Leadership Transition - David McCreight was announced as Interim President & CEO, and Thomas Folliard as Interim Executive Chair, effective December 1, 2025[6] - Former Chief Executive Officer, Bill Nash, stepped down from his position and as a member of the Board effective December 1, 2025[9] Q3 2026 Financial Performance - Net earnings per share decreased by 24.7% year-over-year to $0.64[24, 27] - Total gross profit decreased by 12.9% year-over-year to $590.0 million[24] - SG&A expense increased by 1.0% year-over-year to $581.4 million[24] - CarMax Auto Finance (CAF) income increased by 9.3% year-over-year to $174.7 million[27] Sales Performance - Total vehicles bought decreased by 11.7% year-over-year to 238,000 units[24] - Retail used unit sales decreased by 6.2% year-over-year[24] - Wholesale unit sales decreased by 9.0% year-over-year[24] Capital Allocation - The company repurchased $201.6 million in shares of common stock[17]

Group 1 - The Nasdaq is expected to open significantly higher due to optimism surrounding artificial intelligence developments [1] - The consumer price index (CPI) for November increased at an annual rate of 2.7%, which is lower than the anticipated 3% [1] - Following the CPI data, the probability of a Federal Reserve rate cut in January has risen to 28.8%, up from 24.4% earlier in the week [1]

Core Viewpoint - The concentration risk in the market is increasingly relevant due to the dominance of a few mega-cap growth stocks, particularly the "Magnificent Seven," which significantly influences market performance [1][3]. Group 1: Market Concentration - The top 10 domestic stocks by market value now account for 35% of the broader market, a figure that has doubled over the past decade [2]. - This top-heavy market structure raises concerns about vulnerability, as any downturn in these leading stocks could lead to significant declines in overall market performance [3][5]. Group 2: Investment Strategies - The ALPS Equal Sector Weight ETF (EQL) is highlighted as a potential investment option, as it offers a strategy that equally weights sectors rather than individual stocks, which has historically led to superior returns compared to other equal-weight ETFs [4]. - Investors are advised to diversify their portfolios beyond a few dominant stocks to mitigate risks associated with market concentration [3][5]. Group 3: Historical Context - Historical examples, such as the dot-com bubble, illustrate the dangers of high market concentration, where a surge in the share of the largest stocks led to significant market volatility and losses when expectations were not met [4].

Core Insights - The Wasatch Micro-Cap Fund reported a return of 9.52% in Q3 2025, underperforming the benchmark Russell Microcap® Growth Index, which returned 19.93% [1] - Microcap stocks showed strong performance due to a consistent risk appetite among investors [1] Company Highlights - Impinj, Inc. (NASDAQ:PI) is highlighted as a key stock in the Wasatch Micro-Cap Fund's Q3 2025 investor letter, with a one-month return of 12.54% and a 52-week gain of 16.73% [2] - As of December 17, 2025, Impinj, Inc. had a market capitalization of $5.013 billion, with shares closing at $166.49 [2] - Impinj's RFID technology is noted for its superior reading ability and range, with significant applications in inventory tracking and supply-chain logistics, particularly with major clients like Walmart, UPS, and FedEx [3] Investment Strategy - The fund purchased Impinj shares earlier in the year due to tariff-related weaknesses but exited the position in Q3 2025 as the valuation became less favorable and inconsistent with the fund's micro-cap focus [3] - Impinj's revenue for Q2 was reported at $96.1 million, reflecting a 2% sequential increase and a 1% year-over-year increase [4] - While Impinj is recognized for its potential, the fund suggests that certain AI stocks may offer greater upside potential with less downside risk [4]

Core Insights - Terawulf Inc. (NASDAQ:WULF) experienced a significant decline of 10.93% on Wednesday, closing at $11.57, as investors reduced their stakes in AI-related stocks due to concerns over heavy spending in the sector [1][3] - The drop in Terawulf's stock was influenced by Blue Owl Capital's decision to withdraw its $10 billion financial support for Oracle Corp.'s data center project in Michigan, raising concerns about Oracle's substantial debt of $108 billion and its ability to manage AI expansion costs [2][3] Company Performance - In the third quarter, Terawulf reported total revenues of $50.58 million, representing an 87% increase from $27.06 million in the same period last year [4] - Digital assets were the primary revenue source, contributing $43.37 million, while HPC leasing generated $7.2 million, a notable increase from zero in the previous year [4] - However, the company faced a significant net loss of $455 million, which widened by nearly 2,000% from $22.7 million year-on-year [4] Market Context - The negative sentiment surrounding Terawulf and similar HPC stocks was exacerbated by concerns regarding Oracle's financial health and its ability to repay its debts, which has implications for the broader AI and HPC market [3] - The transition of Terawulf from a Bitcoin-mining firm to a provider of HPC and AI services reflects the growing demand for data services, although the current market conditions pose challenges [3]

Company Analysis - Meta is viewed positively, with a strong balance sheet that allows it to manage its recent debt effectively. The company has sufficient cash on hand and expected cash flow to cover its debt obligations [3][4] - Oracle, in contrast, has a significantly higher debt burden, which has increased to approximately $200 billion from $80 billion over the past year. This raises concerns about its financial stability and investment attractiveness [3][4] Market Sentiment - Investors are currently taking a cautious approach, reflecting on the sustainability of double-digit returns in the stock market. There is a focus on discerning investment opportunities and understanding the potential ROI of technologies like AI [1] - The upcoming Consumer Price Index (CPI) report is expected to show a stable inflation rate around 3%, which is not anticipated to significantly impact market conditions. The Federal Reserve appears more focused on the labor market than on inflation concerns [5][6]

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