4Q2025 - Focus Growth Commentary
Market volatility picked up as concerns around an AI bubble and the scale of related infrastructure spending weighed on sentiment, even as major indexes delivered modest gains.
Market volatility picked up during Q4 as concerns around an AI bubble and the scale of related infrastructure spending weighed on sentiment, even as major indexes delivered modest gains. The Portfolio saw mixed results, with strong contributions from Eli Lilly and Shopify offset by Oracle’s sharp reversal after last quarter’s strength. Portfolio changes reflected selective repositioning, including a new investment in Intuitive Surgical and exits from Netflix and Workday. Despite skepticism around the durability of AI driven capex, we remain constructive: earnings and demand trends continue to support a healthy backdrop, and the Portfolio is intentionally diversified beyond the most concentrated areas of the Index.
- Market volatility increased in Q4 2025, driven by concerns about an AI bubble and the scale of infrastructure investment, but the Russell 1000 Growth Index (the “Index”) and the S&P 500 both posted slightly positive returns.
- High-beta stocks outperformed, while quality factors lagged, creating headwinds for the quality-focused Polen Focus Growth Composite Portfolio.
Index concentration risk remains elevated. Nearly two-thirds of the Russell 1000 Growth Index is now comprised of just 10 companies, each valued over $1 trillion, and we expect their growth to slow over the next five years. - Top relative contributors included Eli Lilly, Meta (not owned), and Shopify, while the largest relative detractors were Oracle, Apple (not owned), and Zoetis. Oracle was the primary drag, reversing its strong Q3 performance due to investor concerns about execution and financing risks tied to OpenAI contracts.
- In Q4, we initiated a new position in Intuitive Surgical (a leader in robotic surgery) and exited positions in Netflix (due to regulatory and leverage concerns after the Warner Brothers acquisition) and Workday (due to decelerating growth). We increased our holdings in ServiceNow and trimmed those in Abbott Laboratories and Shopify.
- Our outlook remains constructive. We expect the datacenter capex cycle and equity bull market to continue, driven by strong earnings, demand, and supportive policy. The Portfolio is diversified beyond AI and datacenter themes, aiming for resilience and potential outperformance if market leadership broadens.