Core Insights - The market is witnessing a potential multi-year outperformance cycle for low-valuation equities and small caps, which have lagged for about a decade [2] - Value stocks outperformed growth stocks by 269-724 basis points across all market caps in Q4 [3] - The concentration of large-cap technology stocks has increased significantly, with the top 12 AI-linked stocks adding approximately $15 trillion in market cap since the launch of ChatGPT in 2022, while their revenue growth was only $650 billion [5] Market Performance - In Q4, value stocks across various market caps showed significant outperformance compared to growth stocks, with the Russell Top 200 value stocks returning 3.81% versus 1.12% for growth, resulting in a 2.69% difference [4] - Small caps have shown signs of recovery, with earnings growth slightly exceeding that of larger companies for the first time in thirteen quarters [7] - The Deep Value Select strategy returned +5.09% in the last quarter, outperforming both the S&P 1500 Value Index and the S&P 600 Value Index [12] Capital Expenditure Trends - The five largest AI hyperscalers have seen their combined capital expenditures rise from $97 billion in 2020 to approximately $400 billion in 2025, with expectations of exceeding $600 billion by 2027 [6] - Technology sector capital expenditures as a percentage of U.S. GDP are projected to surpass the peak of 1.2% seen in 2000 [6] Company-Specific Insights - Nabors Industries improved its balance sheet significantly, reducing debt leverage from over 6x to near 2x, and is well-positioned to benefit from a potential increase in global rig demand [14][17] - JELD-WEN is undergoing a multi-year transformation to improve profitability, despite facing challenges in the housing market [19] - Conduent is in the midst of a multi-year transformation, focusing on streamlining operations and reducing debt, with a significant portion of its shares repurchased [20][24] Valuation Insights - Small caps are currently trading at a forward 1-year price-to-earnings multiple that is 30% lower than large caps, indicating a potential for valuation expansion [8] - The valuation spread between large-cap growth and small-cap value is near historical extremes, suggesting that small-cap value may be poised for outperformance [12]

Attribution Analysis & Portfolio Activity - The Value Plus Strategy achieved a gain of 8.50% in the third quarter [2] - This performance was compared to a 12.60% gain for the Russell 2000® Value index [3]

分组1 - Small cap value stocks are experiencing a significant breakout this quarter, contrasting with the previous trend dominated by large cap growth stocks [2][3] - Historically, small cap value has been the best investment segment, but it has been undervalued in recent years until this quarter [2][3] - The current performance of small cap value is attributed to its relative affordability compared to the overall market, particularly the S&P 500 [3][4] 分组2 - Smaller stocks are heavily weighted in sectors such as industrials, home building, energy, and financials, which benefit from a positively sloped yield curve [5][6] - The normalization of the yield curve is advantageous for financials, which in turn supports small cap value stocks [6] - Recent data shows a 20% increase in new home sales, indicating positive momentum in the home building sector [7] 分组3 - Oracle, previously identified as a tech value stock, has seen its valuation increase significantly, moving from $146 to $350, thus no longer qualifying as a value stock [8][10] - Despite Oracle's high valuation, its strong fundamentals and business momentum justify holding onto a portion of the investment [10][11] - The strategy of trimming positions in overvalued stocks while maintaining stakes in fundamentally strong companies is emphasized [11]