Investment management company Vulcan Value Partners recently released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. All the strategies of Vulcan Value Partners delivered positive results in the year. The Large Cap Composite (Net) returned -1.5% in Q4 and 7.9% YTD, the Small Cap Composite (Net) gained 3.2% in Q4 and 9.5% YTD, The Focus Composite (Net) retuned 0.1% in Q4 and 7.1% YTD, Focus Plus Composite (Net) returned 0.1% in Q4 and 6.2% YTD and the All-Cap Composite (Net) returned 1.3% in Q4 and 10.7% YTD. Despite overvalued markets, the firm improved its price-to-value ratios while still achieving positive returns, prioritizing safety and long-term gains over short-term performance. This situation echoes the late 1990s dot-com bubble, where hype and high valuations led to a crash, and today’s AI disruptions seem to mirror that pattern, with investors risking overpaying for promising businesses. The firm is addressing such situations by sticking to its investment discipline. For more information on the firm’s best picks in 2025, please check its top five holdings. In addition, please check the firm’s top five holdings to know its best picks in 2025.
In its fourth-quarter 2025 investor letter, Vulcan Value Partners highlighted stocks like Microsoft Corporation (NASDAQ:MSFT). Vulcan Value Partners exited its holdings in Microsoft Corporation (NASDAQ:MSFT) from its Focus Strategy during the quarter. Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions. The one-month return of Microsoft Corporation (NASDAQ:MSFT) was -3.53%, and its shares gained 5.16% of their value over the last 52 weeks. On January 26, 2026, Microsoft Corporation (NASDAQ:MSFT) stock closed at $470.28 per share, with a market capitalization of $3.496 trillion.
Vulcan Value Partners stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2025 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software company with a broad range of offerings including Microsoft Office, Gaming, Azure cloud computing, LinkedIn, and more. Despite the stock being down, Microsoft delivered another strong quarter and our value grew nicely. Azure grew at a robust +39% constant currency, which we thought was pretty darn good. Additionally, the company said that it would increase capital spending as it continues to build capacity to meet customer demand, which continues to outstrip supply. Microsoft is deeply entrenched within its customer base, has high switching costs, and is benefiting from growth tailwinds such as cloud computing and artificial intelligence. We think an underappreciated strength of Microsoft’s business model is that not only are its products designed to work together, but they are also more economical for the customer when multiple products are bundled together. This bundling approach positions Microsoft well to gain share at the expense of less well positioned competitors over time.”
Microsoft Corporation (NASDAQ:MSFT) is in the second position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 312 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the third quarter compared to 294 in the previous quarter. In the first quarter of fiscal year 2026, Microsoft Corporation (NASDAQ:MSFT) reported revenue of $77.7 billion, representing an 18% and 17% when adjusted for constant currency. While we acknowledge the risk and potential of Microsoft Corporation (NASDAQ:MSFT) 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 Microsoft Corporation (NASDAQ:MSFT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of stocks Jim Cramer discussed. 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.
