Giverny Capital's 2025 Struggle: A Niche Strategy Battles the AI Frenzy

In its recently released fourth-quarter 2025 letter to investors, Giverny Capital Asset Management detailed a year of stark contrasts. While the firm's portfolio appreciated solidly on an absolute basis, it significantly trailed the S&P 500, returning 0.01% for the quarter versus the index's 2.66%. For the full year, Giverny returned 12.58% compared to the S&P's 17.88%. The letter pinpoints the cause: a market overwhelmingly focused on a handful of giant technology companies driving AI narratives, which overshadowed the robust earnings growth and capital returns of the smaller, niche leaders favored by Giverny's strategy.

A prime example of this disconnect, according to the firm, is Kinsale Capital Group (NYSE: KNSL). The specialty property and casualty insurer, founded in 2009, is a long-term holding that exemplifies Giverny's approach of investing in focused market leaders. However, Kinsale's shares have felt the market's shift away from such stories, declining 12.09% over the past 52 weeks and closing at $395.88 on January 30, 2026. With a market cap of $9.2 billion, Kinsale operates in the less glamorous but potentially lucrative excess and surplus (E&S) insurance lines.

"Kinsale represents the type of business we seek—a disciplined underwriter in a specialized market with a proven track record," the letter stated. Yet, the firm acknowledged the stock's absence from its list of most popular hedge fund holdings, with ownership dipping from 31 to 26 funds in Q3 2025. "While we see long-term value in Kinsale, the current market environment is punishing anything perceived as outside the AI orbit. This has created a clear divergence between business performance and stock price."

The letter's tone reflects a broader debate in investment circles: whether the AI-driven concentration of market gains is sustainable or if it has created pockets of value in high-quality companies temporarily out of favor. Giverny's experience underscores the performance headwinds faced by actively managed funds employing a non-consensus, value-oriented approach in a momentum-driven market.

Sarah Chen, Portfolio Manager at Oak Grove Advisors: "Giverny's letter is a textbook case of disciplined investing meeting an irrational market. Kinsale's model is superb—tech-enabled but not hyped. The sell-off is an opportunity, not a indictment. The market's myopic focus on 'AI' as a monolith is ignoring fundamental underwriting quality and cycle management."

Marcus Thorne, Independent Market Analyst: "It's a tough read. You can't blame your underperformance entirely on a 'market fixation.' A 500+ basis point annual lag is significant. Investors pay for results, not a philosophy. While Kinsale may be a fine company, the letter feels like a justification for missing the biggest thematic shift in a decade."

David Park, Financial Blogger at 'Value Digger': "Finally, some honesty! The AI bubble is pushing solid cash-flow machines like KNSL into the bargain bin. Giverny is right to hold firm. This is exactly when contrarian patience pays off. The herd is wrong on tech, and they'll be wrong on ignoring these compounders."

Rebecca Vance, Chief Strategist at Horizon Wealth: "The key takeaway isn't about one stock. It's about portfolio construction in a top-heavy market. Giverny's struggle asks whether diversification itself is a performance drag now. Their analysis is correct, but their clients are still looking at relative underperformance, which is a real business risk for any asset manager."

Giverny's letter also directed readers to its top holdings and other research, including analysis on high-growth mid-cap stocks and a separate report on AI equities perceived to have significant short-term potential.