Jensen Investment Management, an asset management company based in the US, released its fourth-quarter investor letter for “Jensen Quality Growth Equity Strategy”. A copy of the letter can be downloaded here. The S&P 500 Index continued its rally in Q4 2025, which started in 2022. The Jensen Quality Growth Equity Composite underperformed the Index in the fourth quarter. The Strategy returned -0.55% (net) in Q4 2025 Vs 2.66% for the Index. At the sector level, the portfolio’s relative underperformance was largely contributed to by the Industrials sector. The outperformance of low-quality stocks added to the relative underperformance from a quality perspective. Market concentration in mega-cap technology characterizes the current investment theme. The portfolio is well-positioned to capitalize on growth from AI and digital transformation, while maintaining its durability. The firm prioritizes holding companies that can generate economic value over multiple cycles, focusing on quality, cash generation, and durability for long-term shareholder returns. Please review the Portfolio’s top five holdings to gain insights into their key selections for 2025.
In its fourth-quarter 2025 investor letter, Jensen Quality Growth Equity Strategy highlighted stocks like Microsoft Corporation (NASDAQ:MSFT). Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions. On March 05, 2026, Microsoft Corporation (NASDAQ:MSFT) stock closed at $410.68 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was 2.38%, and its shares gained 4.42% over the past 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $3.052 trillion.
Jensen Quality Growth Equity Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2025 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) and Marsh & McLennan (MMC) were the leading individual detractors in the quarter. Microsoft was a key detractor in the quarter as investor attention shifted from the durability of cloud growth to the near-term implications of an unusually investment-heavy phase. While underlying Azure demand remained solid, ongoing data center and power constraints meant the company continued to prioritize where incremental capacity is deployed, creating more quarter-to-quarter variability in perceived upside. At the same time, elevated AI infrastructure build-out and faster refresh cycles in computing have raised concerns about near-term pressure on cloud margins and free cash flow conversion, amplifying sensitivity to any incremental disclosure or headline noise around the broader AI ecosystem.
We continue to view these dynamics as largely temporal rather than structural. Microsoft’s core strengths – mission-critical enterprise relationships, a scaled global cloud platform, and unmatched distribution across productivity, security, developer tools, and applications – position it to translate AI adoption into durable revenue expansion over time. In our view, today’s spending is best understood as building scarce capacity and platform advantage; as supply catches up and AI workloads mature from experimentation to production, Microsoft should be well positioned to regain investor focus on long-run earnings power and compounding.”
Microsoft Corporation (NASDAQ:MSFT) is in second position 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 Bretton Fund’s views on the company. In addition, please check out our hedge fund investor letters Q4 2025 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.
