American Century Investments' Small Cap Value Fund recently unveiled its performance for the fourth quarter of 2025. During this period, the fund experienced a return of -1.06%, notably lagging behind the Russell 2000 Value Index, which posted a 3.26% return. This shortfall was primarily attributed to specific asset allocation decisions and individual stock selections. Among the notable detractors was Bath & Body Works, Inc. (BBWI), a prominent retailer of personal care and home fragrance products. The fund acknowledged the company's new leadership but expressed reservations about the speed of its market recovery, especially given the stock's significant decline over the preceding year.
American Century Investments Reviews Bath & Body Works' Q4 2025 Performance
In its investor letter for the fourth quarter of 2025, released on April 6, 2026, American Century Investments' Small Cap Value Fund meticulously detailed its investment decisions and market observations. The fund highlighted the broader U.S. stock market's upward trend during the quarter, with large-cap stocks slightly outperforming small-cap stocks, and both categories surpassing mid-cap performance. Value-oriented stocks also demonstrated superior returns compared to growth-style stocks across all market capitalization segments. Economically, the U.S. showcased robust growth, with a 4.3% annualized rate in the third quarter, a rise from the previous quarter's 3.8%. Corporate earnings also reflected an improving landscape. Despite a moderation in inflation, the unemployment rate experienced a slight uptick, reaching 4.6% in November.
Specifically addressing Bath & Body Works, Inc. (NYSE: BBWI), the fund noted its negative contribution to the quarter's results. As of April 2, 2026, BBWI's shares closed at $18.57, marking a monthly decline of 10.72% and a substantial 31.95% decrease over the past 52 weeks, bringing its market capitalization to $3.80 billion. The fund's managers expressed confidence in the new management's ability to address the company's growth challenges but tempered expectations regarding the timeline for a full recovery. Despite BBWI not being featured on the fund's list of the "40 Most Popular Stocks Among Hedge Funds Heading Into 2026" (where 52 hedge funds held positions in BBWI at the close of Q4, up from 49 in the prior quarter), American Century Investments indicated a preference for certain AI stocks, which they believe offer superior upside potential and reduced downside risk.
The detailed analysis provided by American Century Investments underscores the complex interplay of macroeconomic factors and individual corporate performance in investment outcomes. While the fund acknowledges the strategic moves by Bath & Body Works to revitalize its growth, the cautionary stance on its recovery trajectory offers a valuable lesson in managing investor expectations amidst corporate transitions. This scenario highlights the continuous need for thorough due diligence and strategic diversification, as even established companies can face unexpected headwinds. The fund's pivot towards AI stocks, citing their potential and lower risk profile, also reflects an evolving investment landscape where innovation and market trends significantly influence portfolio decisions.