ClearBridge Investments, an investment management company, released its “ClearBridge Small Cap Growth Strategy” Q4 2025 investor letter. A copy of the letter can be downloaded here. The Strategy underperformed the Russell 2000 Growth Index in the fourth quarter, after a strong first three quarters of 2025. Market’s overreactions to earnings disappointments in the technology sector and a biotech rally drove the relative underperformance of the Strategy in the quarter. In a volatile year, dominated by a narrow set of themes, the small caps failed to outperform large caps, echoing the past two years, although broadening appears to be emerging. Heading to 2026, the Strategy is optimistic about the favorable backdrop for small-cap growth stocks following years of narrow market leadership and performance disparities. Please review the Strategy’s top five holdings to gain insights into their key selections for 2025.
In its fourth-quarter 2025 investor letter, ClearBridge Small Cap Growth Strategy highlighted stocks like Varonis Systems, Inc. (NASDAQ:VRNS). Varonis Systems, Inc. (NASDAQ:VRNS) is a cybersecurity software company that provides AI-powered data protection technology. On March 26, 2026, Varonis Systems, Inc. (NASDAQ:VRNS) stock closed at $21.83 per share. One-month return of Varonis Systems, Inc. (NASDAQ:VRNS) was -5.50%, and its shares are down 47.57% over the past twelve months. Varonis Systems, Inc. (NASDAQ:VRNS) has a market capitalization of $2.56 billion.
ClearBridge Small Cap Growth Strategy stated the following regarding Varonis Systems, Inc. (NASDAQ:VRNS) in its fourth quarter 2025 investor letter:
“Beyond biotech, we experienced a challenging earnings season with the market continuing its trend of disproportionally punishing disappointments in small cap earnings – further exacerbated by trends in passive and retail investing. We saw this in several of our software investments, particularly security software company Varonis Systems, Inc. (NASDAQ:VRNS) and Wix.com, a website and application creation platform, both of which had minor disappointments that led to material stock price overreactions. We continue to have conviction in the idiosyncratic growth opportunities at each of these profitable and attractively valued businesses, both of which can benefit from the proliferation of AI adoption.”
Varonis Systems, Inc. (NASDAQ:VRNS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 31 hedge fund portfolios held Varonis Systems, Inc. (NASDAQ:VRNS) at the end of the fourth quarter, compared to 37 in the previous quarter. In Q4 2025, Varonis Systems, Inc. (NASDAQ:VRNS) reported total revenue of $173.4 million, reflecting an increase of 9% from Q4 2024. While we acknowledge the risk and potential of Varonis Systems, Inc. (NASDAQ:VRNS) 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 Varonis Systems, Inc. (NASDAQ:VRNS) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Varonis Systems, Inc. (NASDAQ:VRNS) and shared Loomis Sayles Small Cap Growth Fund’s views on the company. 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.
