1Q2024 - U.S. SMID Company Growth Commentary

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• In the first quarter of 2024, the Polen Capital U.S. SMID Company Growth Composite Portfolio (the “Portfolio”) returned -0.28% gross and -0.57% net of fees compared to an 8.51% return for the Russell 2500 Growth Index (the “Index”).
• This was a historic quarter for the Russell 2500 Growth Index as two companies—Super Micro Computer and MicroStrategy—drove more than a quarter of the Index’s performance. Super Micro, a provider of high-performance, energy-efficient servers, was up more than 250% during the quarter and is now a nearly $60 billion market cap company. Crypto-driven MicroStrategy was up over 170%, approaching a $30 billion market cap. Both companies will leave the Index with the June rebalancing. 
• We see ourselves in essentially the same environment that we called out last quarter. In late 2023, it became clear that interest rates had peaked, precipitating a bottom in the Russell 2500 Growth Index on October 27, followed by a rally that can generally be considered lower quality. We were pleased to successfully navigate these headwinds last quarter, as we typically expect to underperform in such environments.  
• During the first quarter, we initiated one new position in EXL Service and added to existing positions in Clearwater Analytics, Progyny, SiTime, Bio-Techne, MarketAxess, Etsy, and Generac. We eliminated our position in Bumble and trimmed positions in Trex, Wingstop, and Houlihan Lokey.
• We favor businesses with robust free cash flow, persistent growth, and high returns on capital. We consistently aim to own companies that we believe are undervalued relative to their long-term compounding potential. As always, we believe maintaining our focus on high-quality growth companies well-positioned to drive cash flow and earnings growth over the next five years will generate long-term performance.

Read the full commentary and disclosures here