1Q2023 – Focus Growth Commentary
We believe owning cash-rich, competitively advantaged businesses avoids the perils of leverage and lack of differentiation
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High Conviction. Active. Quality Growth.
Leveraging over 30 years of high-conviction, active management, Polen’s disciplined “best ideas” approach to stock selection is guided by a strict set of risk guardrails to remove emotion from the investing process and focus on companies with long-term competitive advantages. Driven by a collaborative research process, Dan Davidowitz and the Polen Focus Growth team go beyond fundamentals to invest across the growth spectrum and help you to stay cool in volatile markets.
Tips for Staying Cool in Volatile Markets
Trust the data—don’t let the narratives of others take over
When weighing an investment decision, trust the data and strive to filter out the noise. Often, certain narratives can dominate the news cycle that don’t reflect reality. Don’t let these stories of others take precedence over your empirical data.
Focus on Facts, Not Stories
Get “fresh eyes” on a problem and benefit from a collaborative approach
Often, we’re too close to a problem to see all its angles. We see value in getting a “fresh pair of eyes” on an issue, which is why our research teams take a collaborative approach to research and decision-making.
Check Your Biases
Keep a growth mindset while remembering the importance of humility
All investors make mistakes. The best investors learn from them and seek continuous improvement. At Polen, we reflect on our decisions and ask how we can do better in the future.
Learn from Your Mistakes
Polen’s Equity Investment Guardrails
We invest in companies worldwide with attractive earnings growth, driven by a sustainable competitive advantage, financial strength, proven management teams and powerful products or services. Investing in only what we believe to be the best companies with long-term staying power supports our ability to deliver outsized returns and minimize risk. By thinking and investing like a business owner and taking a long-term investment approach bound by our strict risk guardrails, we believe we can preserve capital and provide stability across market cycles.
Is Quality Stock Picking Broken?
Dan Davidowitz, Polen Focus Growth portfolio manager, digs into this year’s market drivers, the underperformance of quality stocks & what it could signal for the future.
Our Equity Investment Philosophy
Our long-term holding strategy is underpinned by a belief that short-term fluctuations may not reflect the true value of the underlying business and the return of the share price will match the growth of the earnings.
We believe that attractive earnings stability and financial strength serve as a margin of safety that typically results in less volatility during declining markets. That’s why we focus on investing in businesses worldwide that have the potential to compound their earnings year after year rather than merely hugging an index.
Concentrated Portfolio: High Active Share + Best Ideas
Risk Management: Durable Business + Sustainable Competitive Advantage
Hold Period: Long-Term Time Arbitrage
Outcome Orientation: Absolute Return Mentality
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Polen’s Focus Growth Strategy
Product Profile
Managed by our Large Company Growth team, our Focus Growth strategy seeks to achieve long-term growth by building a concentrated portfolio of competitively advantaged businesses with sustainable, above-average earnings growth.
| Number of holdings | 20-30 |
|---|---|
| Style | Growth |
| Benchmark | Russell 1000 Growth |
Why Invest?
- U.S. growth strategy with a strong emphasis on sustainable earnings growth
- Focus on companies with high returns on capital and double-digit earnings growth
- Concentrated portfolio of approximately 25 high-quality growth companies
- Low portfolio turnover with long-term holding periods
Large Company Growth Perspectives
Is the Future of E-Commerce Still Bright?
A look at the evolution in e-commerce growth and where the industry goes from here
Citywire Podcast: Embracing a Growth Mindset to Become a Better Investor
Dan Davidowitz offers a candid, personal view of how the most profound learning opportunities can come from mistakes
Know What You Own: Stocks vs. Businesses
Why we believe that thinking & acting as business owners, rather than securities traders, is key to long-term investment success
Wonderful Companies at Wonderful Prices?
A reminder for the unemotional, patient investor that “fair prices” for high-quality businesses can occasionally become “wonderful prices”
The information is provided for illustrative purposes only. Opinions and views expressed constitute the judgment of Polen Capital as of the period indicated , may involve a number of assumptions and estimates which are not guaranteed, and are subject to change without update. Although the information and any opinions or views given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness or accuracy. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without update, including any forward-looking estimates or statements which are based on certain expectations and assumptions. The views and strategies described may not be suitable for all clients. This information does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction.
Return on Equity: assesses a company’s net income divided by its shareholders’ equity.
Return on Invested Capital: assesses a company’s efficiency at allocating capital and is measured by operating profit after taxes divided by investment capital.
Past performance does not guarantee future results and profitable results cannot be guaranteed.