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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Mairs & Power – Power Fund 2023 Q3 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q3 2023 Letter Analysis

Mairs & Power – Power Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Mairs & Power – Power Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

YTD+12.19%

Annualized+11.18%

Positioning StanceConstructive

Market CapLarge Cap

GeographyUS

Digest Analysis

Quick Take

"With Technology stock selection offsetting Healthcare and Industrials sector drags. The fund strategically added AI-capable companies like JPM and UNH while finding value opportunities in overlooked old economy names like Verizon."

Executive Summary

The Mairs & Power Growth Fund delivered 12.19% year-to-date returns through Q3 2023, slightly trailing the S&P 500's 13.07% due to sector allocation headwinds from overweight positions in underperforming Healthcare and Industrials sectors. However, strong stock selection in Technology names like Amazon, Alphabet, Microsoft, and NVIDIA largely offset these sector drags. The fund has strategically added Technology companies meeting their investment criteria while remaining skeptical of AI-related valuations and trimming accordingly. Key additions include JPMorgan Chase and UnitedHealth Group for their AI implementation capabilities, and value opportunities like Verizon Communications with its 8% dividend yield and fixed wireless access potential. The managers are finding attractive opportunities in old economy industries overlooked due to AI excitement. Despite macro uncertainties around inflation, interest rates, and union activity potentially impacting corporate costs, the fund maintains its long-term investment philosophy, seeking companies with durable competitive advantages that can benefit from AI advancements and weather economic turbulence.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

68%

CautiousHigh

Moderate (68%)

The fund demonstrates moderate-high conviction through specific position additions (JPM, UNH, VZ, TTC), detailed company-specific analysis, and clear investment thesis around AI adoption and value opportunities. However, the diversified portfolio approach and hedged language around valuation concerns prevent a higher score.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The managers acknowledge positive earnings trends and stabilizing expectations for the next two years, but express caution about elevated valuations, mixed economic signals, and multiple uncertainties including inflation, interest rates, and consumption patterns for the rest of the year.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

The fund is selectively adding positions in AI-capable companies like JPM and UNH, and value opportunities like Verizon, while trimming AI holdings due to valuation concerns. This represents a balanced approach with selective risk-taking rather than aggressive deployment.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

The fund shows modest net deployment through selective additions to JPM, UNH, VZ, and TTC positions, but this is partially offset by trimming AI holdings due to valuation concerns. No cash level changes are reported, suggesting moderate selective deployment rather than aggressive capital deployment.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

The managers indicate they are hunting for more value-oriented names and finding compelling opportunities in overlooked sectors, suggesting a selective deployment bias, but tempered by their trimming of expensive AI holdings and cautious valuation discipline.

Language Signal

15%

BearishBullish

Bearish (15%)

The letter contains more cautious language around uncertainties, mixed signals, elevated valuations, and risks from union activity and rate environment than bullish language, though opportunities in AI and value names are mentioned.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The managers identify multiple specific macro risks including union activity impacting corporate costs, potential Fed rate increases, elevated mortgage rates hurting housing, student loan repayment resumption affecting consumer spending, and general uncertainties about inflation and interest rates creating mixed market signals.

Opportunity Density

60%

ScarceAbundant

Selective (60%)

The managers describe finding compelling opportunities in old economy industries overlooked due to AI excitement, and mention being on the hunt for value-oriented names. However, they also express skepticism about AI valuations and note the need for selectivity, suggesting moderate opportunity density.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The fund explicitly states they invest for entire economic cycles and not the short-term, remain committed to long-term investing, and have maintained the same investment philosophy for more than 90 years. Their approach of adding to positions during weakness and focus on durable competitive advantages indicates a multi-year investment horizon.