The Goldman Sachs Large Cap Equity Fund experienced a period of underperformance relative to its benchmark, the Russell 1000 Index (net), during the third quarter of 2025. Despite this, the fund maintains a strong conviction in the future prospects of AppLovin, particularly its ability to penetrate and expand within the burgeoning e-commerce sector. The fund also strategically diversified its holdings by initiating new positions in Lam Research and Morgan Stanley, driven by compelling investment opportunities and solid underlying business fundamentals.
A significant focus for the fund is on AppLovin, which is viewed as being in the nascent stages of unlocking substantial growth in the e-commerce landscape. The company's AI-driven platform and advanced machine learning models are perceived as leading innovations that will drive significant market share. Despite some short-term market headwinds that led to a negative stock reaction, the fund believes the market's response is an overreaction, and its long-term belief in the company's potential remains steadfast. This perspective is rooted in the anticipation that AppLovin's technological edge will eventually translate into superior financial performance and market leadership.
In the same quarter, the fund made strategic additions to its portfolio by acquiring shares in Lam Research Corporation. This decision was based on Lam Research's strong positioning to capitalize on the increasing demand for semiconductors, particularly those driven by advancements in artificial intelligence. The company's operational resilience and its critical role in the semiconductor supply chain were key factors in this investment. Concurrently, a position was also taken in Morgan Stanley, recognizing its robust balance sheet, consistent market share gains, and a positive outlook for its wealth management division, especially in an environment anticipating interest rate adjustments.
Conversely, the fund made the decision to exit its investments in UnitedHealth and Lennar. The divestment from UnitedHealth was prompted by concerns over profitability pressures, heightened regulatory scrutiny, and a series of adverse events impacting the company's outlook. For Lennar, the exit followed a disappointing performance post-spinoff and growing anxieties regarding the management's strategic agility and potential margin compression within the housing market. These divestitures reflect a proactive management approach to reallocate capital towards opportunities with more favorable risk-reward profiles.
The strategic adjustments in the portfolio, including the continued commitment to AppLovin and new investments in Lam Research and Morgan Stanley, underscore the fund's dynamic approach to capitalizing on identified growth drivers and resilient business models. The exits from UnitedHealth and Lennar highlight a disciplined strategy of divesting from companies facing increasing operational and market challenges, ensuring the portfolio remains aligned with long-term growth objectives despite recent market fluctuations.
