In the fourth quarter of 2025, American Century Investments' Small Cap Value Fund delivered an investor letter detailing its performance and market outlook. During this period, U.S. equities experienced gains, with large-cap stocks slightly exceeding small-cap stocks, both of which outperformed mid-cap stocks. Across all market segments, value-oriented stocks generally surpassed growth-oriented counterparts. The economy expanded at an annualized rate of 4.3% in the third quarter, a rise from the previous quarter's 3.8%, and corporate earnings demonstrated improvement. Despite an easing of inflation, unemployment saw a modest increase to 4.6% in November.
The fund's performance for the quarter, however, recorded a -1.06% return for investors, falling short of the Russell 2000 Value Index's 3.26% return. This underperformance was attributed to specific allocation choices and stock selection. The fund specifically addressed MARA Holdings, Inc. (NASDAQ: MARA), an energy and digital infrastructure firm. While MARA's shares saw an 8.74% increase over one month, they declined by 22.92% over the preceding 52 weeks, with a market capitalization of $3.31 billion as of April 2, 2026. The fund noted that its decision to not invest in MARA Holdings proved advantageous, as cryptocurrency-related stocks, including MARA, experienced a downturn due to weakening Bitcoin prices.
Currently, MARA Holdings is not listed among the 40 most favored stocks by hedge funds as of late 2025, with a decrease in hedge fund portfolios holding the stock from 35 to 30. Despite acknowledging MARA's potential, American Century Investments believes that certain AI stocks offer superior upside potential with reduced risk. This perspective suggests a strategic focus on emerging technologies and market trends that are perceived to offer more robust growth opportunities and stability.
Embracing a forward-looking investment strategy that carefully weighs both potential gains and risks is crucial for navigating dynamic market conditions. By continuously evaluating market trends and making informed allocation choices, investors can aim for sustained growth and resilient portfolios, ensuring long-term financial health and prosperity.