Hotchkis & Wiley, an investment management company, released its fourth-quarter 2025 investor letter for the “Hotchkis & Wiley Large Cap Disciplined Value Fund.” A copy of the letter can be downloaded here. In Q4 2025, the S&P 500 returned 2.7%, bringing its yearly gains to 17.9%. Since the 2007-08 financial crisis, the Index has increased tenfold, achieving positive results in 15 of 17 years. However, high valuations have made investors cautious, particularly with the returns concentrated in a few stocks. Excluding the “Magnificent 7,” the forward PE of the S&P 500 Index aligns with historical averages. In 2025, information technology and communication services led performance, but results varied significantly within those sectors. The firm views the potential of certain software companies to be very attractive. In this environment, the Fund outperformed the Russell 1000 Value Index both in Q4 and over the full calendar year. Positive stock selection contributed to the Fund’s relative performance. Please review the Fund’s top 5 holdings to gain insight into their key selections for 2025.
In its fourth-quarter 2025 investor letter, Hotchkis & Wiley Large Cap Disciplined Value Fund highlighted Workday, Inc. (NASDAQ:WDAY) as one of its leading relative detractors. Workday, Inc. (NASDAQ:WDAY) is a technology company that offers enterprise cloud applications. The one-month return of Workday, Inc. (NASDAQ:WDAY) was -15.13%, and its shares lost 33.35% of their value over the last 52 weeks. On January 29, 2026, Workday, Inc. (NASDAQ:WDAY) stock closed at $174.66 per share, with a market capitalization of $46.634 billion.
Hotchkis & Wiley Large Cap Disciplined Value Fund stated the following regarding Workday, Inc. (NASDAQ:WDAY) in its fourth quarter 2025 investor letter:
“Workday, Inc. (NASDAQ:WDAY) is a leading cloud-based enterprise software company providing human capital management, financial management, and analytics solutions to large and mid-sized organizations. Shares fell modestly as the company reported strong Q2 results but only reaffirmed full-year guidance, which disappointed investors hoping for a beat-and raise quarter. Sentiment around application software deteriorated over the course of the quarter, with the valuation gap between application software and semiconductor indices widening to near an all-time high. While the consensus view in the market today is that AI poses a headwind to application software vendors, our research suggests AI is more likely to be a tailwind as vendors like Workday incorporate AI-powered features into their software suites. Even without an AI tailwind, Workday should be able to grow sales in the teens for many years. Given low customer churn rates and high gross margins, Workday should earn a normal EBIT margin in the high-30s as the business matures. At a normal profit margin, Workday trades for a low-to-mid teens multiple of operating profit, vs. high-teens for the S&P 500. We believe Workday has favorable business quality attributes to the average S&P 500 company and has a net cash balance sheet and is returning cash to shareholders. This represents a compelling risk/reward.”
Workday, Inc. (NASDAQ:WDAY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 64 hedge fund portfolios held Workday, Inc. (NASDAQ:WDAY) at the end of the third quarter, compared 76 in the previous quarter. In the fiscal third quarter of 2026, Workday, Inc. (NASDAQ:WDAY) reported total revenue of $2.432 billion, representing a growth of 13% year-over-year. While we acknowledge the risk and potential of Workday, Inc. (NASDAQ:WDAY) 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 Workday, Inc. (NASDAQ:WDAY) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Workday, Inc. (NASDAQ:WDAY) and shared the list of most promising QQQ stocks according to hedge funds. 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.
