Polen Focus Growth Portfolio Q3 2025 Commentary

Core Insights - The US equity markets maintained strong momentum in Q3 2025, primarily driven by enthusiasm for generative AI and the semiconductor sector, despite challenges such as high tariffs and inflation [5][6][7] - The Polen Focus Growth Portfolio returned 3.3% in Q3 2025, underperforming compared to the Russell 1000 Growth Index's 10.5% and the S&P 500's 8.1% [15][5] - Significant contributors to the portfolio's performance included Oracle, Shopify, and Alphabet, while detractors included Apple, NVIDIA, and Tesla [15][16] Economic Context - The US economy grew at a revised annual rate of 3.8% in Q2 2025, with technology capital expenditures, particularly in AI, contributing significantly to this growth [8][11] - Oracle reported a 359% increase in remaining performance obligations, indicating strong demand for cloud computing and AI infrastructure [9][10] Sector Performance - AI-driven sectors, especially semiconductors, outperformed, while traditionally defensive sectors like healthcare and consumer staples lagged [5][13] - The market has bifurcated companies into "AI winners or losers," leading to performance dispersion [5][13] Portfolio Activity - New positions were initiated in Broadcom and Boston Scientific, while positions in Gartner and Thermo Fisher Scientific were exited [23][36] - The portfolio saw increased investments in Starbucks, ServiceNow, and CoStar Group, while trimming positions in Netflix, Alphabet, and Visa [23] Future Outlook - The focus remains on durable, high-quality businesses, with expectations of mid-teens earnings growth over the long term [5][38] - The demand for AI-related infrastructure is anticipated to continue, with companies like NVIDIA and Broadcom expected to generate earnings growth of approximately 20% per annum over the next 3-5 years [30][27]