Mairs & Power Investment Philosophy   |  Video

Mairs & Power Investment Philosophy | Video

September 30, 2019

Our investment process has been in place since the firm’s founding. Listen as our investment professionals provide a brief description of our philosophy and approach. The video runs about 3 minutes and features three of the firm's executives.

Transcript follows:

 

Andrew R. Adams, CFA, Chief Investment Officer

Mark L. Henneman, CFA, CIC, Chairman and Chief Executive Officer

Robert W. Mairs, President and General Counsel

 

Andy: Mairs & Power has followed the same investment discipline for decades. We really focus on the long-term investing, regional focus and just getting to know companies extremely well.

 

Regional Focus: Favoring companies headquartered in Minnesota and the Upper Midwest

Mark: We’re heavily invested in Minnesota companies and we think that’s a great place to be for the long haul. We’ve got some excellent companies to choose from. I can point to the work ethic in the state of Minnesota in this region. I can point to higher education and the education standards; the benefits of being in a community where the University of Minnesota is right between Minneapolis and St. Paul in the heart of our community has played an important role in making Minneapolis and St. Paul a great place to have a business.

Andy: Last year we did over 150 meetings with company managements and visiting those companies and because we have that low turnover, we tend to do that every year. If we find a good opportunity outside the upper Midwest that we don’t really think we can get with companies here, we’ll absolutely go out of the region as long as we get the same kind of access to those management teams.

 

Multi-Cap Companies

Seeking companies with

  • Consistent, above-average growth potential
  • Durable competitive advantages
  • Attractive valuation

Mark: We also will buy companies that are very large but we’ll buy smaller companies and everything in between, a lot of exposure to mid-cap companies.Companies with high returns and fast growth rates attract a lot of attention in the form of competition. So we’re looking for companies that have those characteristics but also have something we call a durable competitive advantage.

 

Porter’s 5 Forces:

  1. Competition in the industry
  2. Potential of new entrants into the industry
  3. Power of suppliers
  4. Power of customers
  5. Threat of substitute products

Porter, Michael E., Competitive Strategy: Techniques for Analyzing Industries and Competitors, 1980

We use the Porter framework, the five forces, to assess how strong that durable competitive advantage is for every company that we invest in. That’s really the heart of the investment process.

Andy: We are very much a bottom-up investment style. One of the things that differentiates our investment process from others is just the concentration of our portfolios. The funds and the separate accounts typically have 50 stocks, so any particular stock is gonna have a significant impact.

 

Focused Long-term Investing

Andy: We invest in the long-term for a number of reasons. There is efficiencies in taxes and transactions; our holding periods are over a decade for a lot of our stocks. With the rest of the market focused so much on the short term, that creates opportunity.

Mark: The typical investment manager, when they talk to a CEO, is really just trying to gauge how the quarter is going. We’re focused on what they’re investing in. That won’t pay for itself this quarter, maybe not even this year, but five- and 10-years down the line, that’s what we’re most interested in. We want to have conviction that they continue to invest in their business so that they can grow well out in the future.

Rob: The Investment Committee is really the core of the investment process at Mairs & Power and is where ideas for additions and subtractions to the accounts are proposed, debated, reviewed, analyzed.

It’s a very spirited discussion and really shows the collaborative, collegial atmosphere we have here, that when somebody works with Mairs and Power, you may have a portfolio manager that represents the company to you, but you’re really getting the benefit of hundreds of years of investment expertise.

 

We offer individually managed accounts and a family of mutual funds. Learn more at mairsandpower.com. Learn more at www.mairsandpower.com

 

IMPORTANT INFORMATION

Diversification does not eliminate the risk of experiencing investment loss.