| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 2.7% | -3.9% | -5.6% |
| 2025 |
|---|
| -5.6% |
The BBH Select Mid Cap ETF declined 3.9% in Q4 2025 while the Russell Midcap Index gained 0.2%, as unprofitable and high-beta companies dramatically outperformed throughout 2025. The fund's strategy focuses on high-quality, profitable companies and avoids speculative ventures, creating headwinds in the current market environment driven by AI enthusiasm, regulatory changes, and stimulus measures. Top contributors included Darling Ingredients and Keysight Technologies, both benefiting from strong fundamentals and AI-related demand growth. Key detractors were Shift4 Payments and Guidewire Software, which declined despite solid results due to sector rotation concerns. The manager initiated a position in Tradeweb Markets while exiting NVR as homebuilding margins declined. Portfolio companies demonstrate superior fundamentals with 10-11% revenue and EBITDA growth versus 5-4% for the index, plus higher margins and returns. Trading at 82% of intrinsic value estimates, the fund maintains conviction that markets will eventually refocus on cash flow and profitability fundamentals.
The fund focuses on high-quality, profitable mid-cap companies trading at discounts to intrinsic value, avoiding speculative ventures while the market favors unprofitable, high-beta stocks.
We are confident that the market will inevitably turn its attention back to financial fundamentals, including cash flow and profitability. Our focus remains on identifying companies with superior fundamentals with the potential to grow revenues, profits, and free cash flow at an above-market rate sustainably. Ultimately, that is what we believe will drive share prices.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 30 2026 | 2025 Q4 | ANET, ATR, BJ, BRO, CBRE, DAR, ENTG, FOUR, GFL, GWRE, GXO, HEI.A, ICLR, ITT, KEYS, LPLA, MCW, NVR, TTWO, TW, ULS, VMC, WH, WMS, WSC, WSO, WST, ZBRA | AI, fundamentals, Intrinsic Value, mid cap, profitability, Quality, technology, value |
DAR KEYS FOUR GWRE |
AI-related demand is driving the fastest growth in Keysight's wireline business and represented approximately 10% of Keysight total revenue in 2025. The enthusiasm for artificial… |
| Oct 28 2025 | 2025 Q3 | ANET, BFAM, BJ, BRKR, FOUR, GLOB, ITT, WMS | Artificial Intelligence, Intrinsic Value, Life Sciences, Quality, tariffs |
ANET UN WMS UN FOUR UN GLOB UN BRKR UN ITT UN BJ UN ANET UN WMS UN FOUR UN GLOB UN BRKR UN ITT UN BJ UN |
The fund underperformed due to an AI-driven speculative rally favoring unprofitable firms and headwinds from tariffs and reduced life science funding. Management highlighted holdings like… |
| Jul 20 2025 | 2025 Q2 | FOUR, GLOB, GWRE, WSO | cash flows, Intrinsic Value, Mid Caps, moats, volatility | - | The commentary focuses on bottom-up stock selection in mid-cap companies trading below intrinsic value amid tariff and policy uncertainty. Structural growth drivers and competitive moats… |
| Mar 31 2025 | 2025 Q1 | - | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIThe extended federal government shutdown added volatility during what was otherwise a risk-on environment, with a mid-quarter shift in market behavior for AI-related equities as the exuberant narrative evolved to one more balanced in assessing the technology's enormous potential against staggering capital spending plans and high expectations. The team initiated a position in Credo Technology as a more diversified way to gain exposure to strong trends in AI-connectivity. |
Connectivity Semiconductors Infrastructure Capital Spending |
QualityThe portfolio has shifted toward higher quality businesses with better profitability, lower leverage, and less volatile earnings. Quality stocks underperformed significantly in 2025, creating attractive entry points for value investors. The manager maintains price discipline while seeking quality companies trading at discounts to intrinsic value. |
Quality Profitability Leverage Earnings | |
ValueManager emphasizes investing in controlled companies trading at significant discounts to NAV, with European holding companies showing discounts of 30-68%. The strategy focuses on securities mispricing where real value exists, contrasting with overvalued technology stocks. |
Discounts NAV Mispricing Undervalued Controlled | |
| 2025 Q3 |
AIThe extended federal government shutdown added volatility during what was otherwise a risk-on environment, with a mid-quarter shift in market behavior for AI-related equities as the exuberant narrative evolved to one more balanced in assessing the technology's enormous potential against staggering capital spending plans and high expectations. The team initiated a position in Credo Technology as a more diversified way to gain exposure to strong trends in AI-connectivity. |
Connectivity Semiconductors Infrastructure Capital Spending |
QualityThe portfolio has shifted toward higher quality businesses with better profitability, lower leverage, and less volatile earnings. Quality stocks underperformed significantly in 2025, creating attractive entry points for value investors. The manager maintains price discipline while seeking quality companies trading at discounts to intrinsic value. |
Quality Profitability Leverage Earnings | |
Tariffs |
||
| 2025 Q2 |
ValuationAI-related companies continue to command premium valuations while other sectors remain reasonably priced. This valuation divide continues to guide investment activity, with the fund remaining wary of companies trading at exceedingly high valuations that imply exceptional multi-year earnings growth. |
Premium Divide Discipline Stretched Reasonable |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 30, 2026 | Fund Letters | Tim Harris | KEYS | Keysight Technologies Inc. | Information Technology | Electronic Equipment & Instruments | Bull | New York Stock Exchange | AI infrastructure, Instrumentation, margin expansion, semiconductors, Test-And-Measurement | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | ANET UN | Arista Networks Inc. | Information Technology | Communications Equipment | Bull | NYSE | AI, cloud, data centers, hyperscalers, Networking | Login |
| Jan 30, 2026 | Fund Letters | Tim Harris | FOUR | Shift4 Payments Inc. | Financials | Transaction & Payment Processing Services | Neutral | New York Stock Exchange | buybacks, consumer spending, hospitality, Payments, Sentiment | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | WMS UN | Advanced Drainage Systems Inc. | Industrials | Building Products | Bull | NYSE | construction, Stormwater, Sustainability, Water infrastructure | Login |
| Jan 30, 2026 | Fund Letters | Tim Harris | GWRE | Guidewire Software Inc. | Information Technology | Application Software | Neutral | New York Stock Exchange | AI adoption, ARR growth, cloud migration, Insurance-software, vertical software | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | FOUR UN | Shift4 Payments Inc. | Information Technology | IT Services | Bull | NYSE | Fintech, hospitality, organic growth, Payments | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | GLOB UN | Globant S.A. | Information Technology | IT Consulting & Services | Bear | NYSE | AI services, Digital transformation, It consulting, Software | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | BRKR UN | Bruker Corp. | Health Care | Life Sciences Tools & Services | Bear | NASDAQ | Funding cuts, instruments, life sciences, R&D | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | ITT UN | ITT Inc. | Industrials | Machinery | Bull | NYSE | Aerospace, capital allocation, EVs, Industrials, machinery | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | BJ UN | BJ’s Wholesale Club Holdings Inc. | Consumer Discretionary | Food Retail | Bull | NYSE | consumer staples, Membership, Pricing power, retail, Warehouse | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | ANET UN | Arista Networks Inc. | Information Technology | Communications Equipment | Bull | NYSE | AI, cloud, data centers, hyperscalers, Networking | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | WMS UN | Advanced Drainage Systems Inc. | Industrials | Building Products | Bull | NYSE | construction, Stormwater, Sustainability, Water infrastructure | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | FOUR UN | Shift4 Payments Inc. | Information Technology | IT Services | Bull | NYSE | Fintech, hospitality, organic growth, Payments | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | GLOB UN | Globant S.A. | Information Technology | IT Consulting & Services | Bear | NYSE | AI services, Digital transformation, It consulting, Software | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | BRKR UN | Bruker Corp. | Health Care | Life Sciences Tools & Services | Bear | NASDAQ | Funding cuts, instruments, life sciences, R&D | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | ITT UN | ITT Inc. | Industrials | Machinery | Bull | NYSE | Aerospace, capital allocation, EVs, Industrials, machinery | Login |
| Oct 28, 2025 | Fund Letters | Tim Harris | BJ UN | BJ’s Wholesale Club Holdings Inc. | Consumer Discretionary | Food Retail | Bull | NYSE | consumer staples, Membership, Pricing power, retail, Warehouse | Login |
| Jan 30, 2026 | Fund Letters | Tim Harris | DAR | Darling Ingredients Inc. | Consumer Staples | Agricultural Products | Bull | New York Stock Exchange | Animal-Byproducts, Free Cash Flow, Rendering, Renewable diesel, Sustainability | Login |
| TICKER | COMMENTARY |
|---|---|
| ANET | ASML, TSMC, and Arista Networks are key players in the AI build out supply chain. |
| ATR | Aptar, a specialist in drug-delivery and consumer-dispensing solutions, experienced reduced demand from pharmaceutical customers due to inventory normalization in nasal decongestants |
| BJ | BJ's Wholesale Club Holdings is a Massachusetts-based retailer operating membership warehouse clubs that sell a wide variety of goods from groceries and housewares to electronics, appliances and jewelry. With the company benefitting from better-than-expected performance from recently opened stores that highlights their strong fundamental execution and a pipeline of new stores in development, we believe that management should be able to continue these efforts to grow shareholder value over the next several years. |
| BRO | In 2026, we plan to publish deep dives on Brown & Brown |
| CBRE | CBRE Group Inc. was an excellent investment for us. As the world's largest commercial real estate services company, CBRE has a market-leading position in leasing and property sales brokerage. We purchased shares in June 2022 at peak concern regarding the future of the office due to remote work, rising interest rates, and a weakening economy. CBRE's value grew over the course of our ownership, but its share price rose faster, and we reallocated capital to more discounted businesses. |
| DAR | Darling Ingredients (DAR) was a top contributor in the SMID Cap strategy in the fourth quarter. DAR is the largest publicly traded company turning edible by-products and food waste into sustainable products and a leading producer of renewable energy. Darling has faced significant headwinds over the past couple of years, and the stock traded within a fairly tight range of $30-40 over the past twelve months. This downturn is, in our opinion, at or near a bottom. We see several fundamental and regulatory changes supporting our view that top line and bottom-line results will inflect higher in 2026. |
| ENTG | For Entegris (ENTG), margin pressure from expansionary efforts, combined with lackluster demand, helped contribute to lower earnings expectations. |
| FOUR | Relative weakness was also driven by Shift4 Payments |
| GWRE | Shares of P&C insurance software vendor Guidewire Software, Inc. declined during the quarter following strong gains earlier in the year, as the broader software sector came under pressure. After a multi-year transition period, we think Guidewire's cloud migration is largely complete. We believe cloud will be the sole path forward, with annual recurring revenue benefiting from new customer wins and migrations of existing customers to InsuranceSuite Cloud. |
| HEI.A | HEICO Corp. (HEI.A), IDEXX Laboratories, Inc. (IDXX) and Rollins, Inc. (ROL) were the three largest contributors to portfolio returns for the year. |
| ICLR | We also decided to exit our relatively small position in ICON plc. We remain optimistic about Icon's long-term prospects but growth for the company in the short to intermediate term still appears challenged to us. Without the conviction to add to our existing weight we feel it is better to reallocate to other opportunities where the business momentum is stronger. |
| KEYS | Keysight is an electronic design and testing company. It is at the heart of the digital revolution, providing solutions to help accelerate innovation in industries such as communications, networking, electronics, semi-conductor, automotive, aerospace and battery. The company delivered a material acceleration in order growth and guided meaningfully above consensus, with core order growth reaching double digits and broad-based strength across its segments. |
| LPLA | Additionally, a position in the leading US independent broker-dealer LPL Financial was established. LPL is well positioned to benefit from the ongoing shift toward fee-based wealth management and greater adviser independence. The company has delivered impressive organic revenue growth over time, targeting the 7–13% range, reflecting strong advisor recruitment and the firm's ongoing ability to attract advisers who are switching platforms. This momentum has translated into consistent net new asset inflows and robust revenue growth, while technology investments continue to enhance their platform stickiness and operating leverage. Although LPL does possess interest rate sensitivity through its cash sweep program, which is a meaningful earnings contributor, we are comfortable that consensus and buyside expectations already embed a prudent buffer for interest rate cuts through to 2027. Trading at a reasonable valuation relative to its growth profile and capital return potential, LPL offers a compelling risk-reward profile and exposure to structural tailwinds in wealth management. |
| NVR | When interest rates first shot up in 2022, home builders NVR and Dream Finders Homes surprisingly held up relatively well. People in existing homes who were locked into low rates didn't want to move, which left less competition for new homes. But as home builders ran through this demand, continued high rates—and hopes for imminently lower rates—left potential buyers on the sidelines. The result was a weak year for housing. NVR and Dream Finders returned -10% and -27%, respectively, while earnings per share declined 18% and an estimated 29%. |
| TTWO | Take-Two Interactive Software Inc. develops, publishes, and markets interactive software games. Their game franchise includes Grand Theft Auto, BioShock, Red Dead Redemption, Max Payne, NBA 2 K, LA Noire, Civilization, Midnight Club, and Borderlands. The company delivered solid fiscal second-quarter results, with 20% year-over-year growth in recurring consumer spending. Net bookings projections were therefore increased. Overshadowing earnings was an announcement that its subsidiary, Rockstar Games, will delay the launch of Grand Theft Auto 6 from May to November 2026 to allow for a higher level of polish. GTA6 is the most anticipated game launch in the company's history. Shares of Take-Two fell sharply following that report and we added to our position on weakness. Take-Two's price subsequently rebounded and ended the quarter down on -1%, which far exceeded the benchmark sector average of -20%. |
| TW | Tradeweb -1.4% |
| ULS | Positive returns from UL Solutions were not enough to offset the detractors |
| VMC | The Vulcan Materials and Philip Morrises of the world are fine examples of modestly profitable businesses that can turn out to be wonderful investments if those profits are protected for decades. |
| WSC | Security selection within Industrials comprised the biggest drag on relative performance in the year, as positions in Masco, WillScot Holdings, and ACV Auctions all incurred pullbacks of varying magnitudes (vs. a positive return for the overall sector). The resultant sell-offs in WillScot and ACV in particular create what we view to be a potentially asymmetric return opportunity for both positions – should industry conditions in their respective industries (WillScot provides modular office/storage for construction sites, ACV is a leader in wholesale car auctions) normalize as anticipated. |
| WSO | Relative weakness was also driven by Watsco amid softer HVAC trends |
| ZBRA | back in November, Zebra Technologies (ZBRA) hit our insider radar. On the surface, the valuation of the $12.6B business appeared attractive at less than a 14x P/E, a modest debt burden and decent return on incremental invested capital. It looked like a worthwhile investment candidate – but the wheels came flying off when we did our risk review. What these attractive statistics do not tell you is that management had entered into a transformative acquisition of commercial touch screen provider, Elo Touch for $1.3B. The problem, management almost certainly paid too much for a business generating ~$80M in EBITDA (earnings before interest, taxes and depreciation) (press release). At over 16x EBITDA, the acquisition blew out the capital structure with debt and presented significant execution risk resulting in an expected risk-adjusted return well below our threshold of safety. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
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| No industry data available | |||
