| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.3% | - | 6.6% |
| 2025 | 2024 |
|---|---|
| 6.6% | 9.6% |
The Mairs & Power Balanced Fund returned 6.61% in 2025, underperforming its benchmark by 6.91% due primarily to equity underperformance. The fund was hurt by insufficient exposure to AI-related companies that witnessed outsized performance, while holdings in Information Technology, Financials, and Healthcare sectors faced company-specific challenges. Notable detractors included Fiserv, which revised earnings guidance twice due to disappointing Clover product results, and UnitedHealth Group, which experienced higher medical loss ratios leading to CEO changes. Positive contributors included Roche, with 10 new products advancing to phase III trials, and JPMorgan Chase, benefiting from improving credit conditions. The managers believe markets are entering a transition period for AI, moving into a higher risk phase given the flood of capital and unusual financing structures. They expect lower interest rates to support the economy through 2026, particularly benefiting small businesses. The fund maintains focus on companies with durable competitive advantages that can harness long-term technological advancement, while preferring domestic investments given geopolitical uncertainties.
Focus on identifying businesses with durable competitive advantages that will harness technological advancement over the long-term, particularly those benefiting from AI secular shifts, while maintaining a balanced approach between growth and defensive positioning in an environment of increasing market concentration and valuation dispersion.
The managers believe we are entering a transition period for AI, moving into a higher risk phase. They expect lower interest rates to continue supporting the economy through 2026. Their approach remains focused on identifying businesses that will harness technological advancement over the long-term, not just during the initial build-out phase. They maintain a preference for domestic investments given shifting geopolitical dynamics.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 18 2026 | 2025 Q4 | AMZN, CASY, ENTG, FI, GOOG, HD, HON, HRL, JPM, LLY, MSI, NEOG, PFG, RHHBY, ROK, TECH, TGT, TRV, TXN, UNH, USB, WEC, WFC | AI, Balanced, earnings, financials, healthcare, rates, technology | - | AI and increasing market concentration took center stage in 2025, with the rate of investment in technology and AI infrastructure spending driving market narrative. McKinsey… |
| Oct 24 2025 | 2025 Q3 | AMZN, ENTG, FI, FUL, JPM, MSI, TECH, TXN, UNH, WFC | asset allocation, Data centers, inflation, tariffs, Utilities | - | The team keeps a long-term, valuation-disciplined balance across equities and bonds while noting extreme market concentration in AI mega-caps. They highlight a multi-year buildout in… |
| Jul 18 2025 | 2025 Q2 | ABT, AMZN, FI, TECH, TTC, USB, WEC, WFC | balanced allocation, capital preservation, dividends, income, Quality | - | The commentary focuses on balanced allocation as a way to navigate uncertain markets while preserving capital. Emphasis is placed on dividend-paying equities and high-quality bonds… |
| May 1 2025 | 2025 Q1 | DIS, GOOG, MSI, QCOM, TECH, TXN, WEC | - | - | - |
| Dec 31 2024 | 2024 Q4 | FISV, LLY, MDT, MINN, UNH | - | - | - |
| Sep 30 2024 | 2024 Q3 | AMP, CASY, HSY, LFUS, LLY, NVDA, TTC | - | - | - |
| Jul 23 2024 | 2024 Q2 | AMP, CASY, HSY, LLY, UNH | - | - | - |
| Apr 15 2024 | 2024 Q1 | AMP, CASY, FI, NVDA, PG, TGT, WFC | - | - | - |
| Jan 28 2024 | 2023 Q4 | CRM, ECL, ENTG, FI, HSY, LLY, MSFT, NTRS, SHW, TXN | - | - | - |
| Sep 30 2023 | 2023 Q3 | HON, LLY, TECH, XEL | - | - | - |
| Jun 30 2023 | 2023 Q2 | HD, MSFT | - | - | - |
| Apr 19 2023 | 2023 Q1 | - | - | - | - |
| Feb 2 2023 | 2022 Q4 | - | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
EarningsEarnings are central to the manager's optimism with consensus expectations pointing to meaningful acceleration in small-cap earnings in 2026, with growth projected in the low-to-mid teens and exceeding that of large-cap companies. This anticipated rebound reflects easier year-over-year comparisons, improving operating leverage, and broadening demand across cyclical and value-oriented sectors. |
Earnings Growth Operating Leverage Cyclical Sectors Consensus Estimates Earnings Revisions | |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity | |
| 2025 Q3 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
InfrastructureDigital 9 Infrastructure holds telecom infrastructure assets including Arqiva stake. Despite poor 2025 performance, potential capital returns and asset sales could unlock value. Infrastructure assets provide defensive characteristics. |
Telecom Infrastructure Digital Infrastructure | |
| 2025 Q2 |
Stability |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| AMZN | One company we own that we think has unique positioning to benefit from both the infrastructure and application layers is Amazon. Amazon's logistical prowess is one of the foremost moats in business today and it can and will be enhanced with AI. The company will do this in multiple ways, with better orchestration of its logistics assets and underlying cargo, as well as the buildout of more capable, sophisticated and robust robotics. Amazon is singularly well positioned to dominate the coordination layer, with AI's help, across its entire logistics network. |
| CASY | We trimmed Casey's on strength, and the stock's roughly flat performance compared favorably with benchmark's sector returns, which declined nearly -11%. |
| ENTG | For Entegris (ENTG), margin pressure from expansionary efforts, combined with lackluster demand, helped contribute to lower earnings expectations. |
| FI | Notable detractors from performance came from Fiserv (-43bps absolute and -39bps relative) |
| GOOG | From the moment OpenAI hit the scene with ChatGPT 3.5 in the Fall of 2022, Google was a perceived loser and thousands of pontificators warned about the end of search. Fast forward three years and this was Google Search's fastest quarter of revenue growth since Q1 2022, when the reopening and pandemic were still considerable drivers of results. In parallel with the Search re-acceleration, Google has also emerged as a leader in AI itself. This combination has been potent for Google's stock and could not have opened on Search alone, given the terminal value fears. |
| HD | Conversely, our biggest detractors this quarter were DR Horton (DHI), Lennar Corp (LEN), Home Depot (HD). |
| HON | Honeywell is a US multinational leader in aerospace and industrial automation that is simplifying its business. Following the separation of its advanced materials business in late 2025, Honeywell's aerospace division will spin off in 2026. |
| HRL | Other increasers included Hormel Foods |
| JPM | JPMorgan (JPM) has identified 42 AI-related stocks in the S&P 500, which today represent 45% of the index's market cap. They estimate that these stocks have accounted for 78% of S&P 500 returns, 66% of earnings growth, and 71% of capital spending growth since ChatGPT launched in November 2022. As it relates to the impact on the U.S. economy, JPM estimates tech sector capital spending contributed 40%-45% of U.S. GDP growth through the first 9 months of the year, up from less than 5% during the same period in 2023. |
| LLY | Eli Lilly shares were a top performer in 4Q25 after delivering strong Q3 2025 earnings in October. Revenue rose 54% year-over-year to $17.6 billion, and adjusted EPS of $7.02 beat consensus of $6.02. Growth was driven by its GLP-1 franchises, Mounjaro and Zepbound, where sales more than doubled year-over-year, alongside strength in other therapeutic areas. Management raised full-year guidance for both revenue and earnings, reinforcing investor confidence in the company's growth outlook. |
| MSI | For Motorola Solutions (MSI), underlying results remain quite positive, but a recent acquisition is expected to dilute earnings at a time when tariff headwinds are expected to create near-term margin pressure. |
| NEOG | and out-of-favor recovery stocks (RXST, NEOG, MRVI). |
| PFG | The Fund exited its positions in Honeywell (HON), Principal Financial Group (PFG), Neogen (NEOG), and Target (TGT). |
| RHHBY | Roche (RHHBY) was another positive performer in 2025, driven by a robust pipeline of new and innovative drugs making it to market and favorable regulatory approvals. |
| ROK | Rockwell Automation is the pure-play bet on factory digitization. Its moat is sticky, mission-critical automation software and hardware that enable manufacturers to boost efficiency, safety, and uptime. Secular tailwinds—reshoring, labor shortages, electrification, and physical AI-driven industrial automation—give it years of demand runway. With recurring revenue growth, strong pricing power, and capital-light margins, ROK is a high-quality compounder in a world where industrial efficiency is gold. |
| TECH | Bio-Techne is a leader in the life sciences research market with a broad portfolio of products that are used to enable discoveries of new drugs, therapeutics, and diagnostics. These products include over 6,000 proteins, 400,000 antibody types, and 2,400 diagnostic assays. Around 80% of the business is recurring revenues. We are encouraged by the new CEO's strategy to leverage the core business and expand the company's leadership position in protein research. Consternation surrounding the health of customer research spending gave us the opportunity to buy the stock at a discount to our estimate of intrinsic value. |
| TGT | Target was sold during the quarter as it was not tracking to plan. |
| TRV | In the fourth quarter, the Fund initiated a position in Travelers (TRV), once a long-time holding of the Fund, as the company has proven its data and operational excellence has helped it develop a long-term competitive advantage in the insurance carrier space. The company has navigated several difficult elements in the past five years, and its improving profitability profile led to our confidence in re-establishing a position. |
| TXN | During the quarter, we started a position in Texas Instruments (TXN), a leading semiconductor company. TXN is very well managed with a strategy of investing through the business cycle. The company has a strong balance sheet and earnings history. Its share price was volatile in 2025, peaking at over $200 in July following strong second quarter earnings but declining in November to less than $160 after weaker fourth quarter guidance despite beating third quarter revenue and profits forecasts. The drop in the share price provided a good entry point for this high-quality company and we expect to see a nice cyclical rebound in its business and a much higher stock price over the next few years. |
| UNH | We also added back a full position in UnitedHealth |
| USB | Select holdings in banking (US Bank) detracted from returns |
| WEC | Earlier in the year, the Fund added WEC Energy (WEC) as a high-quality utility with improving growth prospects and a best-in-class regulator. |
| WFC | and money center banks Citigroup and Wells Fargo, all following strong performance |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
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| No Recent Buys Data | |||||
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