Meridian Funds, managed by ArrowMark Partners, released its “Meridian Contrarian Fund” fourth-quarter 2025 investor letter. A copy of the same can be downloaded here. U.S. equity markets experienced a quarter supported by optimism around potential monetary easing and caution related to economic growth and valuations. Early gains were driven by strong AI-related earnings and the US Federal Reserve’s rate cut in October, which improved expectations for financial conditions. However, market sentiment cooled later in the quarter. Despite this moderation, the quarter contributed positively to robust annual results. Value stocks outperformed growth, returning 3.3% versus 1.2% for the quarter. Against this backdrop, the Fund delivered a return of 2.18% (net) in the quarter, underperforming the Russell 2500 Index’s 2.22% return and the secondary benchmark, the Russell 2500 Value Index’ 3.15% return. As the market heads into 2026, the firm is closely watching factors that may affect market returns, including monetary policy changes with a new Fed Chair and the sustainability of AI investments due to high valuations among hyperscalers. In the unpredictable backdrop, the firm concentrates on its systematic and consistent investment approach, which aims to pinpoint opportunities in companies that can achieve strong performance regardless of macroeconomic factors. In addition, please check the Fund’s top five holdings to know its best picks in 2025.
In its fourth-quarter 2025 investor letter, Meridian Contrarian Fund highlighted Penguin Solutions, Inc. (NASDAQ:PENG) as one of its leading relative detractors. Penguin Solutions, Inc. (NASDAQ:PENG) is a leading enterprise solutions provider. The one-month return of Penguin Solutions, Inc. (NASDAQ:PENG) was 1.02%, and its shares gained 2.38% of their value over the last 52 weeks. On January 27, 2026, Penguin Solutions, Inc. (NASDAQ:PENG) stock closed at $19.76 per share, with a market capitalization of $1.039 billion.
Meridian Contrarian Fund stated the following regarding Penguin Solutions, Inc. (NASDAQ:PENG) in its fourth quarter 2025 investor letter:
“Penguin Solutions, Inc. (NASDAQ:PENG) is a diversified technology company that designs and manufactures solutions in the computing, memory, and LED industries. We first invested in the company in 2020 on the heels of an earnings decline due to volatility in the memory business, order delays in its high performance computing segment, and near-term dilution from investments in new products.
After strong performance earlier in the year, the stock declined during the quarter as growth in its advanced computing division moderated against difficult comparisons tied to prior hyperscaler orders. With hyperscaler customers internalizing certain capabilities, Penguin has shifted its focus toward enterprises and sovereign customers for its next phase of growth. We added to the position on weakness during the quarter after reducing exposure into strength earlier in the year. We continue to maintain a large position based on the company’s earnings growth prospects, strong balance sheet, high returns on invested capital, and reasonable valuation at <10X P/E.”
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Penguin Solutions, Inc. (NASDAQ:PENG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 29 hedge fund portfolios held Penguin Solutions, Inc. (NASDAQ:PENG) at the end of the third quarter, up from 25 in the previous quarter. In the first quarter of fiscal 2026, Penguin Solutions, Inc. (NASDAQ:PENG) revenue totaled $343 million, showing a sequential increase of 2% and a 1% rise compared to the same quarter last year, despite the anticipated challenges in the first half of the fiscal year. While we acknowledge the risk and potential of Penguin Solutions, Inc. (NASDAQ:PENG) 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 Penguin Solutions, Inc. (NASDAQ:PENG) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Penguin Solutions, Inc. (NASDAQ:PENG) and shared the list of hot AI stocks to keep on your radar. 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.
