Wedgewood Partners' Trimmed Its Holdings in PayPal Holdings (PYPL)

Wedgewood Partners, an investment management company, released its fourth-quarter 2025 investor letter. The firm anticipates stronger market volatility in the coming years and has moderated its enthusiasm. A copy of the letter can be downloaded here. The Wedgewood Composite returned -1.8% (net) in the fourth quarter compared to the S&P 500’s 2.7%, the Russell 1000 Growth Index’s 1.1%, and the Russell 1000 Value Index’s 3.8% returns. YTD, the Composite gained 4.3% compared to 17.9%, 18.6%, and 15.9% returns for the indexes, respectively. Wedgewood Partners’ focus on high-quality stocks has historically worked since 1992, but not in 2025. The letter highlighted poor stock selection, the portfolio’s strong past performers due for valuation correction, and being structurally underweight in AI stocks drove the underperformance. The letter noted that in 2026, crowded AI investments and stretched valuations create pressure on prudent investment decisions.  In addition, you can check the Fund’s top 5 holdings to determine its best picks for 2025.

In its fourth-quarter 2025 investor letter, Wedgewood Partners highlighted PayPal Holdings, Inc. (NASDAQ:PYPL) as a performance detractor. PayPal Holdings, Inc. (NASDAQ:PYPL) is a technology platform that enables digital payments. On January 16, 2026, PayPal Holdings, Inc. (NASDAQ:PYPL) stock closed at $56.88 per share. One-month return of PayPal Holdings, Inc. (NASDAQ:PYPL) was -4.88%, and its shares lost 38.04% of their value over the last 52 weeks. PayPal Holdings, Inc. (NASDAQ:PYPL) has a market capitalization of $54.337 billion.

Wedgewood Partners stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its fourth quarter 2025 investor letter:

"PayPal Holdings, Inc. (NASDAQ:PYPL) also detracted from performance during the most recent quarter. The Company reported healthy +8% volume growth across its branded checkout portfolio, driven by +10% growth in the U.S., leading to +12% growth in adjusted earnings per share. However, PayPal also reported a slowing in its volume late in the quarter, a trend they attributed to a weaker macro environment along with a slower than expected uptake in the rollout of their new checkout initiatives. In addition, the Company disappointingly announced it would make meaningful investments in the emerging agentic commerce industry, partnering with AI developers to bring PayPal to popular assistants such as ChatGPT and Perplexity, along with Alphabet's agentic solutions. We trimmed our PayPal positions during the quarter as we believe the combined slowing of transaction volumes and heightened expenses will result in slower proit growth than we previously expected."

PayPal Holdings, Inc. (NASDAQ:PYPL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 86 hedge fund portfolios held PayPal Holdings, Inc. (NASDAQ:PYPL) at the end of the third quarter, compared to 89 in the previous quarter. While we acknowledge the potential of PayPal Holdings, Inc. (NASDAQ:PYPL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered PayPal Holdings, Inc. (NASDAQ:PYPL) and shared the list of most undervalued fintech stocks to buy. PayPal Holdings, Inc. (NASDAQ:PYPL) detracted from Wedgewood Partners' performance in the previous quarter due to investor rotation to AI/crypto, competition and growth skepticism. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None. This article is originally published at Insider Monkey.