Frels joined Mairs and Power in 1992 after 30 years of investment management experience. Mr. Frels has had a long career. He worked for First National Bank of Minneapolis as a security analyst and director of research and for First Trust Company of Saint Paul as a senior portfolio manager.
Mairs and Power is characterized by a conservative investment approach, which it has been using for almost 70 years. Things have gone very well with it indeed. The company is very strong and has had successful events. Its idea is to select quality growth stocks at what management considers to be reasonable valuation levels.
Frels' general idea is to hold stocks for a long period to take advantage of tax-efficiency and allow the power of compounding to build wealth for their shareholders. Sales are usually made when fundamentals change, investment strategy shifts, and there is excessive valuation.
“Once a stock is added to the fund, it usually stays,” says Morningstar analyst Josh Koeck.
Here are some of his top buys:
Freeport-McMoRan Copper & Gold B (FCX):
FCX's mines produce copper and molybdenum. They are the most productive across the globe. Its assets include the Indonesian Grasberg mining complex, and significant operations in North and South America.
Freeport is hoping for prices to remain strong to be able to increase copper output. Regarding mines, they are geographically diversified. Sixty percent of the output comes from countries with an investment-grade sovereign rating.
JPMorgan Chase & Co (JPM):
JPMorgan Chase is one of the largest financial institutions in the U.S. and operations in more than 60 countries. The company is organized into six business segments, namely investment banking, commercial banking, treasury and securities services, asset management, retail financial services and credit card businesses.
JPM is financially sound. Indeed it posted a Tier 1 common capital ratio of 9.9% in 2011. JPM is also generating capital at a reasonable pace, which provides double-digit returns on equity.
JPMorgan Chase achieved a reasonable level of profitability in recent quarters, despite a number of headwinds. It has been able to remarkable limit its losses during the financial crisis. The bank's performance under current leadership should give investors confidence in the firm's risk management practices, despite the complexity of the business. JP Morgan Chase's reputation in the market is the strongest among its peers.
Bank of Montreal (BMO):
Bank of Montreal is Canada's fourth-largest bank, operating four business segments: personal and commercial, personal and commercial, the private client group, and BMO Capital Markets.
BMO has a very strong loan portfolio which enables it to offset M&I integration with little negative impact in the generation of capital. Finally, it has certain non-traditional banking segments which have accounted for more than 20% in annual returns on equity.
Zimmer Holdings Inc. (ZMH):
Zimmer's core operational activities include orthopedic device development, manufacturing and marketing. The firm focuses primarily on joint reconstruction. It is a key leader especially in knee and hip implants.
This leading position has greatly benefited the company, particularly thanks to the growth in the industry.
In terms of shareholders, Zimmer holds a share repurchase program by means of which it expects to return value to shareholders given current prices and the financial uncertainty.
Baxter International Inc. (BAX):
Baxter International focuses on delivering injectable therapies for a wide variety of medical conditions. One of its segments, BioScience, specializes in developing treatments for disorders such as hemophilia and immune deficiencies.
Apart from the therapies it offers, BAX has a variety of medication delivery systems such as intravenous bags, solutions and other devices to control fluid inflow.
In terms of sales, 60% thereof comes from outside the U.S. BAX is entering into the Chinese and Brazilian markets. The products it sells in these developing countries can boost sales growth and returns on invested capital.