1Q2025 - Focus Growth Commentary
As the global economy faces volatility and shifting narratives, the Focus Growth Portfolio outperformed the Russell 1000 Growth Index in the first quarter. With strategic investments in software- and services-oriented companies possessing robust pricing power, recurring revenues, and competitive advantages, we remain confident in our strategy and optimistic amid market uncertainties.
- The Russell 1000 Growth Index began 2025 following its best two-year stretch ever, driven by AI infrastructure enthusiasm. Election-related optimism further fueled a late 2024 rally. However, semiconductors declined, while the “Magnificent 7” also fell. Elevated valuations and Index concentration amplified market volatility amid rising uncertainty.
- Against this challenging backdrop, the Polen Focus Growth Composite Portfolio outperformed the Russell 1000 Growth Index but underperformed the S&P 500 Index.
- Top relative contributors were Abbott Laboratories, Tesla (not owned), and NVIDIA (not owned). Top absolute contributors were Abbott Laboratories, Visa, and Eli Lilly.
- The largest relative detractors were Meta Platforms (not owned), ServiceNow, and Oracle. Top absolute detractors were Amazon, Alphabet, and Oracle.
- We initiated new positions in Starbucks and Aon and eliminated our position in Novo Nordisk. We added to positions in Eli Lilly, Zoetis, and Oracle and trimmed positions in Netflix, ServiceNow, Alphabet, and Apple.
- The Trump administration tariffs disrupted global trade, sparked inflation concerns, and weakened confidence. However, we believe the Portfolio’s current emphasis on software- and services-oriented companies with attractive pricing power, recurring revenues, and competitive advantages enhances its resilience against tariff-related headwinds.
- Despite this year’s market selloff, we are confident in our disciplined approach to identifying resilient, high-quality businesses that drive consistent earnings growth. With a 36-year track record of avoiding hype cycles and prioritizing quality, we believe we are positioned to capitalize on opportunities amid uncertain markets.