Giverny Capital Asset Management (GCAM) recently disclosed its second-quarter performance for 2025, revealing a portfolio return of 5.41% year-to-date. While this figure showcased healthy absolute growth, it slightly lagged behind the S&P 500's robust performance. This differential primarily stemmed from GCAM's intentional decision to maintain a comparatively lower exposure to the technology behemoths that have largely fueled the market's ascent. The firm's core investment philosophy continues to center on identifying and investing in financially sound, niche market leaders, particularly those poised to capitalize on the burgeoning artificial intelligence sector. Amidst an environment of economic uncertainty and market fluctuations, GCAM has actively refined its portfolio through strategic adjustments, demonstrating a clear commitment to its long-term investment principles.

Second Quarter 2025 Investment Review: Giverny Capital Asset Management's Strategic Moves

In the second quarter of 2025, from April through June, Giverny Capital Asset Management (GCAM) navigated a tumultuous market landscape. Despite a rollercoaster start to the year, marked by significant market swings influenced by trade policy shifts, GCAM's model portfolio delivered a 9.11% return for the quarter, culminating in a 5.41% year-to-date performance as of June 30th, 2025.

David M. Poppe, a key figure at GCAM, highlighted that while the portfolio's returns have historically lagged the broader S&P 500 index, their absolute figures remain impressively high, underscoring the benefits of consistent compounding. This divergence in performance is largely attributed to GCAM's deliberate portfolio construction, which emphasizes high-return, market-leading niche businesses over a heavy concentration in mega-cap technology firms, unlike the S&P 500. A notable strength of GCAM's holdings is their robust financial health, with nearly 40% of the portfolio in a net cash position and a significantly lower debt-to-capitalization ratio compared to the index. This conservative approach positions the portfolio favorably to mitigate risks during economic downturns and to seize opportunistic investments when capital becomes scarce.

During this period, several holdings significantly boosted the portfolio. Heico Corp. surged by 39.1%, benefiting from the ongoing demand for aircraft parts amidst manufacturing challenges. Ferguson Enterprises, a plumbing supply distributor, saw a 26.6% increase. Meta Platforms, a substantial investor in AI capabilities, climbed 26.3%, while financial powerhouses Charles Schwab and JP Morgan Chase also posted strong gains of 24.1% and 22.2%, respectively.

Conversely, some investments faced headwinds. Builders FirstSource and CarMax experienced declines of 18.4% and 17.8%, respectively, largely due to high interest rates impacting consumer demand for homes and vehicles. Fiserv's stock dropped 16.7% following a slight earnings miss related to its Clover payment processing business. Align Technology, a provider of clear aligners, also saw a 9.2% decrease, possibly affected by reduced consumer spending on big-ticket discretionary items. Alphabet, despite its promising Gemini AI model and diverse ventures like YouTube and Waymo, saw a 6.7% dip amidst concerns about AI competition in internet search.

GCAM undertook several key transactions. The firm exited its position in M&T Bank, a conservative regional bank, due to concerns about its growth prospects in slower-growing Northeastern markets and increasing competition from non-bank lenders. Although the bank was financially sound, GCAM sought opportunities with higher growth potential elsewhere. A portion of the successful holding in Progressive Corp. was trimmed, reflecting a cautious stance on the auto insurance cycle, which appears to be nearing its peak with high rates and rising industry profitability potentially attracting regulatory scrutiny. Despite the trim, GCAM retains a significant stake in Progressive, acknowledging its superior management compared to rivals.

On the acquisition front, GCAM increased its stake in Kinsale Corp., an insurer whose stock had temporarily declined due to a minor revenue miss and wildfire-related losses. Kinsale's efficient operations and high growth rates align with GCAM's investment criteria. Additionally, GCAM added to its Fiserv holdings after a 30% stock drop, viewing the dip as an overreaction given Fiserv's robust long-term earnings growth trajectory and strong regional bank partnerships.

The quarter concluded with 5.4% of the portfolio in cash, with a new position established in early July with a 3.5% weighting. This new investment targets a company critical to the expansion of AI and cloud computing data centers, offering significant AI exposure at a more attractive valuation than industry leaders. This strategic move, alongside existing holdings in Arista Networks, Alphabet, Meta, and AAON, means close to one-third of the portfolio now has substantial exposure to the global AI buildout.

Looking ahead, GCAM plans to host its annual client meeting in New York City on October 3rd, where Poppe and Francois Rochon will provide further insights and engage with clients.

From an investor's vantage point, Giverny Capital Asset Management's approach highlights the critical importance of a clear, disciplined investment philosophy, especially during periods of market turbulence. Their emphasis on financially robust companies with strong fundamentals and a strategic allocation to high-growth sectors like AI, while maintaining a healthy cash position, offers valuable lessons. It underscores that long-term success isn't solely about mirroring market indices but about making informed, strategic decisions that align with a deep understanding of individual company strengths and broader economic trends. This commitment to rigorous due diligence and a willingness to act counter-cyclically by adding to strong positions on weakness can yield substantial rewards, proving that a steady hand and a clear vision are paramount in the complex world of investment.