Polen Capital, an investment management company, released its “Polen Focus Growth Strategy” first-quarter 2026 investor letter. A copy of the letter can be downloaded here. The first quarter of 2026 was highly volatile for US equities, driven by AI disruption concerns and the US-Israel conflict in Iran and the Middle East. In this backdrop, the Polen Focus Growth Strategy declined 17.16% in the quarter, compared to a -9.78% return for the Russell 1000 Growth and -4.33% return for the S&P 500. The Strategy focuses on mission-critical businesses with recurring revenue and competitive advantages and capitalizes on the volatility to increase investments in software and semiconductor companies. The Strategy remains confident in the long-term potential of the Portfolio, emphasizing businesses with strong economic moats, robust balance sheets, and multi-year earnings growth. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Polen Focus Growth Strategy highlighted Microsoft Corporation (NASDAQ:MSFT) as a “Baby Thrown Out with the Bath Water”. Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions, holding dominant positions in software, cloud infrastructure, generative AI, and gaming. On April 28, 2026, Microsoft Corporation (NASDAQ:MSFT) stock closed at $429.25 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was 16.21%, and its shares gained 8.60% over the past 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $3.19 trillion.
Polen Focus Growth Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter:
“Amidst this investor panic, it would appear to us that the proverbial ‘baby’ has been ‘thrown out with the bathwater’. Take Microsoft Corporation (NASDAQ:MSFT) for example, after the quarter’s sell off is now trading at the same valuation (~20x 12-month forward earnings) as Exxon Mobil despite generating ~4x the amount of operating profit and ~2x the free cash flow (even with Microsoft’s heavy investment into AI infrastructure) and delivering materially higher earnings growth, all with a much greater degree stability and consistency through the cycle. To us, this exemplifies the dichotomy of perception vs. reality.”
Microsoft Corporation (NASDAQ:MSFT) ranks second on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 312 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the fourth quarter, the same as in the previous quarter. While we acknowledge the risk and potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Microsoft Corporation (NASDAQ:MSFT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of most popular stocks on Robinhood in 2026. In its Q1 2026 investor letter, Vulcan Value Partners highlighted Microsoft Corporation’s (NASDAQ:MSFT) strong potential in both its intelligent cloud and software segments. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
