Finance

In the first quarter of 2026, the Mairs & Power Balanced Fund experienced a return of -1.77%, outperforming its benchmark composite index, which saw a decline of -2.68%. This positive performance was primarily attributed to successful stock selection and strategic exposure to the Utilities and Industrials sectors, which helped mitigate the impact of market fluctuations driven by the Iran conflict and escalating energy prices. However, the fund noted the re-emergence of inflation concerns as Middle East tensions pushed oil prices higher, prompting the Federal Reserve to adopt a more cautious stance on interest rates. Despite this challenging backdrop, the firm expressed a long-term optimistic outlook, citing robust corporate earnings, improving trends in small-cap companies, and attractive opportunities in reasonably valued sectors such as Utilities, Industrials, and Health Care. Within this context, the fund highlighted Fiserv, Inc. (NYSE: FISV) as a stock facing challenges with its Clover product.

Fiserv, Inc., a prominent financial technology company, provides a comprehensive suite of payment processing, banking software, and digital commerce solutions to various businesses and financial institutions. However, the company's Clover product, a cloud-based payment platform, has been identified by Mairs & Power Balanced Fund as a source of decelerating growth. In their Q1 2026 investor letter, the fund specifically stated that "The Financial sector also weighed on performance due to our overweight allocation as well as unfavorable security selection. Fiserv (NYSE:FISV) continues to face issues with its Clover product, a cloud-based payment platform, which has caused decelerating growth." This observation underscores a key challenge for Fiserv, as the performance of its Clover platform directly impacts its overall growth trajectory.

The financial data for Fiserv, Inc. reflects some volatility. The stock's one-month return was -0.70%, with shares trading between $52.17 and $177.36 over the preceding 52 weeks. As of June 1, 2026, Fiserv, Inc. closed at approximately $59.05 per share, commanding a market capitalization of about $30.46 billion. Despite its significant market presence, Fiserv, Inc. did not appear on Mairs & Power Balanced Fund's list of the "40 Most Popular Stocks Among Hedge Funds Heading Into 2026." The number of hedge fund portfolios holding Fiserv, Inc. also saw a decrease, falling from 83 in the previous quarter to 61 at the end of the first quarter.

While acknowledging the inherent risks and potential for growth in Fiserv, Inc. as an investment, the Mairs & Power Balanced Fund expressed a stronger conviction in the potential of certain AI stocks to deliver higher returns within a shorter timeframe. This strategic preference suggests a pivot towards emerging technologies and sectors that are perceived to offer more immediate and substantial growth opportunities. The fund's stance highlights a cautious approach towards Fiserv, despite its established position in the financial technology sector, due to the perceived challenges with its Clover product and the more compelling opportunities available elsewhere.

The Mairs & Power Balanced Fund's analysis of Fiserv, Inc. in its Q1 2026 investor letter indicates a period of adjustment and re-evaluation for the financial technology giant. While Fiserv remains a significant player in its industry, the performance of its Clover product and the shifting investment landscape towards high-growth AI opportunities are factors that warrant close attention from investors. The fund's decision to favor other investment avenues, particularly in the AI sector, suggests a strategic recalibration in response to market dynamics and evolving technological trends, which could have implications for Fiserv's future growth and investor appeal.

American Superconductor Corporation (AMSC) has recently experienced a significant surge in its market value, with shares doubling since February. This bullish trend is largely attributed to the market's perception of AMSC as a key player in providing power solutions for generative artificial intelligence and data centers, areas currently enjoying substantial investor interest.

Despite the enthusiastic market response, a deeper analysis of AMSC's financial performance reveals a more nuanced picture. A substantial portion of the reported revenue growth originates from strategic acquisitions rather than organic expansion within its existing operations. The core Grid segment, which is fundamental to the company's long-term stability, continues to show growth predominantly in the high single-digit range. Additionally, while the Wind segment has demonstrated impressive growth, it is heavily concentrated and dependent on a single major customer, Inox, posing a potential risk due to lack of diversification. This raises questions about the sustainability and true breadth of AMSC's accelerated growth, suggesting that the current valuation might be overly optimistic.

The market's enthusiasm for American Superconductor, fueled by its perceived connection to the booming AI sector, has pushed its valuation to levels that imply robust, broad-based growth. However, the company's financial indicators do not yet consistently support this narrative. Investors should exercise caution and evaluate whether the underlying fundamentals align with the elevated market expectations. A comprehensive and diversified growth strategy, coupled with a reduction in reliance on single clients, would strengthen the company's position and provide a more solid foundation for its future valuation.