SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Smid Cap Strategy” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the SMID Cap Composite returned -3.72% on a gross basis (-3.89% net) compared to 2.22% for the Russell 2500 Index and 3.15% return for the Russell 2500® Value Index. The composite returned 5.19% on a gross basis (4.46% net) over the trailing 12 months compared to 11.91% and 12.73% for the indexes, respectively. The letter highlighted the economic lessons learned during the oil price collapse of 2014-15. Initially seen as a positive development for the global economy, the decline in oil prices revealed underlying weaknesses, leading to broader economic impacts beyond the energy sector. The author compares this to the current situation with artificial intelligence (AI), cautioning that while AI is now a fundamental aspect of economic planning and decision-making, its associated risks need to be carefully analyzed. As the market approaches 2026, the investment landscape is shaped by various scenarios, including valuation compression and overcapacity in AI infrastructure, rather than inevitable outcomes. SouthernSun Asset Management maintains a disciplined, humble approach focused on intrinsic value and is optimistic about the future but remains aware of historical lessons. In addition, please check the Strategy’s top five holdings to know its best picks in 2025.
In its fourth-quarter 2025 investor letter, SouthernSun Smid Cap Strategy highlighted stocks like Trex Company, Inc. (NYSE:TREX). Trex Company, Inc. (NYSE:TREX) is a leading manufacturer of composite decking and railing products. On March 03, 2026, Trex Company, Inc. (NYSE:TREX) stock closed at $40.16 per share. One-month return of Trex Company, Inc. (NYSE:TREX) was -8.29%, and its shares lost 31.57% over the past 52 weeks. Trex Company, Inc. (NYSE:TREX) has a market capitalization of $4.307 billion.
SouthernSun Smid Cap Strategy stated the following regarding Trex Company, Inc. (NYSE:TREX) in its fourth quarter 2025 investor letter:
“Trex Company, Inc. (NYSE:TREX) We chose to exit our position in TREX during the fourth quarter. We initiated the position in 2022 with the belief that the company’s decking products would benefit from a secular tailwind as consumers continued to shift from wood to composite decking, and that TREX possessed a strong competitive advantage due to its brand, scale, and distribution network. Over the course of our holding period, we sold more than half of our shares into market strength and entered 2025 with a relatively small position. During the year, the competitive dynamics within the decking industry changed meaningfully, prompting us to reassess whether the remaining position warranted additional capital. Given these changes, and considering the opportunity set elsewhere in the portfolio, we chose to exit the position as we judged the risk-reward profile of alternative investments to be more attractive at this time.”
Trex Company, Inc. (NYSE:TREX) is not on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 48 hedge fund portfolios held Trex Company, Inc. (NYSE:TREX) at the end of the fourth quarter, up from 41 in the previous quarter. Trex Company, Inc. (NYSE:TREX) reported net sales of $161 million in Q4 2025, marking a decrease of 4% compared to $168 million in Q4 2024. While we acknowledge the risk and potential of Trex Company, Inc. (NYSE:TREX) 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 Trex Company, Inc. (NYSE:TREX) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Trex Company, Inc. (NYSE:TREX) and shared Conestoga Capital Advisors’ 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.
