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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Mairs & Power Growth Fund returned 19.62% in 2024, lagging the S&P 500 due to housing weakness and sector allocation. The fund leverages AI exposure through NVIDIA and Microsoft while capitalizing on small-cap valuations at 25-year lows."
The Mairs & Power Growth Fund returned 19.62% in 2024, underperforming the S&P 500's 25.02% return due to sector allocation and stock selection challenges. The fund's regional focus and multi-cap approach faced headwinds from mega-cap technology dominance and housing market weakness affecting core holdings Graco and Toro. Despite underperformance, the managers remain committed to their 94-year investment philosophy emphasizing long-term value creation. They have strategically diversified into technology stocks including NVIDIA and Microsoft, positioning the fund to benefit from AI adoption across enablers, application vendors, and adopters. The fund is capitalizing on small-cap valuations trading at 25-year lows relative to large caps, initiating new positions like Clearfield while adding to existing holdings. With small-cap earnings growth estimates exceeding large caps and potential regulatory tailwinds, the managers see compelling opportunities ahead. They continue seeking value-oriented names that can leverage AI for improved profitability, maintaining their disciplined approach through market cycles while adapting to technological shifts.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The fund demonstrates high conviction through concentrated long-term holdings like Graco and Toro (held since 1970), explicit position sizing language about Microsoft being the largest holding, and active adding to positions during market weakness. Named positions with clear thesis explanations and willingness to add during volatility support this score.
Growth Outlook
The manager acknowledges market strength in 2024 but expresses caution about elevated S&P 500 valuations and mixed economic signals. They note uncertainty from political changes and potential inflation pressures, while seeing selective opportunities in small caps and value names.
Risk Appetite
The fund is selectively adding to positions where conviction is high and valuations are attractive, particularly in small caps and housing-related names. They initiated a new position in Clearfield and are adding to existing holdings like Graco and Toro, showing moderate risk appetite.
Capital Deployment
The fund is actively adding to existing positions where conviction is high and initiated a new position in Clearfield. They are adding to Graco and Toro during the housing downturn, indicating moderate deployment activity, though no specific cash level changes are mentioned.
Forward Guidance
The manager is actively seeking value-oriented names that can benefit from AI but emphasizes selectivity and patience. They acknowledge dynamic conditions and potential challenges from administration changes while maintaining their long-term disciplined approach.
Language Signal
Language is balanced with mentions of opportunities in small caps and AI, but also discusses risks from elevated valuations, housing weakness, political uncertainty, and mixed economic signals. Risk language slightly outweighs bullish language.
Perceived Risk
The manager identifies several specific risks including political uncertainty around inflation, elevated S&P 500 valuations, potential policy impacts on business costs, and mixed economic signals. Housing market weakness and manufacturing contraction are also discussed as meaningful concerns.
Opportunity Density
The manager sees selective opportunities in small caps trading at 25-year low valuations relative to large caps, value-oriented names that can benefit from AI, and specific opportunities like Clearfield in fiber optics. They characterize the environment as requiring selectivity but identify multiple compelling areas.
Time Horizon
The fund emphasizes its 94-year investment philosophy and long-term approach, holding core positions like Graco and Toro for 55 years. They explicitly state commitment to long-term investing and focus on companies with durable competitive advantages, indicating a multi-year to permanent holding horizon.
