Webinar Replay: Fireside Chat with Our Quality Growth Team

In this webinar replay, the Polen Quality Growth team — Dan Davidowitz, Damon Ficklin, and Stephen Atkins — discussed how, in their view, an extreme semiconductor rally and continued software pressure drove roughly 85% of Focus Growth's Q2 underperformance in their calculation. In response, the team described a deliberate shift toward more nimble portfolio management, exiting long-held positions like Accenture, Zoetis, and Aon where business momentum had stalled, and redeploying capital into areas where we think there are strong structural tailwinds — including a new cluster of commercial aerospace holdings and additional AI infrastructure exposure. Despite frustration with a market they described as momentum-driven and structurally changed, the team expressed confidence in their ability to adapt while staying true to their quality-focused principles.

Key Topics & Takeaways

• Semiconductor surge & Q2 performance (01:08–05:44): Steve noted the SOX index returned ~80% in April–May alone — a 4.5 standard-deviation event — and estimated the semi-vs-software dynamic drove ~85% of Focus Growth's Q2 underperformance. Dan attributed the extremity to algorithmic, leverage-driven market structure.
• Becoming more nimble (01:08–08:30): Dan said the team is prioritizing business revenue momentum and reducing opportunity cost from patient holdings, using Buffett's "church attached to a casino" analogy. Damon said research has been reprioritized around momentum since the start of the year.
• Russell reconstitution (07:21–11:28): Semis will likely represent roughly a third of the Russell Growth 1000 Growth index — about 4–5x larger than a few years ago. The team has already leaned in with additions to NVIDIA and new positions in LAM Research and EMCOR.
• Selling Accenture, Zoetis & Aon (12:55–21:56): Dan explained that Accenture (the portfolio's longest-ever holding) and Zoetis are growing below expectations, with re-accelerations taking longer than anticipated. Both remain in the team's periphery for re-entry. Aon was sold as the P&C insurance market appears to be weakening.
• Accenture post-mortem (18:55–21:56): Dan said Accenture is navigating the AI transition the same way it navigated offshoring and the cloud shift, but he thinks today's market structure punishes slowdowns far more severely — its multiple compressed from the low 20s to single digits.
• Commercial aerospace cluster (25:29–32:56): The team built a basket of GE Aerospace, ATI, and Howmet Aerospace around a structural supply-demand imbalance in aircraft production. Damon compared Howmet to TSMC for fan blade manufacturing. All three hold monopoly or duopoly positions with 10-plus-year growth runways. GE Vernova was also added as one of only three companies they think are globally positioned to meet surging power and turbine demand.
• Mag 7 & hyperscaler CapEx (32:45–38:23): Dan acknowledged CapEx numbers are getting "shockingly large" and some hyperscalers have begun issuing equity, but argued the spending will either generate strong returns or be pulled back — restoring cash flow either way. Both he and Damon remain confident over a 3–5 year horizon.
• Memory stocks & new IPOs (38:23–45:26): The team is studying memory and CPU providers but emphasized a high hurdle for businesses with extreme cyclicality. On upcoming and recent IPOs, Dan said SpaceX (particularly Starlink), OpenAI, and Anthropic have interesting qualities but are not yet profitable. Damon noted SpaceX's disruptive potential across multiple industries.
• Market structure & the path forward (45:28–48:47): Dan reflected that markets can uncouple from fundamentals for extended periods, but sees this as a sign of the times rather than permanent. Damon summarized: the markets have changed, the benchmark has changed, and the team must adapt without abandoning who they are.

Important Notice & Disclaimer

This video has been prepared by Polen Capital without taking into account individual objectives, financial situations or needs. As such, this video is for informational purposes only and is not to be relied on as, legal, tax, business, investment, accounting, or any other advice. Recipients of this video should seek their own independent financial advice. Investing involves inherent risks, and any particular investment is not suitable for all investors; there is always a risk of losing part or all of your invested capital.

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The Russell 1000® Growth Index is a market capitalization weighted index that measures the performance of the large-cap growth segment of the U.S. equity universe. It includes Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values. The index is maintained by the FTSE Russell, a subsidiary of the London Stock Exchange Group. It is impossible to invest directly in an index. The performance of an index does not reflect any transaction costs, management fees, or taxes. 

Portfolio characteristics are as of June 29, 2026. There can be no guarantee that the portfolio will exhibit identical or similar characteristics to those described at any future time of investment. 

Holdings are subject to change. The top holdings, as well as other data, are as of the period indicated and should not be considered a recommendation to purchase, hold, or sell any particular security. There is no assurance that any of the securities noted will remain in a portfolio at the time you view this presentation. 

Momentum: Momentum in trading refers to how quickly a security's price changes, capturing the momentum of its trend. This strategy leverages the speed of price changes to identify trends for trade opportunities, often using oscillators in technical analysis to spot these potential moves.

Standard deviation: Standard deviation is a common measure of investment risk that shows how widely asset prices move away from their average, helping investors assess market volatility. It is used to estimate how much an investment's returns may vary, which can signal higher or lower risk levels and influence trading decisions. Investors often use standard deviation alongside other risk metrics such as beta and the Sharpe ratio to evaluate potential investments.

PHLX Semiconductor Index (SOX): The PHLX Semiconductor Sector Index (SOX) is a capitalization-weighted index composed of 30 semiconductor companies. The companies in the index have primary business operations that involve the design, distribution, manufacture, and sale of semiconductors. The index is designed to track the performance of listed semiconductors.

Central processing unit (CPU): A central processing unit (CPU) is the brain of your computer. Like a human brain, a CPU receives instructions from another part of the computer (the memory), processes the instructions, and sends the results to be executed.

Memory: Computer memory is a critical component of a computer's hardware that stores data and instructions essential for its operation. It can be categorized into different types, including temporary memory like Random Access Memory (RAM), which is used for quick calculations, and permanent memory, such as Read Only Memory (ROM) and hard disk drives, used for long-term data storage. The efficiency of a computer often depends on the amount of RAM it has, as more RAM allows the computer to perform multiple tasks simultaneously.