F5 Shares Slide After Confirmation of Security Breach, Highlighted as Top Detractor in Hotchkis & Wiley Fund Letter
In its fourth-quarter 2025 investor letter, the Hotchkis & Wiley Large Cap Disciplined Value Fund pointed to application security and delivery specialist F5, Inc. (NASDAQ: FFIV) as a significant individual detractor from performance. The fund's disclosure followed F5's confirmation of a cybersecurity breach, news which contributed to the stock's decline. F5 shares closed at $282.53 on January 29, 2026, having lost nearly 5% over the preceding 52-week period.
The breach confirmation introduces a new layer of risk for a company whose core business is securing and optimizing applications across multi-cloud environments. Analysts note the incident could challenge customer trust in the short term, even as the broader demand for application security solutions remains robust. F5 reported Q1 2026 revenue of $822 million, a 7% year-over-year increase, suggesting underlying business momentum that now must contend with reputational headwinds.
Hotchkis & Wiley's letter provided broader market context, noting the S&P 500's 2.7% return in Q4 2025, bringing full-year gains to 17.9%. The fund outperformed the Russell 1000 Value Index for the quarter and the calendar year, attributing success to positive stock selection. However, the firm expressed caution over high market valuations, particularly with returns concentrated in a handful of mega-cap stocks.
Investor Reactions:
"This is a stark reminder that no company is immune, especially one in the security sector. The market's reaction is a direct penalty for the perceived irony. It will take flawless execution and transparent communication from F5's leadership to rebuild confidence." — Marcus Chen, Portfolio Manager at Sterling Capital Insights.
"The sell-off feels overdone. The fundamentals are still strong—revenue is growing, and the long-term demand drivers for application security are intact. This could be a buying opportunity once the short-term noise settles." — Eleanor Vance, Senior Analyst at Clearwater Research.
"Unbelievable. A security company getting hacked? It's the ultimate failure of credibility. Investors should be asking hard questions about their entire governance and tech stack. This isn't just a blip; it's a fundamental crack in the story." — David R. Keller, independent cybersecurity consultant and outspoken industry commentator.
"The fund's note is interesting because it juxtaposes F5's issues against their search for AI opportunities. It signals a shift in where some value investors see the next wave of growth, potentially at the expense of established infrastructure players facing new challenges." — Priya Sharma, Editor at The FinTech Digest.
According to Insider Monkey's database, hedge fund interest in F5 was modest, with 40 funds holding the stock at the end of Q3 2025, up from 37 the prior quarter. The stock did not rank among the 30 most popular hedge fund holdings.
Disclosure: None. This analysis is based on publicly available investor communications and market data.