SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Smid Cap Strategy” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the SMID Cap Composite returned -3.72% on a gross basis (-3.89% net) compared to 2.22% for the Russell 2500 Index and 3.15% return for the Russell 2500® Value Index. The composite returned 5.19% on a gross basis (4.46% net) over the trailing 12 months compared to 11.91% and 12.73% for the indexes, respectively. The letter highlighted the economic lessons learned during the oil price collapse of 2014-15. Initially seen as a positive development for the global economy, the decline in oil prices revealed underlying weaknesses, leading to broader economic impacts beyond the energy sector. The author compares this to the current situation with artificial intelligence (AI), cautioning that while AI is now a fundamental aspect of economic planning and decision-making, its associated risks need to be carefully analyzed. As the market approaches 2026, the investment landscape is shaped by various scenarios, including valuation compression and overcapacity in AI infrastructure, rather than inevitable outcomes. SouthernSun Asset Management maintains a disciplined, humble approach focused on intrinsic value and is optimistic about the future but remains aware of historical lessons. In addition, please check the Strategy’s top five holdings to know its best picks in 2025.
In its fourth-quarter 2025 investor letter, SouthernSun Smid Cap Strategy highlighted stocks such as Live Oak Bancshares, Inc. (NYSE:LOB). Headquartered in Wilmington, North Carolina, Live Oak Bancshares, Inc. (NYSE:LOB) is a bank holding company for Live Oak Banking Company that offers commercial banking products and services. On March 03, 2026, Live Oak Bancshares, Inc. (NYSE:LOB) stock closed at $36.45 per share. One-month return of Live Oak Bancshares, Inc. (NYSE:LOB) was -12.57%, and its shares gained 21.30% over the past 52 weeks. Live Oak Bancshares, Inc. (NYSE:LOB) has a market capitalization of $1.678 billion.
SouthernSun Smid Cap Strategy stated the following regarding Live Oak Bancshares, Inc. (NYSE:LOB) in its fourth quarter 2025 investor letter:
“During the fourth quarter we initiated new positions in Oshkosh Corporation (OSK), Live Oak Bancshares, Inc. (NYSE:LOB) and Extreme Networks Inc. (EXTR). Live Oak Bancshares, Inc. (LOB) We initiated a position in Live Oak Bancshares, Inc. during the fourth quarter of 2025. Live Oak is the largest originator of SBA 7(a) loans in the United States and has continued to expand its market leadership through the current small business credit cycle. SBA lending remains a relatively small but complex segment of the banking market, requiring deep institutional knowledge, rigorous compliance processes, and significant operational scale to efficiently originate, process, and service loans. Live Oak has built a differentiated, branchless operating model that leverages proprietary technology, vertical specialization, and close borrower relationships to efficiently deliver faster turnaround times and superior service, while maintaining disciplined underwriting standards. Over the past year, Live Oak has further strengthened its position as “America’s Small Business Bank,” growing SBA approvals materially faster than peers and expanding market share despite a challenging macro backdrop.
One of Live Oak’s core strategic initiatives is to be a leader in financial technology within the banking industry. Through its venture and innovation activities, including minority investments and partnerships with early-stage fintech companies, Live Oak seeks to both enhance its own operating platform and create longer-term optionality. Live Oak has increasingly focused on internally developed technology, including the rollout and pilot of AI-driven tools across loan origination, servicing, and internal workflows. Management has highlighted more than thirty active AI initiatives currently underway, with early benefits visible in efficiency gains, expense control, and improved client experience. We believe Live Oak’s technology-first culture and willingness to invest ahead of peers strengthens its competitive moat over time.…” (Click here to read the full text)
Live Oak Bancshares, Inc. (NYSE:LOB) is not on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 22 hedge fund portfolios held Live Oak Bancshares, Inc. (NYSE:LOB) at the end of the fourth quarter, compared to 24 in the previous quarter. While we acknowledge the risk and potential of Live Oak Bancshares, Inc. (NYSE:LOB) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Live Oak Bancshares, Inc. (NYSE:LOB) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
