Year-End 2025 – Sequoia Fund Letter

Ruane Cunniff's Investment Committee argued in its 2025 annual letter that the S&P 500 has reached an unprecedented level of concentration, with the Magnificent Seven accounting for 34.4% of the index at year-end—surpassing even the dot-com bubble and the Nifty Fifty era. The committee also warned plainly that "the market is far from cheap and will not keep compounding at 20%-plus rates," framing the portfolio's lower drawdown during the April tariff-driven selloff (11.0% vs. the market's 18.7%) as evidence that quality-focused stock selection offers better risk-adjusted outcomes. The letter used four holdings to illustrate the distinction between intelligence and wisdom in portfolio management. Rolls-Royce (+120% in 2025) and Alphabet (+66%) were held through uncertainty and rewarded; both were trimmed modestly in Q4 on valuation and position size. UnitedHealth (-33%) and Elevance (-3%) were identified as cases where more aggressive trimming in 2022—when valuations were elevated—would have been wiser, though the committee said it still views both as attractively priced at current levels. Three new positions were initiated: MSA Safety (workplace safety equipment transitioning to subscription-based connected devices), Accenture (IT services leader purchased after a ~40% drawdown on AI disruption fears), and Align Technology (Invisalign maker bought at a low-to-mid-teens earnings multiple after four years of post-pandemic stagnation). The fund returned 22.13% in 2025 versus 17.88% for the S&P 500, with 10% portfolio turnover—below its long-term average.