Webinar

Webinar Replay: Fireside Chat with Our Quality Growth Team

Quarter-end update discussing factors that impacted the Focus Growth Portfolio & what long-term opportunities may lie ahead.
Dan Davidowitz, CFA, Damon Ficklin, Stephen Atkins, CFA
5 Min
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In this webinar replay, the Polen Quality Growth team, Dan Davidowitz, Damon Ficklin and Stephen Atkins, said they believe recent underperformance—especially in software—has been driven more by AI-related narratives, fear, and market structure than by weakening fundamentals. In Q1 2026, they consolidated software exposure into fewer, higher-conviction holdings that Dan Davidowitz described as “mission critical” and difficult to displace, while Damon Ficklin emphasized staying focused on the “far right tail” of quality and defensibility. Despite frustration with short-term stock reactions, the team sees improving valuations and remains confident in long-term earnings growth.

Read the full Focus Growth Commentary 

Key Topics & Takeaways

  • Software repositioning (02:22–07:50): Dan explained they exited Paycom, Adobe, and Intuit due to near-term narrative risk, reallocating to higher-conviction names like Microsoft, Oracle, ServiceNow, Synopsys, Shopify, and CoStar. Net result: slightly higher software exposure, but in fewer names.
  • AI disruption vs. durability (02:22–07:50; 20:16–22:40): Dan acknowledged AI is disruptive but argued companies with proprietary data, high switching costs, and “cost of failure” are harder to replace. He also highlighted potential upside, such as monetizing AI agents interacting with enterprise systems.
  • Market disconnect from fundamentals (09:54–20:16): Damon called the environment “frustrating,” noting strong results from companies like Microsoft and ServiceNow were met with stock declines. Dan attributed this to algorithmic trading and narrative-driven markets with “no nuance.”
  • What businesses are at risk (23:45–28:08): Dan said he thinks weaker software companies lack clear value propositions or differentiation. He cited FactSet as an example of a model potentially more exposed to AI replication.
  • Stock-based compensation (28:08–33:10): Dan argued GAAP treatment can double count dilution; the team instead focuses on diluted share count and free cash flow per share, which they believe better reflects economic reality.
  • Payments resilience (33:10–40:04): Damon said he believes Visa and Mastercard fundamentals remain strong and dismissed AI disruption concerns, noting the necessity of secure, controlled payment rails and growing value-added services.
  • Valuation opportunity (40:04–44:08): Dan highlighted the portfolio trading at a low-20s multiple with estimated mid- to high-teens earnings growth, which he believes is one of the more attractive setups relative to the index in years.
  • Semis and portfolio balance (44:08–53:18): Damon said they have meaningful exposure (NVIDIA, Broadcom, LAM Research) but won’t “run to one side of the ship,” avoiding lower-quality, highly cyclical or leveraged names despite strong recent performance.
  • Company specifics (54:59–59:56): Damon described CoStar as a proprietary-data-driven business with strong long-term growth potential despite near-term pressure. Dan clarified Stripe is largely a customer—not a disruptor—of Visa/Mastercard networks.

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