Optimist Fund's Q3 2025: Navigating Market Dynamics for Robust Returns
Optimist Fund's Q3 2025 Performance: A Resounding Success
In the third quarter of 2025, the Optimist Fund posted an impressive gain of 9.1%. This positive outcome was largely fueled by several cyclical investments that have been navigating a multi-year downturn. These holdings are now showing early signs of market normalization, suggesting substantial growth prospects in the coming years.
Unlocking Potential: Key Cyclical Investments Poised for Growth
Companies such as Wayfair, Latham, and First Advantage are at the forefront of the fund's excitement. These businesses are anticipated to more than triple their value over the next three to five years, provided their respective markets continue to stabilize. The fund views these early indicators as highly encouraging, reinforcing its long-term investment thesis.
Strategic Portfolio Adjustments: Exits and Reallocations
During the quarter, the fund made strategic decisions to exit two previously significant holdings: HelloFresh and Revolve. This move was prompted by a re-evaluation of management's execution capabilities and a reduction in projected annualized returns, respectively. The fund's dynamic approach to portfolio management ensures that capital is consistently allocated to its highest-conviction ideas, maximizing risk-reward potential.
Top Performers: Driving Fund Growth
Wayfair delivered an exceptionally strong quarter, showcasing accelerating revenue growth, improved margins, and positive free cash flow. This performance highlights the inherent operating leverage in its model, indicating significant future profitability. ThredUp also demonstrated impressive growth, with increased revenue and active buyers, while Carvana achieved record retail unit sales and adjusted EBITDA, underlining its structural advantages and vast market share potential. Medpace, a new addition to the portfolio, reported outstanding results with accelerating revenue and profits, driven by its focused strategy and strong capital allocation.
Addressing Underperformance: Lessons from Detractors
Monday.com, despite solid revenue and free cash flow growth, experienced a slight reduction in guidance due to shifts in performance marketing trends. The fund views this as a transient issue and believes Monday.com is well-positioned to leverage AI for future growth. Fiverr's performance fell short of expectations, leading to a reduction in its position size. This adjustment reflects the fund's commitment to dynamically adjust holdings based on conviction and near-term visibility.
Introducing Medpace: A Market Leader with Enduring Value
Medpace is a leading contract research organization (CRO) specializing in small and mid-sized biotech companies. Founded by Dr. August Troendle, who still leads the company and holds a significant ownership stake, Medpace has consistently achieved organic growth and maintained best-in-class margins. Its success stems from a focused strategy, operating exclusively on a full-service basis, which ensures high-quality control and predictable outcomes. Medpace's disciplined capital allocation, particularly its opportunistic share repurchases during market downturns, further enhances its long-term value. With a single-digit share in a growing market, Medpace represents an underappreciated, inflecting compounder.
Looking Ahead: Optimism for Future Returns
The fund's leadership remains highly optimistic about the future, citing encouraging signs across several holdings whose markets are finally stabilizing and entering a period of sustained recovery. Despite broader market valuations, the Optimist Fund sees ample opportunities for high returns in the coming years, driven by its focused, value-oriented investment philosophy. The recent Investor Day further reinforced these positive outlooks, fostering continued trust and partnership with investors.