2025 Year-End Letter
The letter below is also available as a PDF file HERE.
January 30, 2026
2025 Annual Letter
2025 was the year of AI, geopolitics, and tariffs—or at least the threat of tariffs. Those three topics have been the main subjects for the first month of 2026 as well.
Stock markets had another good year in 2025 despite high starting valuations, with select technology and international stocks leading the way.
There was a wider range of returns in clients’ accounts in 2025 than we’d normally expect. This was largely because we trimmed some larger holdings based on valuation and added to some holdings during the volatility around “Liberation Day.” Because we always keep taxes in mind when making changes to accounts, the pace of changes differed between taxable and non-taxable accounts, and the position sizes of the holdings we trimmed varied depending on when the accounts were established.
In our Diversified Strategy, we mainly experienced positive returns between 7% (for the more conservative accounts) and 15% (for those accounts with more equity exposure) in 2025. In our Absolute Return Strategy, we mainly experienced positive returns between 13% and 18% during the year.
We’re value investors at heart. In 2025, value stocks such as the ones we own generally performed well in the first quarter, underperformed major indices for most of the year after “Liberation Day,” and finished the year with solid gains.
One year ago, we noted record or near-record valuations in the S&P 500 at the end of 2024 and a record level of concentration among the index’s top holdings. Valuations and the level of concentration are now higher and, based on those levels at the end of 2025, have often been associated with flat or even negative returns for the subsequent decade. That’s not a prediction on our part—we don’t make those kinds of predictions—just an observation that it’s not a bad time to examine all your investment portfolios, understand your exposures, and keep proper expectations going forward.
For our part, we continue to find good value outside of the major indices and we expect to find more if volatility returns to the markets, as it eventually always does.
The Uncertainty of the Past and Future
“You can be very deserving and very intelligent and very disciplined, but there’s also a factor of luck that comes into this thing. And the people who get the outcomes that seem extraordinary are the people who have discipline and intelligence and good virtue — plus a hell of a lot of luck.” —Charlie Munger
One of my favorite graphics about life comes from author Tim Urban:
I like not just that it shows the unpredictability of the future, and how the decisions we make going forward can set us on one of many completely different paths; but also that the past, which often seems inevitable now that we’re in the present, could have played out so differently. The call you made, the event you attended, the application you submitted, the nervous ask you found the courage to make, and the near miss—almost all of us have one or more of those things that altered what we do, with whom we spent time, or where we live. Many 50/50 decisions could have gone the other way, completely changing what seems normal in your life today.
And it’s not just life that works that way. Businesses, industries, economies, and whole countries experience the same uncertain paths, where different leaders, laws, and decisions would have completely altered the ultimate winners and losers of the story written by those decisions.
The internet—both the companies that succeeded and failed, and their impact on the world and stock markets—followed a path that could have turned out differently than it has today. And AI will as well. The smartest people and leaders don’t all believe the same things, and most of them seem to agree that no one really knows the endgame for AI. But they think it will be big and important, and that it will likely have an impact significantly greater than even the internet did on our lives.
And the companies involved in AI are spending a lot of money. Formerly capital-light businesses have become among the most capital-intensive in the world, as demand for data centers and other infrastructure has driven capital expenditures to a scale never seen in the history of the U.S. economy.
From an investing standpoint, what does all this mean? It depends on several questions we can’t really answer at this point. What will the return be on all of this spending? How long will it last? Will we have enough energy resources to complete and run the projects already underway and planned in the years ahead? How will it all be financed?
What we do know is that, historically, major capital expenditure booms often last longer than the stock market booms they start, as shown in the chart below (which excludes significant spending by private companies outside the S&P 500). Said another way, savvy investors may have less time than previously thought to prepare and protect their portfolios.
Some of the many things we’ve learned from the life and career of Warren Buffett—now the 95-year-old former CEO of Berkshire Hathaway—is that discipline and patience pay in the long run, that it’s usually a good idea to be fearful when others are greedy, and that it can be very profitable to be around to pick through the pieces when bubbles eventually go bust. We don’t know who all the winners and losers will be when this boom ends. And, at any rate, as Mr. Buffett has said, “It’s only when the tide goes out that you learn who’s been swimming naked.”
Final Thoughts
“And I’ll leave you my last bit of wisdom. There’s another proverb, it’s a Turkish proverb. ‘No road is long with good company.’ The essence of life is to surround yourself, as continuously as you can, with good company.” —Peter Kaufman
Theresa and I thank you for your continued support. And we’d especially like to thank those clients who have introduced us to their family, friends, and colleagues. Referrals from those happy with our work mean so much to us.
One of the benefits of technology is that we can have clients spread throughout the country and the world. Compared to most advisors, we have fewer scheduled meetings and spend less time on things that don’t directly have an impact on current clients, so that when clients truly need us, we can be there, be present, and provide the same level of care and service we’d expect if our roles were reversed—no matter where those clients are located.
For those who happen to reside in Northeast Ohio or find themselves passing through, we moved into our new office on the historic Chardon Square near the end of 2025. Our new address is:
155 Main St.
Chardon, OH 44024
Our contact information is included below for easy reference. As always, feel free to call or email us if you have any questions.
All the best,
Joe Koster
Contact Info:
Joe Koster
office phone: (440) 696-0130 x1
email: Joe@Sorfis.com
Theresa Pfiester
office phone: (440) 696-0130 x2
email: Theresa@Sorfis.com
Legal Information and Disclosures
Sorfis Investments, LLC (“Sorfis”) is a registered investment advisor. Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.
Readers of the information contained in this letter should be aware that any action taken by the viewer/reader based on this information is taken at their own risk. This information does not address individual situations and should not be construed or viewed as any type of individual or group recommendation. Be sure to first consult with a qualified financial adviser, tax professional, and/or legal counsel before implementing any securities, investments, or investment strategies discussed.
Portfolio performance is shown net of the advisory fees of 0.75%, the highest fees charged by Sorfis in its strategies during the year. Performance does not reflect the deduction of other fees or expenses, including but not limited to brokerage fees, custodial fees, and fees and expenses charged by mutual funds and other investment companies. The data used to calculate the portfolio performance was obtained from sources deemed reliable and then organized and presented by Sorfis.
The performance calculations have not been audited by any third party. Actual performance of client portfolios may differ materially due to the timing related to additional client deposits or withdrawals and the actual deployment and investment of a client portfolio, the length of time various positions are held, the client’s objectives and restrictions, and fees and expenses incurred by any specific individual portfolio.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.