Palm Valley Capital Management, an investment management firm, has released the “Palm Valley Capital Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter, Palm Valley Capital Fund appreciated 2.35% compared to a 9.11% gain for the S&P SmallCap 600 and a 7.99% rise in the Morningstar Small Cap Total Return Index. At the start of the quarter, the Fund invested 73.5% in cash equivalents, increasing slightly to 74.1% by the end of the quarter. Small-cap stocks performed ahead of large caps during the period, with the anticipation of Fed easing and reduced concerns about the impact of tariffs on corporate profits. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its third-quarter 2025 investor letter, Palm Valley Capital Fund highlighted stocks such as LKQ Corporation (NASDAQ:LKQ). LKQ Corporation (NASDAQ:LKQ) is a leading distributor of vehicle products and parts to repair, maintain, and accessorize automobiles. The one-month return of LKQ Corporation (NASDAQ:LKQ) was -7.711%, and its shares lost 21.97% of their value over the last 52 weeks. On October 7, 2025, LKQ Corporation (NASDAQ:LKQ) stock closed at $29.97 per share, with a market capitalization of $7.711 billion.
Palm Valley Capital Fund stated the following regarding LKQ Corporation (NASDAQ:LKQ) in its third quarter 2025 investor letter:
“LKQ Corporation (NASDAQ:LKQ) is the largest distributor of aftermarket and recycled auto parts in the United States and Europe. It’s a roll-up success story. In the U.S., the company focuses on collision products (e.g., headlights, fenders, bumpers, paints). In Europe, LKQ’s parts offering is mostly mechanical in nature (e.g., engines, brakes, suspension). Unlike other major auto parts distributors, LKQ sources a significant percentage of its parts by recycling old vehicles purchased from auctions and stored at the firm’s junkyards. Selling auto parts for damaged vehicles has generally been a recession resistant business. Demand is driven by several factors including the number of repairable auto insurance claims, parts inflation and complexity, the aging and size of the car parc, the willingness of insurers to utilize non-OEM parts, and structural trends such as accident avoidance technology and the shift to electronic vehicles.
