation achieved a record 15% of annual sales, with the POOL360 platform's AI features enhancing customer engagement and operational agility [1] Regional Performance - Regional performance faced challenges in Florida due to tough year-over-year comparisons linked to prior-year hurricane recovery, while Texas showed early signs of recovery late in the year [1] Market Demand Outlook - Management highlighted a 'pent-up demand' thesis, indicating that deferred upgrades and projects are expected to return to the market once consumer confidence stabilizes [1]

Economic Indicators - The February Philadelphia business outlook survey unexpectedly rose by 3.7 to a 5-month high of 16.3, surpassing expectations of a decline to 7.5 [1] - Weekly initial unemployment claims fell by 23,000 to a 5-week low of 206,000, indicating a stronger labor market than the anticipated 225,000 [1][3] - The December trade deficit widened more than expected to $70.3 billion, the largest deficit in 5 months, compared to expectations of $55.5 billion [6] Stock Market Performance - Stock indexes closed lower on Thursday, with the S&P 500 down by 0.28%, the Dow Jones down by 0.54%, and the Nasdaq down by 0.41% [6] - Chipmakers and AI-infrastructure stocks faced significant pressure, contributing to the broader market decline [5][14] - Avis Budget Group's stock fell more than 22% after forecasting full-year adjusted EBITDA of $800 million to $1.00 billion, below the consensus of $1.07 billion [15] Corporate Earnings - Over three-quarters of S&P 500 companies have reported earnings, with 74% beating expectations, and S&P earnings growth is expected to rise by 8.4% in Q4 [9] - Booking Holdings reported Q4 adjusted EPS of $48.80, below the consensus of $48.86, leading to a decline of more than 6% in its stock [17] - Deere & Co raised its full-year net income forecast to between $4.5 billion and $5.0 billion, up from a previous forecast of $4.00 billion to $4.75 billion, resulting in a stock increase of more than 11% [18] Geopolitical Factors - Geopolitical risks impacted stocks, with WTI crude oil rising more than 1% to a 6.5-month high due to concerns over Iran's nuclear negotiations amid U.S. military buildup in the Middle East [4]

Core Viewpoint - AppLovin reported its best quarter in history with record revenue and high EBITDA margins, yet its stock price fell significantly, indicating a disconnect between performance and market reaction [1]. Financial Performance - AppLovin achieved $1.657 billion in Q4 revenue, surpassing the $1.618 billion estimate, and reported earnings per share (EPS) of $3.24 against an expected $2.97 [1]. - The company recorded an 84% adjusted EBITDA margin, showcasing exceptional profitability [1]. - Over the past twelve months, AppLovin generated $4.0 billion in free cash flow while growing revenue by 40% [1]. Market Reaction - Despite strong financial results, AppLovin's shares declined by 29.25%, with a notable drop of 28.90% over the past month to $404.39 [1]. - The stock's decline has sparked discussions among retail investors on platforms like Reddit, with mixed sentiments regarding whether the selloff represents a buying opportunity or a fundamental issue [1]. Investor Sentiment - Social sentiment on Reddit shifted from a bearish score of 30 to a bullish score of approximately 70, indicating that retail traders are increasingly viewing the post-earnings decline as a buying opportunity [1]. - Supporters argue that AppLovin's growth metrics and high margins justify a higher valuation, while skeptics express concerns about potential competition and the impact of AI on the mobile gaming ecosystem [1]. Analyst Ratings - Analysts maintain a Strong Buy rating for AppLovin, with a 12-month price target of $705.17, suggesting a potential upside of approximately 75% from current levels [1]. - No analysts have rated the stock as a Sell, indicating a consensus of optimism despite the recent stock decline [1].

Economic Indicators - Q4 GDP is expected to expand by +3.0% (q/q annualized) and the Q4 core price index is expected to climb by +2.6% [1] - December personal spending is expected to rise by +0.4% m/m and personal income is expected to be up +0.3% m/m [1] - The December core PCE price index is expected to increase by +0.3% m/m and +2.9% y/y [1] - The February S&P manufacturing PMI is expected to slip by -0.1 to 52.3 [1] - The December trade deficit was -$70.3 billion, wider than expectations of -$55.5 billion [2] - The February Philadelphia business outlook survey unexpectedly rose +3.7 to a 5-month high of 16.3 [2][3] - Weekly initial unemployment claims fell -23,000 to a 5-week low of 206,000, indicating a stronger labor market [2][3] Stock Market Performance - Stock indexes are under pressure, with the S&P 500 down -0.26%, Dow Jones down -0.28%, and Nasdaq down -0.34% [6] - Chipmakers and AI-infrastructure stocks are leading losses, with significant declines in companies like Seagate Technology and Microchip Technology [12] - EPAM Systems is down more than -21% after forecasting weaker-than-expected revenue growth [13] - Avis Budget Group is down more than -20% after forecasting lower adjusted EBITDA than consensus [13] - Pool Corp is down more than -13% after reporting Q4 adjusted RPS below consensus [14] Earnings Reports - More than three-quarters of S&P 500 companies have reported earnings, with 75% beating expectations [7] - S&P earnings growth is expected to climb by +8.4% in Q4, marking the tenth consecutive quarter of year-over-year growth [7] - Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6% [7] - Omnicom Group is up more than +13% after reporting Q4 revenue well above consensus [15] - Deere & Co is up more than +11% after raising its full-year net income forecast [16]

Core Viewpoint - Choice Hotels International, Inc. (CHH) is set to report its fourth-quarter 2025 results on February 19, with expectations of earnings per share (EPS) of $1.56, reflecting a 0.7% increase year-over-year, while revenues are projected to decline by 2.4% to $380.3 million [1][2][8]. Group 1: Earnings and Revenue Estimates - The Zacks Consensus Estimate for CHH's EPS has remained unchanged at $1.56 over the past week, indicating a slight increase from $1.55 in the same quarter last year [2]. - Revenue expectations for the upcoming quarter are pegged at $380.3 million, which represents a 2.4% decline compared to the previous year [2][8]. Group 2: Factors Supporting Revenue Growth - Revenue growth in the fourth quarter is likely to be supported by net room growth in higher-revenue segments such as extended stay, upscale, and midscale, which generate higher royalty income [3]. - An improvement in small and medium business travel and group demand is expected to contribute positively to occupancy and fee growth [3]. - The expanding international portfolio, where revenue per available room (RevPAR) trends are stronger than in the U.S., is anticipated to add incremental revenues [3]. Group 3: Challenges Impacting Revenue - Top-line growth may face pressure from a softer U.S. RevPAR backdrop, attributed to weaker government travel and subdued international inbound demand [4]. - Comparisons to hurricane-related demand from the previous year and cautious consumer spending are likely to limit revenue upside during the quarter [4]. Group 4: Profitability Factors - Earnings are expected to benefit from Choice's asset-light, fee-based model and higher average royalty rates from a richer brand mix [5]. - Continued strength in international operations, which carry higher margins, along with tight cost control and productivity gains, are likely to help offset U.S. RevPAR pressures [5]. Group 5: Earnings Prediction Model - The Zacks model does not predict a definitive earnings beat for Choice Hotels this quarter, as the company has an Earnings ESP of -2.38% and a Zacks Rank of 3 (Hold) [6].