Artisan Mid Cap Fund Trims Coherent Holdings Despite Strong Earnings
The fund maintained long-term conviction in the photonics supplier even as it reduced exposure following robust revenue growth and a stock price nearing the upper end of its assessed range.
Artisan Partners has released its first-quarter 2026 investor letter for the Artisan Mid Cap Fund, revealing a portfolio adjustment that reflects a broader shift in market sentiment. While the fund recorded negative absolute returns for the quarter, it managed to slightly outperform the Russell Midcap Growth Index. This performance occurred against a backdrop where investors increasingly favoured lower volatility and income-oriented equities, causing value stocks to outpace growth strategies significantly.
A key action taken during the quarter was the trimming of the fund's position in Coherent Corp (NYSE:COHR). The decision followed the company's strong earnings report and a valuation that had approached the upper end of the fund's assessed range. Although the fund maintains long-term conviction in the company, the move highlights a disciplined approach to risk management when stock prices rise rapidly on strong fundamentals.
Coherent reported revenue of $1.8 billion in the third quarter of fiscal 2026, representing a 21 per cent year-on-year increase. This growth was driven by surging demand for AI data centre and communications applications. The stock has rallied sharply, closing at $335.26 on 8 May 2026, which marked an 8.88 per cent return over the preceding month and a 331.09 per cent gain over the past 52 weeks.
Despite these robust fundamentals, Artisan Partners noted that while they acknowledge the potential of Coherent as an investment, they believe certain other AI stocks offer greater upside potential while carrying less downside risk. The fund manager cited the stock's valuation as the primary driver for the reduction, even as the company benefits from strong demand for high-speed optical components supporting AI-driven data centre expansion.
The fund also reduced its positions in Wingstop and Astera Labs during the quarter, indicating a broader rebalancing of the portfolio. The Artisan Mid Cap Fund continues to navigate a complex environment where the escalating conflict in Iran has influenced market behaviour, alongside persistent AI-related investments that continue to support capital spending and earnings across the sector.
The move underscores the ongoing tension between growth narratives and valuation discipline in the mid-cap space. As the fund looks ahead, it remains focused on selective stock choices in sectors like industrials and healthcare, which have provided strength, while consumer discretionary has faced weaknesses.
