The Nasdaq Composite is on pace for its worst week since November despite Friday's rebound. ...

Core Insights - David Einhorn, a prominent hedge fund manager, employs a strategy of buying undervalued stocks while shorting overvalued ones, which has led to distinct returns for Greenlight Capital compared to the overall market [1][2] - Despite a notable short position on Lehman Brothers in 2007, Greenlight Capital has underperformed the S&P 500 since then, achieving an average annual return of 12.7% since its inception in 1996, compared to the S&P 500's 10.2% [2] Market Valuation Concerns - Einhorn has raised alarms about the current U.S. equity market valuations, suggesting they are the highest seen since the management of Greenlight Capital began, indicating a potential market downturn [3][4] - The S&P 500's forward price-to-earnings (P/E) ratio is approximately 22, and the CAPE ratio exceeds 40, both of which are historically high and suggest lower future market returns [5] - The Buffett Indicator, which compares total stock market capitalization to GDP, currently stands at about 224%, significantly above the favorable range of 70% to 80%, indicating an overvalued market [6]

Core Insights - Vulcan Value Partners reported positive results across all its investment strategies for the year, with notable returns in both large and small cap composites despite overvalued markets [1] - The firm emphasizes a disciplined investment approach, prioritizing safety and long-term gains, reminiscent of the late 1990s dot-com bubble dynamics [1] Investment Performance - Large Cap Composite (Net) returned -1.5% in Q4 and 7.9% YTD - Small Cap Composite (Net) gained 3.2% in Q4 and 9.5% YTD - Focus Composite (Net) returned 0.1% in Q4 and 7.1% YTD - Focus Plus Composite (Net) returned 0.1% in Q4 and 6.2% YTD - All-Cap Composite (Net) returned 1.3% in Q4 and 10.7% YTD [1] Company Highlight: Ituran Location and Control Ltd. - Ituran Location and Control Ltd. (NASDAQ:ITRN) is recognized as a significant contributor within Vulcan's Small Cap Strategy [2] - The company specializes in telematics products and services, particularly in stolen vehicle recovery, with a market cap of $877.904 million [2][3] - Ituran's stock traded between $30.06 and $45.90 over the past year, closing at $44.13 on January 26, 2026, with a one-month return of 4.08% and a three-month gain of 14.62% [2] Business Performance of Ituran - Ituran's revenue increased by 5% year-to-date, with 70% of its revenue derived from ongoing subscriptions [3] - The EBITDA margin has slightly contracted due to currency headwinds [3] - Recent agreements with Stellantis and Renault in Latin America are expected to bolster its business [3] - The company is viewed as trading at a substantial discount to its intrinsic value [3]

Investment management company Vulcan Value Partners recently released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. All the strategies of Vulcan Value Partners delivered positive results in the year. The Large Cap Composite (Net) returned -1.5% in Q4 and 7.9% YTD, the Small Cap Composite (Net) gained 3.2% in Q4 and 9.5% YTD, The Focus Composite (Net) retuned 0.1% in Q4 and 7.1% YTD, Focus Plus Composite (Net) returned 0.1% in Q4 and 6.2% YTD and the All-Cap Composite ...

Core Insights - Vulcan Value Partners reported positive results across all its investment strategies for Q4 2025, with the Large Cap Composite returning -1.5% in Q4 and 7.9% YTD, and the All-Cap Composite returning 1.3% in Q4 and 10.7% YTD, despite overvalued markets [1] Investment Performance - The Small Cap Composite (Net) gained 3.2% in Q4 and 9.5% YTD, while the Focus Composite (Net) and Focus Plus Composite (Net) both returned 0.1% in Q4, with YTD returns of 7.1% and 6.2% respectively [1] - The firm emphasized a focus on safety and long-term gains over short-term performance, drawing parallels to the late 1990s dot-com bubble [1] Company Specifics - Vulcan Value Partners exited its holdings in SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) during Q4 2025, which had a one-month return of -4.23% and a 52-week gain of 7.31% [2] - As of January 22, 2026, SS&C Technologies had a market capitalization of $20.961 billion, with shares closing at $85.83 [2] Investment Rationale - The company had initially invested in SS&C Technologies in the summer of 2023, anticipating positive outcomes from its investments in sales, marketing, and product development [3] - SS&C Technologies exceeded expectations in organic revenue growth, margins, and free cash flow, leading Vulcan Value Partners to sell its position and reallocate to more attractive opportunities [3]

Core Insights - Vulcan Value Partners reported positive results across all its investment strategies for Q4 2025, with the Large Cap Composite returning -1.5% in Q4 and 7.9% YTD, and the All-Cap Composite returning 1.3% in Q4 and 10.7% YTD, despite overvalued markets [1] Group 1: Investment Performance - The Small Cap Composite (Net) gained 3.2% in Q4 and 9.5% YTD, while the Focus Composite (Net) and Focus Plus Composite (Net) both returned 0.1% in Q4, with YTD returns of 7.1% and 6.2% respectively [1] - The firm improved its price-to-value ratios while prioritizing safety and long-term gains over short-term performance [1] Group 2: Market Context - The current market situation is compared to the late 1990s dot-com bubble, where high valuations led to a crash, and today's AI disruptions are seen as potentially mirroring that pattern [1] - Investors are at risk of overpaying for promising businesses, prompting the firm to adhere to its investment discipline [1] Group 3: Company Focus - Skyworks Solutions, Inc. - Vulcan Value Partners exited its holdings in Skyworks Solutions, Inc. from its Large Cap and All Cap Strategies during Q4 2025, with the stock trading between $47.93 and $93.33 over the past 52 weeks [2] - Skyworks Solutions, Inc. has a market capitalization of $8.946 billion, and its shares experienced a one-month return of -7.07% and a three-month loss of 19.41% [2] Group 4: Industry Insights - Skyworks Solutions, Inc. is a leading designer and manufacturer of semiconductors for wireless communications, with approximately two-thirds of its revenue coming from smartphones [3] - The growth in the semiconductor industry is driven by an increasing number of wireless devices and higher RF content per device, with demand for higher data throughput and smaller chips [3] - Vulcan Value Partners sold Skyworks to capitalize on more discounted opportunities but continues to monitor the business closely, especially in light of Skyworks' bid for Qorvo, which the firm still holds due to its more favorable valuation [3]

Core Insights - Vulcan Value Partners reported positive results across all its strategies for the year, with the All-Cap Composite returning 1.3% in Q4 and 10.7% YTD, despite overvalued markets [1] - The firm emphasizes safety and long-term gains over short-term performance, drawing parallels to the late 1990s dot-com bubble and current AI disruptions [1] Company Highlights: CarMax, Inc. (NYSE:KMX) - CarMax, Inc. was added to Vulcan's All-Cap Strategy, with a one-month return of 21.80% and a 52-week loss of 42.19%, closing at $47.83 per share with a market cap of $5.826 billion [2] - CarMax is the largest used car retailer in the U.S. and has faced underperformance due to macroeconomic, competitive, and operational factors, including a depressed used car supply and increased competition from Carvana [3] - Despite competitive pressures, CarMax's customer experience, brand strength, scale, vertical integration, and omnichannel approach are seen as competitive advantages that will help it gain market share in a fragmented market [3] - The company is making operational changes to increase volumes, lower costs, and expand profitability, with expectations of a recovery in earnings as the used car market normalizes [3] - CarMax has a solid balance sheet, generates significant free cash flow, and is actively buying back shares at a discount to intrinsic value [3]

Economic Context - The U.S. deficit decreased by 15% year-over-year in 2025 but is projected to increase again due to President Trump's One Big Beautiful Bill Act [1] - The Federal Reserve implemented three rate cuts in 2025, contrasting with the rate hikes in 1999 when the government had a budget surplus [1] Market Sentiment - Investor sentiment is reminiscent of the late 1990s, with expectations of a significant market run-up driven by central bank policies and government spending [2] - Late-cycle rallies are noted for delivering substantial gains, with the greatest price appreciation typically occurring in the 12 months before market peaks [2] Asset Performance - Gold has shown a remarkable return of approximately 71% over the past 12 months, reaching a high spot price of about $4,756 per ounce [6][8] - Bitcoin, described as "digital gold," has experienced a powerful rally, with its supply capped at 21 million coins, contributing to its appeal as a scarce asset [12] Investment Strategies - A diversified investment approach is recommended, including traditional assets like gold and cryptocurrencies, as well as exposure to tech stocks, particularly in the Nasdaq [5][15] - The Nasdaq Composite has surged roughly 52% since its low in April, driven by significant investments in artificial intelligence [15][16] Alternative Assets - Art is highlighted as an alternative asset with low correlation to the stock market, offering unique opportunities for portfolio diversification [20] - Platforms like Masterworks allow investors to buy fractional shares in high-value artworks, yielding notable returns [21]

Group 1 - The AI investment cycle is shifting from a speculative phase to a focus on execution, with the market questioning the return on investment (ROI) from significant capital expenditures by major tech firms [4] - Historical patterns show that tech stocks can experience rapid gains followed by significant declines, leading to prolonged periods of flat returns [2][3] - The current market is seeing a saturation of AI narratives, with many companies struggling to justify high price-to-earnings (P/E) ratios as the initial excitement fades [4] Group 2 - The infrastructure supporting the AI revolution, particularly semiconductors and utility companies, remains a viable investment opportunity due to their tangible earnings and high demand [5] - A risk-first approach is recommended for investing in AI-related stocks, utilizing strategies like option collars or trailing stops to manage potential downturns [6] - The Nasdaq 100 ETF (QQQ) has shown a flat performance recently, indicating a need for strategic positioning rather than a simple buy-and-hold approach [7]

Group 1 - The article discusses the shift in investment philosophy from individual stock picking to index fund supremacy following the dot-com bubble burst in 2000 [1][2] - It highlights the argument made by proponents of index funds that individual investors are either too uninformed or imprudent to manage their own investments effectively [2][3] - The article argues that while index funds may provide steady returns of 8 to 10% annually, they do not offer the potential for significant wealth accumulation that individual stock investments can [4][5] Group 2 - The author asserts that it is indeed possible to outperform the market averages, specifically referencing the S&P 500, which contains a mix of both good and bad stocks [5][6] - The article emphasizes that owning an index fund does not guarantee wealth, as it includes underperforming stocks alongside the successful ones [6]