4Q25 Partners Fund Commentary

Longleaf Partners Fund returned 2.93% in 2025, underperforming the S&P 500's 17.88% return. Management attributed underperformance to insufficient exposure to big winners: while over 35% of the S&P 500 rose more than 20% (averaging 50% gains), only 5% of the fund's portfolio exceeded 20% (averaging 35% gains). Management drew parallels to prior turning-point years (1987, 1999, 2007, 2021) when momentum-driven markets in late bull cycles preceded downturns. The fund holds 45% in defensive sectors and cash combined, similar to 1999 positioning. Management raised the maximum single-position limit from 6.5% to 8% to enhance engagement capacity and tax efficiency. Key contributors included Mattel, Regeneron, and IAC/MGM Resorts; detractors included Kraft Heinz, PayPal, and PVH. Management expressed confidence in portfolio resilience, noting bond spreads on holdings are roughly half 2007/2021 levels.