F5 (FFIV) Fell Following a Hacker Breach Confirmation

Hotchkis & Wiley, an investment management company, released its fourth-quarter 2025 investor letter for the “Hotchkis & Wiley Large Cap Disciplined Value Fund.” A copy of the letter can be downloaded here. In Q4 2025, the S&P 500 returned 2.7%, bringing its yearly gains to 17.9%. Since the 2007-08 financial crisis, the Index has increased tenfold, achieving positive results in 15 of 17 years. However, high valuations have made investors cautious, particularly with the returns concentrated in a few stocks. Excluding the "Magnificent 7," the forward PE of the S&P 500 Index aligns with historical averages. In 2025, information technology and communication services led performance, but results varied significantly within those sectors. The firm views the potential of certain software companies to be very attractive. In this environment, the Fund outperformed the Russell 1000 Value Index both in Q4 and over the full calendar year. Positive stock selection contributed to the Fund's relative performance. Please review the Fund’s top 5 holdings to gain insight into their key selections for 2025.

In its fourth-quarter 2025 investor letter, Hotchkis & Wiley Large Cap Disciplined Value Fund highlighted F5, Inc. (NASDAQ:FFIV) as one of its leading individual detractors. F5, Inc. (NASDAQ:FFIV) offers multi-cloud application security and delivery solutions. The one-month return of F5, Inc. (NASDAQ:FFIV) was 10.09%, and its shares lost 4.96% of their value over the last 52 weeks.  On January 29, 2026, F5, Inc. (NASDAQ:FFIV) stock closed at $282.53 per share, with a market capitalization of $16.61 billion.

Hotchkis & Wiley Large Cap Disciplined Value Fund stated the following regarding F5, Inc. (NASDAQ:FFIV) in its fourth quarter 2025 investor letter:

"F5, Inc. (NASDAQ:FFIV) is a global provider of application delivery, security, and performance solutions that help enterprises run and protect applications across hybrid and multi-cloud environments. Shares fell after the company disclosed that state-backed hackers from China had breached its networks and gained access to certain files from the company’s BIG-IP application services. While the direct impact of the breach has been limited – no sensitive customer data was leaked and F5’s operations were not impacted – management expects a modest impact to new bookings in the near term as customers are currently focused on evaluating the security posture of existing IT assets rather than buying new products. In response to the breach, F5 offered weak guidance for next quarter, and consensus earnings expectations have declined 7% for 2026 relative to pre-breach levels. While the breach may have a near-term impact on profit growth, our research suggests that the impact of security breaches at similar IT vendors have been short-lived and have very rarely led to impairment of long-term earnings power. Also, F5’s strong free cash flow, net cash balance sheet, and high switching costs could help protect the company from any near-term impacts to bookings that may occur this year. We believe F5 should be able to grow revenue in the high-single-digits for many years given the strong tailwinds the company is seeing related to data center modernization and application traffic growth and limited competition in its core markets. Now trading at about 10x our estimate of next year’s normal operating profit, F5’s shares offer a very attractive risk/reward outlook, in our opinion."

F5, Inc. (NASDAQ:FFIV) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 40 hedge fund portfolios held F5, Inc. (NASDAQ:FFIV) at the end of the third quarter, up from 37 in the previous quarter. F5, Inc. (NASDAQ:FFIV) announced first quarter 2026 revenue of $822 million, reflecting a 7% year-over-year increase. While we acknowledge the potential of F5, Inc. (NASDAQ:FFIV) 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 F5, Inc. (NASDAQ:FFIV) and shared the list of best software infrastructure stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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