First Pacific Advisors

#### I. Institutional Overview First Pacific Advisors (FPA), a venerable institution in the world of value investing, has long been regarded as a bastion of prudent, contrarian, and research-driven capital management. As of the fourth quarter of 2025, the firm’s 13F filing reveals a portfolio valued at approximately **$7.45 billion**, spread across **61 distinct holdings**. This snapshot provides a window into the strategic mind of an institution that prioritizes downside protection and long-term capital appreciation over short-term market momentum. To understand FPA’s current psychological portrait, one must look beyond the raw numbers and into the structural evolution of their portfolio during this period. The reported value of **$7,454,851,055** suggests that FPA remains a significant mid-to-large-scale institutional player. While the firm manages a multi-billion dollar pool of assets, its decision to maintain only 61 positions speaks volumes about its investment philosophy. In an era where many institutional managers succumb to "closet indexing" by holding hundreds of stocks to minimize tracking error, FPA’s relatively lean portfolio indicates a commitment to **concentrated, high-conviction betting**. With a portfolio of this size, each position must clear a high bar for inclusion, and the top-heavy nature of the holdings—where the top 10 positions account for a substantial majority of the total AUM—underscores a "best ideas" approach. The psychological portrait of FPA this quarter is one of **strategic consolidation and tactical harvesting**. The firm is not merely sitting on its hands; rather, it is actively pruning its "winners"—long-term compounders like Alphabet and Meta—to recycle capital into new or expanding opportunities that offer a more attractive risk-reward profile in the current market environment. This behavior is typical of a value-oriented manager who becomes wary when their core holdings reach or exceed intrinsic value estimates. The reduction in several top-tier technology and communication services holdings suggests a belief that the "easy money" in these sectors may have been made, prompting a shift toward more defensive or idiosyncratic value plays. Furthermore, the scale of the institution appears stable, yet the internal churn suggests a transition phase. By analyzing the **number_of_stocks (61)** alongside the **reported_value**, we see an institution that is diversified enough to weather sector-specific storms but concentrated enough to generate significant alpha if its core theses prove correct. FPA’s style is often characterized by "absolute value" rather than "relative value." They are willing to hold cash or move into defensive postures if the market does not provide sufficient margins of safety. In Q4 2025, the firm’s activity reflects a disciplined adherence to this mandate: selling into strength and buying into perceived structural or cyclical discounts. In summary, First Pacific Advisors enters the final stretch of 2025 as a **disciplined value hunter**. The institution is currently characterized by a "harvesting" mindset regarding its massive gains in Big Tech, while simultaneously planting seeds in healthcare, materials, and specialized financials. The overarching psychological state is one of **cautious optimism tempered by valuation discipline**, as evidenced by the significant reductions in their largest, most successful positions and the aggressive scaling of newer, more attractively valued entries. #### II. Sector Allocation Analysis The sector allocation of First Pacific Advisors in Q4 2025 reveals a highly deliberate macro-thematic layout. The firm’s capital is not evenly distributed; instead, it is clustered in sectors where it perceives structural moats or significant valuation dislocations. | Sector | Weight (%) | Trend/Judgment | | :--- | :--- | :--- | | Communication Services | 26.84 | Overweight (Core Moat) | | Technology | 18.32 | Overweight (Growth/Value Hybrid) | | Financials | 14.09 | Overweight (Cyclical Value) | | Healthcare | 11.47 | Increasing (Defensive Growth) | | Consumer Discretionary | 9.56 | Moderate (Selective Recovery) | | Materials | 7.32 | Increasing (Inflation Hedge/Specialty) | | Industrials | 6.35 | Moderate (Infrastructure/Capital Goods) | | Energy | 3.64 | Underweight (Tactical Exposure) | | Real Estate | 1.71 | Underweight (Yield/Niche) | | Consumer Staples | 0.43 | Minimal (Valuation Avoidance) | | Others | 0.27 | Negligible | **2.1 Concentration and Macro Judgment** The most striking feature of FPA’s sector layout is the extreme concentration in the top three sectors: **Communication Services, Technology, and Financials**. Together, these three sectors account for **59.25%** of the total portfolio. This level of concentration indicates a firm that is not afraid to take massive sector bets when it believes the risk-reward is skewed in its favor. The dominance of **Communication Services (26.84%)** is primarily a reflection of FPA’s long-standing conviction in the "platform economy," specifically through its massive holdings in Alphabet and Meta Platforms. However, the fact that this sector remains the largest despite significant selling in Alphabet (GOOGL) and Meta (META) suggests that FPA still views these companies as the "ballast" of the modern economy—utilities of the digital age that provide indispensable services regardless of the macro environment. **2.2 The Shift Toward Defensive Value and Quality** While the "Big Three" sectors dominate, the most telling movements are found in the **Healthcare (11.47%)** and **Materials (7.32%)** sectors. The aggressive addition to Becton, Dickinson and Company (BDX) and International Flavors & Fragrances (IFF) signals a rotation toward **defensive quality**. Healthcare, in particular, often serves as a haven during periods of economic uncertainty or high interest rates, as demand for medical supplies and services remains inelastic. FPA’s increasing weight in this sector suggests a move toward "all-weather" assets that can provide steady cash flows even if the broader market experiences volatility. The **Materials** sector, though smaller at 7.32%, represents a significant thematic bet on specialty chemicals and global supply chain essentials. By increasing its stake in IFF, FPA is betting on a company with high barriers to entry and pricing power—key attributes for a value manager looking to protect against inflationary pressures. **2.3 Financials: A Bet on the Yield Curve and Capital Markets** With **14.09%** of the portfolio in Financials, FPA maintains a robust exposure to the banking and investment management industries. Holdings like Citigroup (C), Jefferies (JEF), and Wells Fargo (WFC) indicate a belief in the ongoing recovery of the banking sector. FPA’s logic here likely centers on "sum-of-the-parts" valuations and the potential for capital return (dividends and buybacks) as these institutions navigate a stabilizing interest rate environment. The presence of LPL Financial (LPLA) also suggests a play on the secular growth of independent wealth management. **2.4 Sector Rotation and Industry Trend Insights** The data suggests a clear rotation: **Harvesting Technology/Communications to fund Healthcare and Materials.** This is a classic "late-cycle" move. When a value manager trims Alphabet and Meta—companies that have seen massive price appreciation—to buy Becton Dickinson and IFF, they are essentially moving down the risk curve. They are taking profits from high-flying, high-multiple stocks and reallocating to "unloved" or "fairly valued" sectors that offer better protection against a potential economic slowdown. Furthermore, the minimal exposure to **Consumer Staples (0.43%)** and **Utilities** (included in Others) is a fascinating contrarian signal. Many defensive managers flock to Staples, but FPA’s avoidance suggests they find the valuations in that sector unattractive—perhaps viewing them as "bond proxies" that are currently overpriced relative to their growth prospects. Instead, FPA prefers to find its defensiveness in Healthcare and specialty Materials, where they likely see better fundamental upside. **2.5 Macroeconomic Inference** Based on this allocation, we can infer that First Pacific Advisors is preparing for a **"Higher for Longer" or "Slow Growth" macro environment**. Their heavy weight in cash-flow-rich Tech/Comm suggests they want to own the winners of the digital economy, but their increasing weight in Healthcare and Materials suggests they are hedging against a broader market correction. They are avoiding the most sensitive cyclical areas like Real Estate and Consumer Staples, opting instead for the "Quality Value" found in large-cap financials and healthcare innovators. #### III. Top 10 Holdings Deep Dive The top 10 holdings of First Pacific Advisors represent the "core engine" of the portfolio, accounting for a massive portion of the firm's total market e ---