| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 8.86% | -2.53% | -2.53% |
Jensen Quality Mid Cap Fund underperformed the MSCI US Mid Cap 450 Index in Q1 2026, returning -2.53% versus the benchmark's 0.60%. The fund's performance was impacted by AI-related market dynamics, with AI infrastructure beneficiaries driving index gains while software and business services stocks faced disruption concerns. Energy sector strength from Iran War-driven oil price spikes also weighed on relative performance, as Jensen avoids energy stocks due to their capital-intensive nature and volatile earnings that rarely meet the firm's strict 15% ROE requirement. Top contributors included Keysight Technologies, Ross Stores, and Kroger, while AI disruption fears hurt holdings like Broadridge Financial Solutions and Genpact. The team initiated positions in AON, Sherwin-Williams, and Cadence Design Systems while exiting FactSet Research Systems due to genuine AI disruption concerns. Jensen maintains its disciplined approach of investing in high-quality companies with sustained competitive advantages, believing this strategy will deliver attractive risk-adjusted returns across market cycles despite near-term unpredictability from geopolitical tensions, energy prices, and inflation.
Jensen maintains an unwavering focus on high-quality companies with sustained competitive advantages, requiring ROE of 15% or more for at least ten consecutive years, believing that over full market cycles these higher-quality businesses will outperform despite shorter-term performance differences.
Looking ahead, we expect market conditions to remain unpredictable throughout 2026. We will continue our strategy of investing for the long-term and purchasing undervalued stocks of high-quality companies with strong competitive advantages and high returns on capital. We believe this strategy should result in attractive risk-adjusted returns throughout various economic and market cycles.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 29 2026 | 2026 Q1 | AON, BR, CDNS, FDS, G, HOLX, KEYS, KR, LH, LULU, ON, ROST, SHW, TTC | AI, competitive advantages, energy, mid cap, Quality, ROE, value | - | Jensen Quality Mid Cap Fund's disciplined focus on companies with 15%+ ROE for ten consecutive years faced headwinds from AI disruption fears affecting software holdings and energy sector strength the fund avoids. Despite Q1 underperformance, the team maintains conviction in high-quality businesses with sustainable competitive advantages, adding AON, Sherwin-Williams, and Cadence Design Systems while exiting FactSet due to AI threats. |
| Jan 22 2026 | 2025 Q4 | AAPL, ACN, AMZN, APH, AVGO, BRK.B, CPRT, GOOGL, JPM, KLAC, LLY, META, MMC, MSFT, MU, NVDA, STX, TSLA, WDC, WM | AI, growth, large cap, Market Concentration, Quality, semiconductors, technology |
KLAC APH LLY ACN MMC CPRT WM SYK AVGO |
Jensen Quality Growth Fund underperformed in 2025 due to market concentration in mega-cap AI stocks, but evolved its portfolio to include AI beneficiaries meeting quality criteria like Nvidia and Meta. The manager maintains discipline in quality investing while positioning for broader market leadership beyond AI concentration, expecting relative performance to improve as fundamentals reassert themselves. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
AIAI investments continued to meaningfully impact mid-cap performance with seven of the top twenty returning stocks being AI infrastructure beneficiaries. However, many software and business services stocks performed poorly due to concerns about AI disruption of their business models, affecting several portfolio holdings. |
Infrastructure Disruption Software Business Services Technology |
QualityThe fund maintains its time-tested investment process focusing on companies with ROE of 15% or more for at least ten consecutive years, indicating sustained competitive advantages. The team believes higher-quality businesses will outperform over full market cycles despite shorter-term performance differences. |
ROE Competitive Advantages Investment Process Business Quality | |
EnergyEnergy stocks rallied significantly due to oil price spikes from the Iran War, contributing meaningfully to index performance despite low sector weighting. The fund avoids Energy sector stocks due to their capital-intensive business models and volatile earnings that rarely meet the strict ROE requirements. |
Oil Prices Iran War Volatility Capital Intensive | |
| 2025 Q4 |
AIAI infrastructure plays dominated 2025 returns, with 65% of Russell 2000's return coming from AI infrastructure. The manager questions whether this singular bet on five companies' data center CAPEX spending will persist, noting the market's extreme concentration around this theme. |
Infrastructure Data Centers CAPEX |
Small CapsSmall caps continued to underperform large caps in 2025's narrow market. The manager notes that small cap index exposure increasingly means exposure to both AI CAPEX and unprofitable companies, creating concentration risk in a historically narrow market. |
Russell 2000 Underperformance Concentration | |
QualityQuality businesses trade at historically cheap multiples despite extreme valuation disparities between winners and losers reaching historic extremes. The manager sees this as creating opportunities for active management in identifying undervalued quality companies. |
Valuation Multiples Undervalued |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 22, 2026 | Fund Letters | Allen T. Bond | APH | Amphenol Corporation | Information Technology | Electronic Components | Bull | New York Stock Exchange | AI, Connectors, datacenter, Interconnect, Sensors, valuation | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | LLY | Eli Lilly and Company | Health Care | Pharmaceuticals | Bull | New York Stock Exchange | Diabetes, GLP-1, innovation, Obesity, pipeline, Reimbursement | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | ACN | Accenture plc | Information Technology | IT Consulting & Other Services | Bear | New York Stock Exchange | Automation, cloud, Consulting, Cyber security, disruption, Outsourcing | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | MMC | Marsh & McLennan Companies, Inc. | Financials | Insurance Brokers | Bull | New York Stock Exchange | Brokerage, cashflow, Consulting, Insurance, Retention, valuation | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | CPRT | Copart, Inc. | Industrials | Diversified Support Services | Bull | NASDAQ | Auctions, cashflow, duopoly, Real Estate, Remarketing, Salvage | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | WM | Waste Management, Inc. | Industrials | Environmental & Facilities Services | Bull | New York Stock Exchange | Automation, Landfills, Pricing power, Recycling, RNG, waste | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | SYK | Stryker Corporation | Health Care | Health Care Equipment | Bull | New York Stock Exchange | Ambulatory, Demographics, International, Medtech, Orthopedics, robotics | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | AVGO | Broadcom Inc. | Information Technology | Semiconductors | Bull | NASDAQ | Asic, Concentration, datacenter, Networking, semiconductors, Volatility | Login |
| Jan 22, 2026 | Fund Letters | Allen T. Bond | KLAC | KLA Corporation | Information Technology | Semiconductor Materials & Equipment | Bull | NASDAQ | AI, Inspection, Metrology, Pricing power, process control, Wafer fab | Login |
| TICKER | COMMENTARY |
|---|---|
| KEYS | Keysight Technologies, Inc. (KEYS), a manufacturer of instruments used in the design, simulation, manufacture and testing of electronic systems, was the largest contributor to Portfolio performance during the quarter. We believe KEYS outperformed due to reporting strong sales, earnings, and order growth in each of the past four quarters as the company continues to benefit from the build-out of AI infrastructure. The company remains a core holding in the Portfolio due to its strong market share, diversified customer base, solid balance sheet, and attractive valuation. |
| ROST | Ross Stores, Inc. (ROST) was the second largest contributor to Portfolio performance during the quarter. We believe ROST outperformed as it reported strong same store sales growth and better than expected earnings for the fourth quarter. In our opinion, ROST's sales and earnings benefit from tighter consumer budgets, which are driving more value-seeking shoppers to the company's stores. ROST remains a core Portfolio holding due to its solid market position, economies of scale versus smaller retailers, strong product sourcing capabilities, and the counter-cyclical nature of its off-price retail model. |
| KR | The Kroger Company (KR) was the Portfolio's third largest contributor to performance during the quarter. We believe KR's stock outperformed as the company reported solid margin and earnings improvement along with share gains during its most recent quarter. Like KEYS and ROST, KR remains a core holding in the Portfolio due to its economies of scale versus smaller competitors, the non-cyclical nature of demand for its products, and the prime location of many of its stores, which represents a difficult to replicate entry barrier. |
| LH | Other notable companies that contributed positively to Portfolio performance during the quarter were Labcorp Holdings, Inc. (LH). LH is one of the largest providers of diagnostic testing services in the U.S. The company is one of the Portfolio's largest holdings due to their strong market position, economies of scale versus smaller competitors, and the stability of demand for its services. Over the long term, we believe LH should benefit from the continued aging of the U.S. population. |
| TTC | The Toro Company (TTC). TTC is a well-known manufacturer of lawn mowers and leaf and snow blowers. The business is characterized by strong brand names, solid market positions, and an extensive dealer network that would be difficult for new market entrants to replicate. Currently, TTC is benefiting from the AI infrastructure build-out as the company's trenchers are being used to dig conduits and lay fiber optic cables and power transmission lines that support new data centers. |
| BR | The largest detractor from Portfolio performance during the quarter was Broadridge Financial Solutions, Inc. (BR), a diversified provider of outsourcing solutions to financial services companies and publicly traded corporations. We believe BR's stock underperformed due primarily to investor concerns regarding the potential disintermediation of the company's business by AI based competitors. In our opinion, these fears are unfounded with respect to BR as many of the company's services are legally mandated, mission-critical and subject to constant audits and regulatory reviews, making them very difficult to replicate. BR remains a core Portfolio holding due to its strong market position, economies of scale, high client retention ratio, and attractively valued stock. |
| G | Genpact Limited (G) was the Portfolio's second largest detractor from performance during the quarter. After outperforming in the fourth quarter of 2025, Genpact's stock traded down during the first quarter of 2026 as it was swept up in similar AI disintermediation fears that also negatively impacted BR's stock. Like BR, we believe these concerns are misplaced. Rather than being disrupted by AI, Genpact is leveraging it to enhance its value proposition and deepen client relationships. Genpact remains a core holding in the Portfolio due to its contracted revenue streams, customized product offerings, high recurring revenues, solid market position, and attractively valued stock. |
| FDS | The third largest detractor from Portfolio performance during the quarter was FactSet Research Systems, Inc. (FDS), a provider of economic and financial data to asset managers, investment bankers, and other financial professionals. We believe the stock underperformed due to investor concerns that the company's business, like BR and G, could be disrupted by AI. Despite these strengths, the position was liquidated during the quarter as we believe AI-native companies represent a real threat to FDS's business, due to much of the underlying data supporting FDS's product offerings being publicly available and therefore accessible to new competitors. |
| AON | During the quarter, the Quality Mid Cap Investment Team initiated positions in AON PLC (AON). AON provides commercial insurance brokerage services and health insurance, employee benefits, and retirement plan consulting to corporate customers. We added AON to the Portfolio due to its attractive valuation, solid brand name recognition, economies of scale, and high customer renewal rates. |
| SHW | The Sherwin-Williams Company (SHW). Sherwin-Williams develops, manufactures, and sells paint and coating products. SHW was purchased as a result of its strong market share, well-known brands, economies of scale, and attractively priced stock. |
| CDNS | Cadence Design Systems, Inc (CDNS). CDNS is a developer of software used to design semiconductors. The company was added to the Portfolio due to its contracted revenues, high contract renewal rates, strong balance sheet, and deep patent portfolio, which makes it difficult for potential competitors to enter its markets. We also believe CDNS's stock was attractively valued at the time of purchase. |
| HOLX | The Investment Team also liquidated the Portfolio's remaining positions in Hologic, Inc. (HOLX) during the quarter. HOLX, a medical technology company focused primarily on women's health, was sold due to limited upside in the company's share price ahead of its now-completed acquisition by private equity firms Blackstone and TPG. |
| ON | ON Semiconductor Corporation (ON) was liquidated during the quarter due to continued deterioration in the company's business results, which had led to anticipation of its ROE falling below our minimum threshold of 15%. |
| LULU | Regarding LULU, the continued deterioration in our view of their underlying business fundamentals caused us to exit the position. |
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