Q3 2025 LP Letter

Dear Partner,

In the third quarter of 2025, the NJC Horizon Fund gained 5.53%, bringing year-to-date performance to 17.9% net of all fees. This represents relative outperformance of 7% versus the Nasdaq 100 (QQQ +16.7%) and 37.4% versus the S&P 500 (SPY +13%). Losses in several of our most promising holdings (CrowdStrike, ServiceNow, and Freeport-McMoRan) offset gains from some of the fund’s largest positions, including NVIDIA, Broadcom, and Oracle.

Navigating a Shifting Market

Entering the third quarter, signs of labor market weakness and speculative behavior in AI-related equities began to emerge. Even OpenAI’s Sam Altman remarked that investors had become “overexcited about AI.” I continue to believe strongly in the value of the fund’s core AI-related holdings. However, in response to these conditions, I trimmed several positions characterized by high volatility or elevated valuations and rebalanced toward a more diversified and resilient portfolio. My view is that AI will either lead the market higher or, in the event of a correction, decline along with unprofitable speculative assets. In either outcome, I expect the majority of our AI exposure to maintain durable profitability in the years ahead even if a prolonged correction occurs.

Key Portfolio Adjustments

The most significant change was a two-thirds reduction in our long-held position in Roblox, whose platform has become a central digital universe for younger Millennials and Gen Z. While I continue to believe that video games, especially social and creative ones like Roblox, are relatively recession-resilient, the company’s dependence on cosmetic in-game purchases introduces uncertainty. Such purchases could either serve as affordable indulgences in a downturn or prove to be among the first discretionary expenses to cut. Meanwhile, the erosion of employment opportunities for the company’s core demographic raises concern that its fortunes may be tied to a broader trend of secular weakness in young adult consumer spending. With this in mind, I reduced the fund’s exposure until the spending behavior of this cohort becomes clearer.

I also lightened positions in Atlassian, Datadog, The Trade Desk, Photonics Lab, and Marvell -mostly long-term holdings- and used the proceeds to invest in undervalued, high-quality businesses such as ARM, Intuitive Surgical (ISRG), MercadoLibre (MELI), Enphase (ENPH), IBM, and Eli Lilly (LLY). I also added to defensive and value-oriented positions including Verizon (VZ), Option Care Health (OPCH), and QXO.

Outlook and Positioning
I remain confident in the intrinsic value of our core holdings, particularly those positioned to benefit from the ongoing transformation driven by artificial intelligence and automation. That said, I approach the coming quarters with measured optimism, maintaining discipline around valuation and flexibility to capitalize on market dislocations as investor sentiment swings between enthusiasm and caution.

As always, I appreciate your continued trust and partnership.

Sincerely,
Nick Carpenter
Managing Partner
NJC Horizon Fund