In this Fund update, Peter Johnson, lead manager of the Mairs & Power Fund (formerly the Growth Fund), is joined by Andrew Adams, chief investment officer and co-manager, and Chris Strom, co-manager, to discuss the Fund's returns, the drivers of performance in the first half of 2026, and what to look for in the remainder of the year. This was recorded on July 23, 2026.
Executive Summary
The Mairs & Power Fund (MPGFX) returned 9.20% in the first half of 2026, keeping pace with the Fund's peer group, the Morningstar Large Blend Category, while modestly trailing the S&P 500.
As it has for several years, artificial intelligence (AI) remained the defining investment theme during the period. Importantly, the benefits of AI are no longer tied solely to a handful of mega-cap technology companies. As adoption accelerates, the opportunity has broadened across the entire AI supply chain, creating a growing set of winners that now includes chip makers, materials, electrical equipment, cooling systems, networking infrastructure, and the cybersecurity tools needed to support the build-out.
The primary reason the Fund trailed the S&P 500 was its lack of exposure to memory manufacturers, whose shares performed exceptionally well as demand for AI-related memory surged. Memory has historically been a cyclical business and the Fund managers continue to prefer businesses it can own for the next decade, not just the next quarter.
Sector Allocation and Stock Selection
The Fund’s participation in the AI build-out is spread out rather than concentrated in its hottest, most cyclical names. Holdings reach across semiconductors and semiconductor materials, electrical equipment, cooling, networking infrastructure, and cybersecurity. All of these areas have benefited from AI-driven demand while the Fund deliberately holds no exposure to memory manufacturers. This positioning allows the Fund to participate in the data-center capital-spending boom without being over-leveraged to the extremely cyclical semiconductor names driving much of that spending.
Many of the Fund’s largest contributors sit squarely within the AI ecosystem. Holdings such as Entegris (ENTG), Taiwan Semiconductor Manufacturing Company (TSM), Littelfuse (LFUS), and nVent (NVT) are helping build the foundation on which AI runs. These companies grab fewer headlines but supply many of the essential tools that make the build-out possible.
Among the Fund’s largest positions, Microsoft (MSFT) remains a central driver of AI investment. While some investors have begun to question the scale of Microsoft’s spending, the company already sits at the center of how enterprises communicate, collaborate, manage workflows, and store their most valuable data. The Fund managers believe this position provides a distinct advantage in delivering AI at scale, and leaves the company well suited to enabling AI adoption without requiring customers to compromise on trust, governance, or control.
Portfolio Activity
The Fund initiated two new positions during the first half. The first was Palo Alto Networks (PANW), a cybersecurity company the team has followed for years and grew more interested in as the stock sold off earlier in the year. As companies move more workloads to the cloud and adopt AI across their businesses, the threat environment grows larger and more complex, and customers increasingly want fewer vendors that can solve more of the problem. Palo Alto has evolved from a firewall company into a broader security platform spanning network security, cloud security, secure access, and security operations. The Fund managers believe this strategy can consolidate customer spending and deepen client relationships while producing attractive growth and free cash flow over time.
The Fund also added Waste Management (WM), a position centered on durability and predictability. Solid waste is an essential service, and Waste Management benefits from route density, local scale, landfill ownership, and pricing power. Permitting a new landfill, for instance, can take more than a decade, while Waste Management already owns and operates it's landfills, providing a significant competitive advantage for the company. The Fund managers view the company as a steady compounder with downside protection, disciplined capital allocation, and additional opportunity from the integration of Stericycle, a subsidiary focused on collecting and disposing regulated medical waste.
Looking Ahead
The team enters the remainder of 2026, and looks toward 2027, with confidence grounded in its long-standing philosophy. A core tenet of the investment process is understanding a company’s competitive position, including its ability to negotiate prices with both suppliers and customers. These characteristics are especially valuable as the environment turns more inflationary. The Fund remains positioned to benefit from the data-center capital-spending cycle without chasing its most cyclical names, and the Fund managers continue to favor companies with durable competitive positions, stable and predictable fundamentals, and the ability to reinvest capital at attractive rates over the long term.
Finally, to read more about recent updates for the Mairs & Power Fund, click here.
Disclosures
Top 10 Fund Holdings (subject to change)
Expense ratio: 0.62%
S&P 500 TR Index is an unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market.
Morningstar large-blend portfolio are fairly representative of the overall U.S. stock marketing in size, growth rates, and price. Stocks in the to 70% of the capitalization of the U.S equity market are defined as large-cap. The blend style is assigned to portfolios where neither growth nor value characteristics predominate. These portfolios tend to invest across the spectrum of U.S. industries, and owing to their broad exposure, the portfolios’ returns are often similar to those of the S&P 500 Index.
The statements and opinions expressed are those of the speakers and are as of the date of this call. All information is historical and not indicative of future results and subject to change. Characteristics and other statistical measures refer to underlying stocks in the portfolio and do not represent or predict the performance of any fund.
Pete Slattery is a registered representative of Foreside Fund Services, LLC.
All investments have risks. The Mairs & Power Fund is designed for long-term investors. Equity investments are subject to market fluctuations and the Fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. Investments in small and midcap companies generally are more volatile. International investing risks include among others political, social or economic instability, difficulty in predicting international trade patterns, taxation and foreign trading practices, and greater fluctuations in price than U.S. corporations.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance as of the most recent month end is available by calling 800-304-7404. Click Here for standardized performance.
The mention of specific securities is not intended as a recommendation or an offer of a particular security, nor is it intended to be a solicitation for the purchase or sale of any security.