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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Disciplined compounder strategy deploying capital into competitively advantaged adopters and infrastructure providers while shedding cyclical exposure and exiting positions facing structural competitive headwinds."
During the third quarter of 2026, the Mairs & Power Fund delivered a net-of-fees return of 3.40%, outperforming the S&P 500 Total Return Index benchmark return of 2.30% and the Morningstar Large Blend Index peer group return of 1.11%. Year-to-date, the strategy generated a 12.92% net return compared to 12.75% for the benchmark. Relative outperformance was primarily generated by stock selection across Consumer Discretionary, Industrials, and Communication Services, while stock selection in Information Technology and Materials alongside sector allocation acted as modest performance drags. The investment team maintains a disciplined macroeconomic outlook amid persistent inflationary pressures driven by elevated energy prices, ten-year Treasury yields surpassing 5.25%, and mounting sovereign debt. Rather than chasing cyclical peaks in artificial intelligence infrastructure, the fund differentiates between commoditized hardware and durable technology adoption. Strategy positioning emphasizes high-quality compounders with pricing power and enduring competitive moats, while fixed income allocations remain focused on short-duration, high-grade corporate and municipal paper held to maturity. Portfolio activity reflected valuation discipline and risk management across key holdings. The fund continued building its position in Waste Management (1.90% allocation) after AI-driven market rotations depressed non-tech compounders. Top contributors included nVent Electric (3.24%), Littelfuse (2.14%), and Taiwan Semiconductor (2.92%), whereas Alphabet (4.81%) and Apple (3.31%) detracted from relative performance. The fund executed complete exits in Sprouts Farmers Market and Clearfield, reallocating capital where risk-reward profiles remain superior.
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