Navigating the Currents: Muhlenkamp & Company's Q3 2025 Market Insights

As we close the books on the third quarter of 2025, the financial landscape continues to present a tapestry of both challenge and opportunity. At Muhlenkamp & Company, our steadfast commitment to fundamental value investing remains the bedrock of our strategy, guiding us through the shifting sands of economic data and market sentiment.

This quarter saw persistent discussions around inflation, the nuanced dance of central bank policies, and the implications of global geopolitical developments on supply chains and consumer confidence.

Inflation, while showing some signs of moderation from its recent peaks, continues to be a central theme.

The Federal Reserve, alongside other global central banks, has maintained a cautious stance, balancing the need to tame price increases with the desire to avoid stifling economic growth. Our analysis indicates that while headline inflation figures might ease, core inflation, particularly in services, could prove stickier.

This scenario underscores the importance of investing in companies with strong pricing power and robust balance sheets, capable of navigating higher input costs and maintaining profitability.

Our portfolio's performance this quarter reflected our selective approach. We continued to favor businesses that demonstrate sustainable competitive advantages, generate significant free cash flow, and trade at attractive valuations relative to their intrinsic worth.

We believe that in an environment characterized by higher interest rates and increased capital costs, the discipline of value will be increasingly rewarded. Companies burdened by excessive debt or reliant on speculative growth narratives faced renewed scrutiny from the broader market, validating our long-held aversion to such profiles.

Technological innovation remains a powerful force, but we remain vigilant about valuations in certain high-flying segments.

While we appreciate the transformative potential of artificial intelligence and other emerging technologies, our focus is on identifying companies that are not only participating in these trends but are also doing so profitably and with a clear path to sustainable earnings. We’ve found compelling opportunities in sectors that are perhaps less glamorous but offer consistent, tangible value, often overlooked by the mainstream.

Looking ahead to the final quarter of 2025 and into 2026, we anticipate continued volatility.

Economic indicators suggest a potential plateau in growth, but a full-blown recession is not a foregone conclusion, especially with resilient labor markets in many developed economies. Our strategy will continue to emphasize prudence, diversification, and a deep understanding of the businesses we own.

We are not swayed by short-term market gyrations but rather by the long-term prospects of the underlying companies.

We thank our investors for their continued trust and partnership. Our conviction in our disciplined, value-oriented investment philosophy remains unwavering, and we are committed to meticulously identifying and investing in companies that we believe offer the best risk-adjusted returns in this evolving economic landscape.

We look forward to continuing this journey together, focusing on long-term wealth creation through thoughtful and diligent investment decisions.