Here’s Headwaters Capital Management’s Investment Thesis for Driven Brands (DRVN)

Headwaters Capital Management, an investment management company, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The third quarter results were mainly focused on AI. The portfolio returned -2.7% (-2.9% net) in the quarter compared to a +5.3% gain for the Russell Mid Cap Index. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its third-quarter 2025 investor letter, Headwaters Capital Management highlighted stocks such as Driven Brands Holdings Inc. (NASDAQ:DRVN). Headquartered in Charlotte, North Carolina, Driven Brands Holdings Inc. (NASDAQ:DRVN) provides automotive services to retail and commercial customers. The one-month return of Driven Brands Holdings Inc. (NASDAQ:DRVN) was -12.49%, and its shares gained 4.42% of their value over the last 52 weeks. On October 13, 2025, Driven Brands Holdings Inc. (NASDAQ:DRVN) stock closed at $15.13 per share, with a market capitalization of $2.486 billion.

Headwaters Capital Management stated the following regarding Driven Brands Holdings Inc. (NASDAQ:DRVN) in its third quarter 2025 investor letter:

“Buy: Driven Brands Holdings Inc. (NASDAQ:DRVN): A starter position in another holding was also added during the quarter.

Before I get into the thesis for DRVN, I want to use the stock as an example for behavior in the market over the last month. DRVN was originally purchased in July for an average price of ~$17. At the time it was cheap relative to peers and the company’s own historical valuation. DRVN announced results in August and the stock actually went up on the strong results. Thesis seemingly on track out of the gates. However, since the Oracle-OpenAI announcement on 9/9/25, the stock is down -25% on no news and has declined on 21 of 23 trading days. Since the Oracle announcement, I don’t believe the need for oil changes or the need for maintenance and repair of cars has materially changed and I certainly don’t believe the value of the company has been impaired by 25% since this announcement. But it’s the perfect example of investors fleeing anything that doesn’t touch AI and using these funds to invest in AI related companies. So yes, the index is up slightly since the Oracle announcement, but it masks the bifurcation in performance between AI winners and the rest of the economy.

Summary Thesis 1) Recurring revenue characteristics due to non-discretionary nature of automotive maintenance and repair services. 2) Portfolio transformation via sale of capital-intensive US car wash business improves free cash flow and reduces leverage. 3) High growth Take 5 oil change drives accelerating consolidated revenue growth due to mix shift. 4) Multiple expansion in-line with peers due to portfolio simplification, accelerating top-line growth and improved leverage profile…” (Click here to read the full text)

Driven Brands Holdings Inc. (NASDAQ:DRVN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 20 hedge fund portfolios held Driven Brands Holdings Inc. (NASDAQ:DRVN) at the end of the second quarter, compared to 24 in the previous quarter.  While we acknowledge the risk and potential of Driven Brands Holdings Inc. (NASDAQ:DRVN) 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 Driven Brands Holdings Inc. (NASDAQ:DRVN) 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 Q3 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.