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Portfolio changes to the Polen Capital Global Growth Fund in the March quarter

Portfolio changes to the Polen Capital Global Growth Fund in the March quarter

After a busier than usual fourth quarter, activity returned to a more normal level for the Polen Capital Global Growth Fund in the first quarter of 2023. This is partly because we are so confident in the current state of the Fund’s Portfolio. This quarter consisted of only adding and trimming current positions in the portfolio, which included adding to Amazon and Thermo Fisher Scientific and trimming weights in Mastercard, Visa, and Abbott Laboratories.


We raised our position in Amazon. During 2022, Amazon’s business experienced revenue deceleration from pre-pandemic levels combined with higher expenses resulting from inflation pressures as well as costs in their fulfilment segment. The fulfilment costs were set in motion during the pandemic when demand overwhelmed their network. More recently, Amazon Web Services (AWS) – along with Azure and Google Cloud Platform (GCP) – experienced a deceleration in growth as customers globally feel pressure to optimize their usage in this tough macroeconomic environment. We don’t expect this deceleration to persist for the long-term given the secular trend of companies transitioning to the cloud.

For long-term investors, we believe this combination provides an opportunity and that Amazon is now poised to re-accelerate revenue growth, of which we are already seeing signs, while expanding margins and free cash flow. With respect to margins, given the fast growth in AWS and advertising, the latter generating almost $40 billion in sales and growing at greater than 30 per cent recently, the resulting mix-shift could result in operating margins of 10 per cent or higher over time. This level would represent a 5x increase over 2022 levels. In sum, we are capitalising on what we believe is arguably one of the most competitively advantaged business in the world, which is growing well, poised to accelerate that growth and expand margins, and is trading at an attractive price.

Thermo Fisher Scientific

During the quarter, we also raised our position in Thermo Fisher Scientific. The company effectively sells pickaxes and shovels to the life sciences industry, is well balanced, is durable, and has a strong management team at the helm. We took an initial position recently and are now raising it to an average weight within the Portfolio. During the most recent quarter, the company grew revenue 11 per cent in constant currency. Core organic growth, excluding COVID-19 testing revenue which fell 16 per cent, grew a very strong 13 per cent. This company plays an important role within the Portfolio as a “safety” within our growth spectrum approach and over the next five years we expect earnings before interest, taxes, depreciation, and amortisation (EBITDA) and earnings per share (EPS) to grow at roughly low double digits and low teens, respectively.

Mastercard and Visa

We trimmed Mastercard and Visa to equal weights of the Portfolio. Mastercard and Visa operate as a duopoly in a large and growing market. Over the last 50 years, global personal consumer expenditures (PCE) has grown 7-9 per cent annualised. We expect 4-5 per cent long-term PCE growth going forward. Additionally, the shift from cash to credit continues unabated, with a total credit penetration of only approximately 50 per cent globally. This shift provides Visa and Mastercard with another approximate 4-6 per cent of growth. When combined with PCE, this gives both companies high-single-digit to low-double-digit revenue growth opportunities. This growth estimate is before accounting for growth amplifiers like the acceleration of e-commerce, the shift from offline to online, and additional services. Both companies enjoy extremely strong network effects that provide strong competitive advantages.

We have trimmed Visa and Mastercard because their combined weight grew to over 12 per cent because of their recent performance and to fund our increase in Amazon’s position size. We added to both positions when their prices were depressed due to cross-border transactions deteriorating materially from the pandemic. Cross-border volumes came roaring back when travel corridors reopened, and although we are several quarters removed from the cross-border nadir, Visa still grew volumes more than 30 per cent in the March 2023 quarter. Total cross-border volumes are now 132 per cent of 2019 levels. At 4.5 per cent each, both companies remain high conviction positions for the Poleb Capital Global Growth Fund.

Abbott Laboratories

Lastly, we trimmed Abbott Laboratories a medical devices and health care company, bringing it back to a more average position size and to also fund our increase in Thermo Fisher Scientific. Abbott is entering a year in which the company is expected to see approximately $6 billion in COVID-19 test sales disappear, thus, creating a headwind for margins and EPS. That said, the core business has a clear path to growing high single digits in FY23. EPS grew at a 20 per cent compound annual growth rate (CAGR) from 2019-2022, far beyond our expectations when we initiated our investment. Now, we expect a more normal growth rate of low teens EPS beyond this year. Further, management’s adeptness at allocating capital continues to impress us. We expect Abbott to drive top line growth without heavily investing in research and development (R&D) and selling, general and administrative expenses (SG&A) this year – management effectively “front-loaded” those investments in 2021 and 2022 when COVID test sales created a bolus of cash. We believe this should allow for leverage on the operating margin going forward. Combined, Abbott and Thermo Fisher now represent 7 per cent of the Portfolio.

The Polen Capital Global Growth Fund owns shares in Amazon, Thermo Fisher Scientific, Mastercard, Visa and Abbott Laboratories. This article was prepared 05 May 2023 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade these companies you should seek financial advice.


Established in 1979, Polen Capital is a high conviction growth investment manager with offices in the US and UK. Polen has been dedicated to serving investors by providing concentrated portfolios of the highest-quality companies for more than three decades. The firm’s established team manages US$71 billion in total assets and their longest-running flagship investment strategy has delivered on average double digit annual returns for more than 30 years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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