VERX

Tensile Capital Management's Stake in Vertex: Tensile Capital Management increased its position in Vertex by 160,559 shares in Q3, bringing its total to 3.8 million shares valued at $94.3 million, making it the fund's largest holding.

Market Value Decline: Despite the increase in shares, the market value of Tensile's position fell by approximately $34.4 million, with Vertex shares trading 65% lower than in January.

Vertex's Financial Performance: Vertex reported double-digit revenue growth, including a 12.7% increase in overall revenue and a 29.6% rise in cloud revenue, alongside a new $150 million share-repurchase program.

Investment Outlook: The significant drop in Vertex's stock price presents a contrarian investment opportunity, as the company maintains strong fundamentals, including $648 million in annual recurring revenue and a 107% net revenue retention rate.

Market Rotation Insight: Goldman Sachs highlights a recurring trend where underperforming stocks from the previous year, termed "laggards," often outperform the S&P 500 in the first quarter of the new year, based on 23 years of market data.

2025 Laggards Performance: The current laggards for 2025 are showing significant underperformance, with an average decline of 19% and a 36% drop relative to the S&P 500, indicating a larger pool of beaten-down stocks than usual.

Potential Recovery Stocks: Goldman Sachs has identified several stocks, including Fortinet, Pool Corp., and Hormel Foods, that are considered mispriced and could lead a rally in early 2026, despite most analysts being neutral or bearish on them.

Caution on Predictions: While the laggard-to-leader strategy has historically shown promise, it is not guaranteed, and investors should remain cautious as January 2026 approaches, as it may bring unexpected movements from previously overlooked stocks.