Market Call: Quality Investing
Portfolio Manager Kevin Walkush joins Chuck Jaffe of the Money Life podcast to discuss Jensen’s methodology behind quality investing and investing for the long term.
From the podcast:
Chuck Jaffe:
[G]iven this market, where growth has been somewhat muted and … dominated by a small number of stocks, what has that done in terms of making it easy or hard for you to find [stocks] for the portfolio?
Kevin Walkush:
I think for the portfolio in general, if I take a step back, how we think about the market and how we function within it, we’re long-term investors. We’re looking for those names that can really deliver over full market cycles. Our average holding period is seven to eight years. We’d like to go longer if we can find a business that can continue to create value.
In that regard, in our mind, the market can often give us great opportunities that may really overplay a risk perspective in the short term. Whereas we look at it through a long-term lens, and maybe see that opportunity through a different opportunity set, so to speak. In that regard, we think the market’s always given us opportunities to high grade our portfolio for long-term returns.
Right now, I would say it’s definitely been a challenging market just because of the high concentration of these large tech momentum names occupying the top of the benchmark. You really haven’t seen that broad recognition of value creation across the market. Our sense would be is that sustainable in the long run? Probably not. We think we’re well positioned as the market starts moving away from just a pure focus on AI and looking at broader value creation. We think our quality names and our strategies can really leverage that change of perspective.
Chuck Jaffe:
Well, let’s talk about a name or two. What’s a poster child for the methodology? The kind of thing that really spins your fan.
Kevin Walkush:
We think we’re well-positioned for AI. We can certainly dive into that. But, as I mentioned, we want to be focused on a broader play of opportunity sets beyond just AI.
Stryker, an orthopedic company, is a market leader in knee and hip replacement. They basically perfected a robotic surgery technique that really has garnered them tons of market share. When we think about an aging population, we’ve seen strong growth recently just because of deferment through COVID of hip and knee replacement. Then, pickleball is a nice near-term catalyst in terms of driving the demand, the incremental demand, for hips and knees right now.
Listen to the podcast above or read the transcript here to discover more businesses that exemplify Jensen’s long-term, quality investing methodology.
Definitions
Margin of Safety: Buying with a “margin of safety,” a phrase popularized by Benjamin Graham and Warren Buffett, is when a security is purchased for less than its estimated value. This helps protect against permanent capital loss in the case of an unexpected event or analytical mistake. A purchase made with a margin of safety does not guarantee the security will not decline in price.
Return on Equity (ROE): Is a measure of financial performance calculated by dividing net income by shareholders’ equity.
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Jensen Quality Growth Fund Holdings
Jensen Quality Mid Cap Fund Holdings
Jensen Global Quality Growth Fund Holdings
Past performance is not a guarantee of future results.
Mutual fund investing involves risk, and principal loss is possible. There is no assurance that the investment process will lead to successful investing or that the stated objective(s) will be met.
The Jensen Quality Growth Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. The prices of growth stocks may be sensitive to changes in current or expected earnings, may experience larger price swings and may be out of favor with investors at different periods of time.
The Jensen Quality Mid Cap Fund invests in mid and smaller capitalization companies, which involve additional risks such as limited liquidity and greater volatility.
The Jensen Global Quality Growth Fund is also non-diversified and invests in foreign securities that involve political, economic and currency risks, greater volatility, and differences in accounting methods. These risks are greater for investments in emerging markets.
Opinions expressed are those of Jensen Investment Management and are subject to change, not guaranteed and should not be considered investment advice.
The Fund’s investment objective, risks, charges and expenses must be considered carefully before investing. The statutory and summary prospectus contains this and other important information about the investment company and it may be obtained by visiting www.jenseninvestment.com or by calling 800-992-4144. Please read carefully before investing.
On September 30, 2024, the Jensen Quality Value Fund was renamed the Jensen Quality Mid Cap Fund.
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