In the fourth quarter of 2025, the John Hancock Classic Value Fund demonstrated notable outperformance compared to its benchmark, the Russell 1000 Value Index. This success was primarily propelled by strong returns within the consumer discretionary, financials, and consumer staples sectors. However, despite this impressive quarterly showing, the fund's overall performance for the entire year did not surpass the benchmark. A key highlight was the exceptional contribution from discount retailer Dollar General, which delivered results far exceeding expectations through strong same-store sales and enhanced profit margins. The fund's strategic approach continues to involve identifying companies facing short-term difficulties but possessing robust long-term earnings capabilities, thereby aiming to leverage existing valuation discrepancies in the market.

This commentary details the John Hancock Classic Value Fund's performance during the fourth quarter of 2025, emphasizing its outperformance against the Russell 1000 Value Index. It highlights the primary sectors that contributed positively to this achievement and acknowledges the full-year performance relative to the benchmark. Furthermore, it delves into the significant impact of specific portfolio holdings, such as Dollar General, which showcased impressive operational improvements. The fund's investment philosophy, centered on identifying undervalued companies with strong intrinsic value despite temporary setbacks, is also discussed. This strategic positioning is designed to uncover opportunities where market perceptions diverge from fundamental business strengths, particularly in a market environment influenced by AI and momentum-driven stocks.

Quarterly Outperformance and Key Sector Drivers

In the final quarter of 2025, the John Hancock Classic Value Fund surpassed its benchmark, the Russell 1000 Value Index, a period marked by significant investor focus on artificial intelligence and the continued dominance of momentum-driven stocks in the broader U.S. market. The fund's superior performance during this quarter was largely attributed to robust showings from key sectors including consumer discretionary, financials, and consumer staples. These sectors exhibited resilience and growth, providing substantial positive contributions to the fund's overall returns. Among individual holdings, Dollar General emerged as a standout performer, significantly exceeding market expectations with its strong same-store sales growth and improved profit margins.

Despite the strong performance in the fourth quarter, the fund's full-year results did not manage to overtake its benchmark. This highlights the dynamic and often challenging nature of value investing in a market environment that heavily favored growth and momentum through much of the year. The strategic emphasis on sectors such as consumer discretionary, financials, and consumer staples proved beneficial, indicating a successful identification of undervalued opportunities within these areas. The impressive turnaround and operational efficiency demonstrated by Dollar General further underscore the fund manager's ability to pinpoint companies capable of navigating market challenges and delivering solid financial outcomes. The fund remains committed to its strategy of investing in companies that, despite facing near-term headwinds, possess a durable capacity for earnings generation, thereby aiming to capitalize on valuation gaps.

Strategic Positioning for Enduring Value

The John Hancock Classic Value Fund maintains a strategic investment approach focused on identifying and investing in companies that, while currently facing challenges or controversies, possess strong, inherent earning power for the long term. This positioning aims to leverage market inefficiencies where temporary issues obscure the true value of robust businesses. By taking a contrarian stance, the fund seeks to uncover opportunities that are often overlooked by the broader market, which tends to gravitate towards more popular, momentum-driven investments.

This ongoing strategy is crucial in an investment landscape heavily influenced by trends like artificial intelligence, which can lead to significant valuation disparities between growth and value stocks. The fund's emphasis on fundamental analysis allows it to differentiate between transient setbacks and structural weaknesses, enabling investments in companies poised for recovery and long-term appreciation. By focusing on firms with resilient business models and undervalued assets, the fund aims to generate superior returns over time, even if these investments face initial skepticism from the market. This disciplined approach underscores a commitment to deep value investing, seeking out quality companies whose stock prices do not yet fully reflect their intrinsic worth.