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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Mairs & Power Balanced Fund returned 6.14% in H1 2026, slightly trailing its benchmark as markets broadened beyond megacaps on strong earnings. The fund added cybersecurity, waste management, and automation plays while exiting names losing competitive advantage."
The Mairs & Power Balanced Fund returned 6.14% in the first half of 2026, slightly underperforming its benchmark composite by 25 basis points. The market delivered striking performance with the S&P 500 up 9.33% year-to-date, driven by broadening corporate earnings growth beyond megacap technology stocks. The second quarter marked the third consecutive year of double-digit earnings expansion, with S&P 500 earnings growing roughly 22% year-over-year. The fund's equity portfolio was pressured by underperformance in Healthcare holdings Abbott Laboratories, Medtronic, and Fiserv, partially offset by strong contributions from Texas Instruments, Entegris, and Littelfuse. The managers added four new positions including Palo Alto Networks, Waste Management, Cognex, and AJ Gallagher, while eliminating five names they believe are experiencing erosion of competitive advantages. Fixed income outperformed due to preference for corporate credits over Treasuries. Looking forward, the managers see the market entering a show me phase for AI spending returns, with sticky inflation from Middle East conflict creating Fed policy uncertainty under new Chair Kevin Warsh. They remain disciplined, positioning toward durable downstream AI beneficiaries rather than cyclical hardware, believing productivity gains and broadening earnings support their long-term approach despite near-term volatility.
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