Bill Frels

Last Update: 2014-08-14

Number of Stocks: 196
Number of New Stocks: 2

Total Value: $7,052 Mil
Q/Q Turnover: 2%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Bill Frels Watch

  • Mairs & Power Balanced Fund Second Quarter 2014 Commentary



  • Mairs & Power Small Cap Fund Comments on United Fire Group

    Portfolio additions during the second quarter included United Fire Group (UFCS), a company based in Cedar Rapids, Iowa that writes property and casualty insurance, life insurance, and offers annuities. With a strong history of conservative underwriting, this steady performer grew its Return on Equity (ROE) 10% last year, while its stock traded at a discount to book value – considered a rare event at current valuations. Another aspect we like about this company is that its management goes out of its way to tell potential investors that, while they must report their results quarterly, they manage their company for the much longer term; music to our ears.

      


  • Mairs & Power Small Cap Fund Comments on Landauer

    In contrast, the radiation detection firm Landauer (LDR) proved to be the biggest laggard in the first half of the year. However, a number of recent regulatory changes that address shortfalls in U.S. hospital radiation monitoring appear likely to provide the company with an opportunity to turn their stock performance around.

      


  • Mairs & Power Small Cap Fund Comments on Vasco Data Security

    The password authentication hardware and software firm, Vasco Data Security (VDSI) also contributed heavily to performance for both the six-month and second-quarter periods, returning 50.06% and 53.85%, respectively. Having an already strong European consumer banking presence, Vasco has now started to make inroads into the U.S. market. Every day, new headlines trumpeting widespread data vulnerabilities help to drive up greater demand for this firm’s products.

      


  • Mairs & Power Small Cap Fund Comments on Gentherm

    Gentherm (THRM), a manufacturer of automobile seat heating and cooling equipment, contributed the most to outperformance for the six-month and second-quarter periods, through June 30, returning 65.80% and 28.02%, respectively. Gentherm continues to benefit from increased inclusion of its products on Original Equipment Manufacturer (OEM) auto platforms as well as from other applications of its proprietary technology (consider how welcome heated seats would have been during Minnesota’s brush with the Polar Vortex last winter).

      


  • Mairs & Power Small Cap Fund Second Quarter 2014 Commentary

    While the pace of the economic recovery was somewhat better than expected during the quarter, we continued to keep our primary focus on the long-term fundamental attributes that make companies profitable. While attentive, we are not swayed by the macro-economic details underpinning global market events. By emphasizing the long-term view, we can make the subtle, opportunistic adjustments to company positions over time that keep portfolio turnover low and tax consequences in check. Our first mutual fund, the Mairs & Power Growth Fund, founded in 1958, provides a good illustration of this approach, which is employed by the Mairs & Power Balanced and Mairs & Power Small Cap Funds as well. Portfolio turnover for the Growth Fund, compared to its peers, the Morningstar U.S. Large Cap Blend category, was substantially lower for each of the past 10 years. As a result, the Fund’s annual realized taxable capital gains exceeded $1.00 in only two of the past 10 years.


    As measured by the Standard and Poor’s Total Return (TR) Index, the stock market advanced 5.23% for the quarter ending June 30, 2014. The market’s strength occurred against a mixed backdrop characterized by a downbeat adjustment to the Gross Domestic Product (GDP) (a key barometer of economic health), a rekindling of the War in Iraq, and hints that higher inflation and rising yields might be just around the corner.

      


  • Bill Frels Comments on Toro Co

    A number of other industrial companies in our portfolio detracted from performance, including Toro Company (TTC), a major provider of landscape maintenance equipment. Due, in part, to last winter’s unseasonably cold weather, the firm lowered earnings expectations. Prior to the disappointing earnings report, we had scaled back our position somewhat, while retaining the firm as a top 10 holding based on our conviction that Toro’s strong product lineup is likely to deliver revenue growth later in the year.

    From Bill Frels (Trades, Portfolio)’ Mairs & Power Growth Fund Second Quarter 2014 Commentary.  


  • Bill Frels Comments on Cray Inc

    The largest detractor from performance during the quarter was Cray Inc. (CRAY), a major super computer manufacturer. However, given our long-term view of the company, we took advantage of this attractive valuation to increase our position.

    From Bill Frels (Trades, Portfolio)’ Mairs & Power Growth Fund Second Quarter 2014 Commentary.  


  • Bill Frels Comments on Medtronic Inc

    Healthcare company Medtronic, Inc. (MDT) also contributed to performance, gaining 3.61% and 11.10% for the second quarter and first six months, respectively. Pending a shareholder vote later this year or in 2015, however, Medtronic is expected to merge with medical device supplier Covidien Plc and change its legal domicile to Ireland. Once completed, the merger will create a taxable event for Fund shareholders who will realize a long-term capital gain estimated at $60 million or $1.50 a share.

    From Bill Frels (Trades, Portfolio)’ Mairs & Power Growth Fund Second Quarter 2014 Commentary.  


  • Bill Frels Comments on CH Robinson Worldwide Inc

    Freight shipper and global supply chain consultant C.H. Robinson Worldwide, Inc. (CHRW) gained 21.76% and 9.34% respectively for the second quarter and first six months, and was a strong contributor to Fund performance. The firm’s efforts to better service high-end customers resulted in a favorable report in the first quarter and helped reverse a lackluster, two-year performance trend. As the requirement for “just-in-time” freight delivery becomes increasingly important to a company’s profitability, customers will turn to third-party logistics firms like C.H. Robinson to coordinate shipments and generate the information customers need in real time to manage their inventories and deliveries.

    From Bill Frels (Trades, Portfolio)’ Mairs & Power Growth Fund Second Quarter 2014 Commentary.  


  • Bill Frels Comments on Schlumberger

    The world’s leading supplier of energy industry technology solutions, Schlumberger (SLB) was a top contributor to performance for both the past quarter and the past six months through June 30, gaining 20.97% and 30.90%, respectively. America’s move to greater energy independence that began more than a decade ago has continued to benefit firms like Schlumberger whose businesses are concentrated in the area of oil and gas exploration. Many factors, however, like global economics and shifting political allegiances can affect both energy prices and exploration budgets. Since 2008, Schlumberger has endeavored to temper the impact of such cyclical influences through major investments in technology innovations, product reliability and better processes. As it gains market share, Schlumberger continues to hold leading market positions in proprietary software, patents, and major equipment.

    From Bill Frels (Trades, Portfolio)’ Mairs & Power Growth Fund Second Quarter 2014 Commentary.  


  • Bill Frels' Mairs & Power Growth Fund Second Quarter 2014 Commentary

    While the pace of the economic recovery was somewhat better than expected during the quarter, we continued to keep our primary focus on the long-term fundamental attributes that make companies profitable. While attentive, we are not swayed by the macro-economic details underpinning global market events. By emphasizing the long-term view, we can make the subtle, opportunistic adjustments to company positions over time that keep portfolio turnover low and tax consequences in check. Our first mutual fund, the Mairs & Power Growth Fund, founded in 1958, provides a good illustration of this approach, which is employed by the Mairs & Power Balanced and Mairs & Power Small Cap Funds as well. Portfolio turnover for the Growth Fund, compared to its peers, the Morningstar U.S. Large Cap Blend category, was substantially lower for each of the past 10 years. As a result, the Fund’s annual realized taxable capital gains exceeded $1.00 in only two of the past 10 years.


    As measured by the Standard and Poor’s Total Return (TR) Index, the stock market advanced 5.23% for the quarter ending June 30, 2014. The market’s strength occurred against a mixed backdrop characterized by a downbeat adjustment to the Gross Domestic Product (GDP) (a key barometer of economic health), a rekindling of the War in Iraq, and hints that higher inflation and rising yields might be just around the corner.

      


  • Bill Frels Comments on Emerson Electric Company

    This company, along with Emerson Electric Company (EMR), which also detracted from the portfolio, was affected by the market’s rotation out of industrials stocks.


    From Bill Frels' Mairs & Power Growth Fund First Quarter 2014 Commentary.

      


  • Bill Frels Comments on H.B. Fuller

    Packaging and adhesive manufacturer H.B. Fuller (FUL) also disappointed, declining 7.23% due to weak revenue in Europe and slower than expected sales growth in the Americas. This company, along with Emerson Electric Company (EMR), which also detracted from the portfolio, was affected by the market’s rotation out of industrials stocks.


    From Bill Frels' Mairs & Power Growth Fund First Quarter 2014 Commentary.

      


  • Bill Frels Comments on C.H. Robinson Worldwide Inc

    On the other side of the equation, our position in C.H. Robinson Worldwide, Inc. (CHRW) with a decline of 10.20% for the quarter was the largest detractor from performance, in part due to falling short on fourth quarter earnings estimates. A freight shipping firm located in Eden Prairie, MN, C.H. Robinson also provides global supply chain consulting and logistics management.


    From Bill Frels' Mairs & Power Growth Fund First Quarter 2014 Commentary.

      


  • Bill Frels Comments on Cray Inc

    Supercomputer manufacturer Cray, Inc. (CRAY) proved to be the strongest contributor to portfolio performance, gaining 35.91% for the period due in large part to the strength of its management. We believe much of the credit for the firm’s success should go to Chief Executive Officer Peter Ungoro and the team he has built since leaving IBM. He has positioned the company within its traditional supercomputer business with an internally-developed adaptive computing technology that gives Cray computers the flexibility to offer CPU (Central Processing Unit) and GPU (Graphical Processing Unit) from several chip manufacturers rather than being tied to just one. As a result, Cray can use the best technology available as well as allow customers to later upgrade or reconfigure their systems if they choose. In addition, while traditionally focused on Government contracts, Mr. Ungoro has positioned the firm to grow within the emerging field of Big Data and expand its base of commercial customers. Commercial revenue accounted for just 20% of total revenue in 2012. The company’s new offerings in Big Data should create significant room to grow that segment of its business over the next several years.


    From Bill Frels' Mairs & Power Growth Fund First Quarter 2014 Commentary.

      


  • Bill Frels Comments on Principal Financial Group

    Principal Financial Group (PFG) declined 6.73% following a tremendous 2013, and we view this simply as a correction.


    From Bill Frels' Mairs & Power Balance Fund First Quarter 2014 Commentary.

      


  • Bill Frels Comments on Exxon Mobil Corporation

    Detracting from performance, Exxon Mobil Corporation (XOM) declined 3.48% for the quarter, as the firm continued to have difficulty finding ways to grow production quickly enough to overcome the natural lifecycle decline of existing wells, and to offset what has been a relatively poor pricing environment for energy products. However, the firm seems ready to fund 10 major new projects in 2014 – a company record.


    From Bill Frels' Mairs & Power Balance Fund First Quarter 2014 Commentary.

      


  • Bill Frels Comments on U.S. Bancorp

    U.S. Bancorp (USB), headquartered in Minneapolis, also finished the period as one of the Fund’s top five performance contributors. While the quarter remained challenging for many other banks locked into low-margin banking activities, U.S. Bancorp advanced 6.09% for the period, with a solid performance advantage relative to its peers. While many of its competitors contend with defensive measures and diminished growth prospects, U.S. Bancorp’s principled adaptation of risk management controls following the financial crisis of 2008-2009 has placed it ahead of the competitive and regulatory curve. Recognized by both their current commercial customers and financial regulators for its integrity and financial soundness, U.S. Bancorp enjoys one of the highest credit ratings available. Over the years, U.S. Bancorp has quietly cultivated and expanded its lucrative commercial lending operations, as well. We have been steadily acquiring and holding the company’s stock for some years, purchasing at attractive prices when the market does not recognize its value.


    From Bill Frels' Mairs & Power Balance Fund First Quarter 2014 Commentary.

      


  • Bill Frels Comments on Medtronic Inc

    Healthcare company Medtronic, Inc. (MDT) also finished the quarter as a top five contributor to the Fund, gaining 7.23%. While emerging market revenue proved scarce for most industries during the quarter, Medtronic increased its share of revenue from the developing world by 15%, which represented 12% of the company’s revenue.


    From Bill Frels' Mairs & Power Balance Fund First Quarter 2014 Commentary.

      


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