Tweedy Browne Funds' commentary for the fourth quarter ended December 31, 2025.
Global equity markets continued their unrelenting advance during the 4th quarter with most major market indices once again finishing the year at or around their all-time highs. While the equity market rally has broadened somewhat over the last year, more economically sensitive small- and mid-capitalization companies have rebounded, and non-US equities have seen a resurgence in performance. Even so, a relatively small group of familiar US technology companies continued to account for an outsized share of global index returns.
In this continued “risk on” environment, all four Tweedy Funds made solid financial progress during the 4th quarter and produced strong absolute results for the calendar year. However, only the Tweedy, Browne Value Fund outperformed its primary benchmark, for both the quarter and calendar year measurement periods. Calendar year results for the Tweedy Funds varied between 21.56% and 26.59%. While the Funds’ absolute results were positive, relative comparisons were mixed for the calendar year:
- Our flagship, International Value Fund, which hedges foreign currency risk, produced a return of 23.77%, modestly ahead of the hedged MSCI EAFE Index’s return of 23.10%, but well below that of the unhedged Index’s outsized return of 31.22%.
- The unhedged International Value Fund II produced the best absolute return of all four Funds, finishing up 26.59% for the year, but trailed the unhedged MSCI EAFE Index.
- The Value Fund’s 21.56% currency hedged return for the year bested the returns of both its primary benchmarks, the MSCI World Index in USD (+21.09%), and the hedged MSCI World Index (+19.03%).
- The Worldwide High Dividend Yield Value Fund also produced a strong absolute return of 21.70% for the year, edging out its benchmark, the MSCI World Index in USD which finished the year up 21.09%. *
For much of the year, the US dollar weakened against most major currencies which diluted absolute returns for Tweedy’s foreign currency hedged Funds, International Value and Value, and helped to boost returns for our two unhedged Funds, International Value II and Worldwide High Dividend Yield Value. That said, during the 4th Quarter, the US dollar regained a bit of its previous strength against many foreign currencies including the Japanese Yen, the Korean Won, the British Pound, and the Euro, among others.
All in all, we were delighted with the progress our Funds made over the past quarter and year and continue to be encouraged by the resurgence of international equities. Despite the outperformance of non-US equities this past year, the gap in valuation between US and non-US equities still remains quite significant and should serve us well going forward given the non-US-centric postures of our fund portfolios.
Portfolio Attribution
Please note that the individual companies discussed herein were held in one or more of the Funds during the quarter ended December 31, 2025, but were not necessarily held in all four of the Funds. Please refer to each Fund's portfolio page, beginning on page 6, for selected purchase and sale information during the quarter and the notes on page 16 for each Fund's respective holdings in each of these companies as of December 31, 2025.
Several broad themes influenced returns across the Funds during the quarter. Our Funds’ health care holdings, which included exposure to pharmaceutical and biotechnology companies, added meaningfully to returns. Holdings such as Roche, Novartis, and Ionis Pharmaceuticals benefited from new drug approvals, steady and growing earnings, and business models that continue to generate cash through a wide range of economic conditions. These are not fast-growing businesses, but they have proven to be durable, and we believe they remain sensibly valued relative to their long-term prospects.
Selected technology-related companies held across several of our funds contributed for the quarter, particularly established franchises such as Samsung Electronics and Alphabet (Google). While the shares of both companies soared upward in price during the year, we believe they remain reasonably valued relative to their near-term growth prospects.
Our industrials were mixed and, on balance, faced a modest headwind. Some holdings performed well, but returns were held back by weaker results in several more cyclical oriented businesses. CNH Industrial detracted across the Funds, reflecting investors’ continued concerns about the downturn of the “Ag” cycle and its impact on endmarket demand. CNH remains significantly undervalued in our view, and we are adding to our position opportunistically.
Defense-related holdings such as BAE Systems and Rheinmetall, which had been standout performers for much of the year, fell back a bit in the 4th Quarter. While these businesses currently benefit from secular growth in defense spending around the world, share prices have moved ahead of underlying fundamentals, and we have been modestly trimming our positions over the past few quarters.
From a geographic perspective, holdings in Switzerland, Japan, and parts of continental Europe, were the most significant contributors to our Funds’ results, in part reflecting renewed interest by investors in more economically sensitive European equities, and continued interest in Japan’s resurgence. The United Kingdom, whose equity market remains one of the most undervalued in the world in our view, was a notable detractor across several Funds, driven by stock-specific weakness during the quarter.
From a market capitalization perspective, larger, more established holdings contributed more consistently during the quarter, while smaller-cap positions produced mixed results. This contrasts with the 3rd Quarter when small and medium sized companies led returns.
The Worldwide High Dividend Yield Value Fund shared many of these attribution themes but with a slightly different emphasis. Financials and industrials contributed meaningfully, consistent with the Fund’s dividendfocused orientation, while exposure to certain materials-related holdings detracted. FMC Corp. was a notable laggard during the quarter.
Portfolio Activity
Portfolio activity was somewhat more subdued during the quarter, understandably, as market valuations continued their advance. We did begin building a position in a new holding, Sysmex Corporation, a global leader in diagnostic equipment, with a large installed base and recurring revenue characteristics that we believe support long-term value creation.
The Funds also added to existing holdings where valuations became more compelling. We took advantage of a pricing opportunity and added to CNH Industrial, which is now a top 10 holding in all four funds. We added to our position in Sodexo, the French food services and facilities-management company we began buying in the third quarter. The purchases were made at prices we believe are still attractive, and Sodexo is now a significant position in all four funds. We also added to CVS Group in the Quarter, a business that provides veterinary services in the UK & Australia. Forced selling, which resulted from a listing venue change, provided an attractive pricing opportunity to increase our position. Other additions to existing positions included Shoei, the Japanese motorcycle helmet manufacturer, and Johnson Service Group, the UK-based industrial laundry business. Both holdings remain attractively valued.
On the sales side, Brenntag, DB Insurance, and Mitsubishi Gas Chemical were sold reflecting valuation considerations, and to make room for more attractively valued holdings.
We also trimmed several larger holdings, including Roche, Novartis, Safran, and TotalEnergies, whose stock prices had approached underlying intrinsic value. While we believe these companies will continue to compound their value, we felt it was prudent to reduce their portfolio position size somewhat.
Tweedy News
Prospect of New ETF Share Classes
In mid-December, the Securities and Exchange Commission preliminarily approved our application for exemptive relief to establish ETF share classes for the Tweedy Browne Funds. While there is considerable work to be done to establish the infrastructure necessary to accommodate these new share classes, in our view, the approval of mutual fund ETF share classes is a potential game-changer for the traditional mutual fund industry. We are excited about the opportunity to offer our shareholders a choice when it comes to investing in our funds, and we will be sure to keep you apprised of our progress moving forward.
Outlook
Despite the imposition of potentially punishing tariffs, the decline in so called US exceptionalism, armed conflict in Gaza and the Middle East, and a stubbornly persistent level of inflation leading to the rise of an affordability crisis, capital markets just kept on “keeping on” over the last year. This market enthusiasm has led to high, if not excessive, valuations across most asset categories, particularly publicly traded US equities. It’s hard to know exactly what is at the root of this exuberance, but history would suggest that it is some combination of benign economic conditions and “new era” thinking on the part of investors. If it was the emergence of the internet in the mid 1990s, today it most likely is excitement around the prospects for artificial intelligence and its ability to dramatically impact productivity. But as Jonathan Levin and Taylor Tyson recently pointed out in a rather compelling Bloomberg article, “Even the most profound technological revolutions aren’t one-way streets to prosperity.” We suspect this time is not likely to be any different.
Making market calls is impossible, and certainly not the focus of our work at Tweedy, Browne, but we’d be remiss if we did not bring these worrisome signs to the attention of our clients. We cannot know when, but at some point the popular acronym “FOMO” will likely be replaced by “FOPCL,” or “fear of permanent capital loss.” Unless human nature has changed, when that day comes there will once again be hell to pay for a while in capital markets. In the interim, we take comfort in knowing that our Funds remain well positioned in what we believe to be financially sound enterprises in the parts of the world where company stock prices are more than collateralized by underlying intrinsic value.
Ultimately, as we have postulated in past letters, we believe fervently that a diversified portfolio of well-capitalized, competitively advantaged companies purchased at attractive valuations offers the best defense against market uncertainty and resultant volatility. If the past is prologue, that should continue to serve us, and our investors, well over time.
We remain humbled by your investment in our Funds and thank you for your continued trust and confidence.
Roger R. de Bree, Andrew Ewert, Frank H. Hawrylak, Jay Hill,
Thomas H. Shrager, John D. Spears, Robert Q. Wyckoff, Jr.
Investment Committee*
Tweedy, Browne Company LLC
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