4Q25 Portfolio Activity and Attribution

Theme and Background

This chapter discusses the portfolio performance and rebalancing logic of the Patient Opportunity Equity Strategy in the fourth quarter of 2025. The market environment was characterized by high concentration: seven stocks contributed over half of the S&P 500’s returns, with the AI theme dominating the year’s performance. However, the strategy achieved its third consecutive year of outperformance against the index through bottom-up stock selection.

Core Thesis

The author’s core investment argument is that excess returns primarily stem from non-obvious, idiosyncratic opportunities rather than chasing AI hotspots. Counterintuitive judgments include:

• Healthcare was the portfolio’s largest contributing sector, yet it ranked only sixth in the S&P 500.
• Healthcare was the portfolio’s worst-performing sector in 2024, but the author persisted in contrarian overweighting, ultimately reaping rewards in 2025.
• The portfolio overweighted sectors such as Consumer Discretionary, Communication Services, and Financials, while holding zero exposure to Real Estate, Utilities, Materials, and Consumer Staples.

Key Arguments and Data

Performance:

• Net return of 5.99% in Q4 2025, outperforming the S&P 500 (2.65%).
• Full-year 2025 return of 26.1%, marking the third consecutive year of outperformance against the index.
• The market’s overall three-year return was 17.9%, the seventh-best three-year period in history.

Portfolio Concentration:

• Held 38 positions at period end, with the top ten accounting for 54.9% (index: 39.2%).
• Active share was approximately 91.7%.

Sector Allocation Comparison:

Overweighted Sectors	Underweighted/Zero-Weighted Sectors
Consumer Discretionary	Real Estate
Communication Services	Utilities
Financials	Materials
Energy	Consumer Staples
Industrials	Information Technology
Healthcare	—

Top Contributors and Detractors:

Top Contributors	Return	Contribution	Top Detractors	Return	Contribution
Alphabet (GOOGL)	28.12%	1.93%	Coinbase (COIN)	-32.91%	-0.80%
Precigen (PGEN)	26.94%	1.01%	Fiserv (FI)	-46.42%	-0.72%
Illumina (ILMN)	38.11%	0.92%	FBTC	-23.39%	-0.70%
Citigroup (C)	15.61%	0.88%	Meta (META)	-10.04%	-0.48%
General Motors (GM)	33.16%	0.72%	Alibaba (BABA)	-17.98%	-0.48%

Healthcare Sector Key Holdings Rebound Data:

• Precigen: PIPE investment helped secure FDA approval for the RRP drug, making it a standout performer.
• CVS Health: Improved underwriting discipline in Medicare Advantage, leading to better financial results.
• Royalty Pharma: Simplified its operating structure by acquiring an external manager and continued to initiate attractive royalty transactions.
• UnitedHealth: Added to the position after a sharp decline in April, with a faster-than-expected rebound.
• Biogen: Began to recover toward year-end, with improved confidence in the late-stage pipeline, and the Alzheimer’s disease opportunity expanded through blood biomarkers and subcutaneous formulations.

Companies/Assets Involved

• Alphabet (GOOGL): Top contributor, up 28.1% in Q4. The author believes the market previously underestimated its AI advantages, with the Gemini model integrating search, YouTube advertising, and cloud services. Bullish.
• Precigen (PGEN): PIPE investment drove FDA approval for the RRP drug, and pipeline assets remain undervalued. Bullish.
• Illumina (ILMN): Up 38.1% in Q4, contributing 0.92%. Bullish.
• Citigroup (C): Up 15.61% in Q4, contributing 0.88%. Bullish.
• General Motors (GM): Up 33.16% in Q4, contributing 0.72%. Bullish.
• Coinbase (COIN): Top detractor, down 32.91% in Q4. Bearish (short-term).
• Fiserv (FI): Down 46.42% in Q4, a new position. The author believes the pullback created an opportunity similar to a successful exit in 2024, with a new CEO, reset guidance, and a customer-focused culture, expecting a return to double-digit EPS growth by 2027. Bullish.
• FBTC: Down 23.39% in Q4, detracting 0.70%. Bearish (short-term).
• Meta (META): Down 10.04% in Q4, detracting 0.48%. Bearish (short-term).
• Alibaba (BABA): Down 17.98% in Q4, detracting 0.48%. Bearish (short-term).
• Biogen (BIIB): New long-term call option (C150 1/21/28), strike price $150, expiring in 2028. The author believes its Alzheimer’s disease franchise will expand the treatable population through blood biomarkers and subcutaneous injections, similar to its historical positioning in multiple sclerosis. Bullish.
• Chime Financial (CHYM): New position, a recently listed fintech company focused on low-cost banking alternatives. Platform engagement is industry-leading with significant cross-selling potential, and primary revenue reliance on direct deposit relationships limits credit risk. Expected to achieve GAAP profitability within the next year. Bullish.
• Angi (ANGI): Exited, with proceeds redeployed into new investments.

Investment Implications

1. Contrarian Positioning in Healthcare: The author added to healthcare when it was the worst-performing sector in 2024, reaping significant returns in 2025. Investors can focus on sectors at historically low valuations but must have patience to endure potential further short-term declines.

2. Focus on Idiosyncratic Opportunities Rather Than AI Hype: Although AI was the dominant theme in 2025, the author’s excess returns came primarily from non-AI-related stocks (e.g., Precigen, CVS, Royalty Pharma). Investors should avoid blindly chasing popular themes and instead seek out overlooked individual stocks.

3. Use Pullbacks to Add to Familiar Names: After Fiserv’s 46% decline in Q4, the author rebuilt the position, seeing a repeat of the opportunity that led to a successful exit in 2024. Investors can monitor turnaround opportunities driven by management changes and strategic resets.

4. Long-Term Options Strategy: Biogen’s long-term call option (expiring in 2028, strike $150) reflects the author’s high conviction in the Alzheimer’s pipeline, albeit with elevated risk. Investors may reference such structures, using options to amplify potential returns based on in-depth research.

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Theme and Background

This chapter focuses on analyzing the best and worst performers in Patient Capital's Q4 2025 portfolio holdings. The report details the reasons why Precigen and Illumina were major contributors, as well as the specific context in which Coinbase, Fiserv, and FBTC dragged down portfolio performance, aiming to illustrate how its bottom-up stock selection logic navigates market volatility.

Core Views

The report argues that short-term price fluctuations (such as those of Coinbase and FBTC) are cyclical or sentiment-driven and should not alter the assessment of long-term structural growth potential. For the sharp stock price decline at Fiserv caused by management changes, the report views it as a "reset" rather than fundamental deterioration and is optimistic about its ability to restore double-digit earnings per share growth by 2027. The approval of Precigen's RRP drug is seen as a milestone event, likely to drive the company toward self-sustainability and accelerate its other pipeline programs.

Key Arguments and Data

• Precigen (PGEN): Its drug Papziemos was approved in early August, becoming the first "off-the-shelf" immunotherapy for recurrent respiratory papillomatosis (RRP), a patient population with no prior treatment options. The company is rapidly advancing commercialization and is close to achieving self-financing. CEO Dr. Helen Sabzevari previously founded Compass Therapeutics and served as its Chief Scientific Officer, possessing deep immunotherapy experience. The report believes several of its pipeline assets have "blockbuster" potential.
• Illumina (ILMN): Q3 earnings exceeded expectations, delivering "a significant earnings beat and guidance raise." The core driver is the continued growth of clinical consumables, which accelerated faster than anticipated, primarily due to the ongoing upgrade cycle of the high-throughput sequencing platform NovaSeq X. The report judges that after years of disruption, the core sequencing business is returning to a trajectory of normalized growth and profitability.
• Coinbase (COIN): The stock price declined alongside digital asset prices, but the report views this as "cyclical" volatility. Over the long term, the platform is evolving from a pure cryptocurrency exchange into a comprehensive financial exchange, involving products such as the Layer-2 blockchain Base, stock trading, ETF trading, stablecoins, and prediction markets. The report emphasizes that as the digital asset ecosystem matures, institutional participation increases, and adoption broadens, this product matrix will support higher user engagement, revenue diversification, and long-term earnings potential.
• Fiserv (FI): After a new CEO took office, the company significantly lowered its full-year earnings guidance and announced a broad restructuring of the board and senior leadership, triggering a sharp market reaction and multiple sell-side downgrades. The report believes that despite short-term sentiment pressure, Fiserv remains a leader in the payments space, with scaled, mission-critical platforms and deeply embedded client relationships. It expects that through a "client-first" cultural transformation, the company can rebuild investor confidence, regain market share growth, and achieve double-digit EPS growth by 2027.
• Fidelity Wise Origin Bitcoin Fund (FBTC): Bitcoin's price declined alongside the broader crypto market, dragging down performance. The report reiterates its long-term view: Bitcoin has a supply cap of 21 million coins, and as accessibility improves, demand will increase. Currently, Bitcoin's market cap is approximately $1.8 trillion, compared to gold's $31.4 trillion, suggesting significant upside potential for Bitcoin as "digital gold."

Companies/Assets Involved

Company/Asset	Role	Key Data	View
Precigen (PGEN)	Major Contributor	Papziemos approved; RRP patient population had no other treatment options; CEO has immunotherapy background	Bullish, believes multiple pipeline assets have blockbuster potential
Illumina (ILMN)	Major Contributor	Q3 earnings beat expectations with guidance raised; clinical consumables growth faster than expected; NovaSeq X ongoing upgrade	Bullish, core business returning to normalized growth and profitability
Coinbase (COIN)	Major Detractor	Stock price declined with digital asset prices; platform expanding to Base, stock/ETF trading, stablecoins, etc.	Bullish, views short-term volatility as cyclical; long-term transformation into a comprehensive financial exchange
Fiserv (FI)	Major Detractor	New CEO lowered full-year guidance and restructured leadership; sharp market reaction with multiple sell-side downgrades	Bullish, believes after the reset, it can restore double-digit EPS growth by 2027
Fidelity Wise Origin Bitcoin Fund (FBTC)	Major Detractor	Bitcoin price declined; market cap $1.8 trillion vs. gold's $31.4 trillion	Bullish, viewed as "digital gold" with limited supply and increasing demand

Investment Implications

• Healthcare Sector: Focus on small-cap biotech companies (e.g., Precigen) that achieve a "first-approved" milestone. A single product approval can be a key inflection point for company revaluation and cash flow self-sufficiency.
• Tech Hardware: Illumina's case shows that after a technology upgrade cycle (e.g., NovaSeq X), faster-than-expected growth in the core business (clinical consumables) can lead to earnings surprises. Investors can look for similar platform companies undergoing upgrade cycles.
• Crypto Assets: The short-term declines in Coinbase and FBTC are viewed as cyclical opportunities. Investors should distinguish between price volatility and fundamental changes, maintaining a long-term bullish view on crypto asset infrastructure (exchanges, ETFs) and Bitcoin's thesis as a store of value.
• Payments Sector: The sharp stock price decline at Fiserv triggered by management changes presents a contrarian entry opportunity. The key is to assess whether the "reset" is thorough and whether the new management can deliver on earnings recovery promises within 1-2 years.