Polen Capital, an investment management company, released its “Polen Focus Growth Strategy” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The equity market continued its strong performance in the third quarter of 2025, driven by enthusiasm for generative AI and strength in the semiconductor sector. In the quarter, the focus shifted to positive economic surprises, fiscal policy optimism, and better-than-expected corporate earnings. In the quarter, the strategy returned 3.34 ...

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]