Holdings Update: Buy MSI

The Jensen Investment Team added Motorola Solutions (ticker: MSI) to the Quality Growth Strategy with an initial weighting of 1%. As of November 30, 2025, the Strategy had 26 holdings.

November 2025

Why We Like Motorola Solutions

Our thesis for Motorola Solutions (“Motorola”) is driven by their strong business fundamentals’ alignment with key tenets of the Jensen Quality Growth Strategy’s investment selection process:

Competitive Advantages

• Economies of scale: Motorola dominates the radio market when it comes to mission critical (e.g., first responder) networks. This allows the company to out-invest competitors in research and development and maintain a leading edge in technology, while spreading costs across a wide base.
• Switching-costs: Radio networks have longevity spanning decades and installing a new network would require redoubling the investment, an unlikely pursuit for those managing public budgets. This creates opportunity for Motorola to have years/decades-long services contracts that are unlikely to be displaced, resulting in consistent, recurring, and predictable revenue. There are also costs to switching devices. First-responders consider their radio to be among the most important pieces of equipment — it is the lifeline of a firefighter running into a burning building. While switching devices may seem insignificant, it can introduce frictions (e.g., users asking, “How do I turn this thing on?”) that can literally mean life or death. The software pieces of the Video and Command Center businesses also create switching costs as software becomes embedded into client workflows.
• Brand: Due to the aforementioned “mission critical” nature of devices, Motorola’s decades-long history of reliably servicing first-responders create a high degree of trust when making procurement decisions.

Earnings Stability

• Motorola has stably grown revenue at compound annual growth rates (CAGRs) of 6.5% and 6.3% over the last 5- and 10-year periods. This has translated into adjusted earnings per share (EPS) CAGRs of 11.7% and 18.3% over those periods, demonstrating the significant operating leverage of the business model. The company maintains some leverage due to growth through acquisition; however, there is a demonstrated history of paying down debt, and maturities are laddered over the next decade with no single maturity above FY24’s free cash flow. The average coupon is 4.6% and interest coverage is in the double digits.

Valuation

• Motorola trades at an attractive valuation with strong expected returns based on our forecasts of future cash flows.

Why Now

While we have long viewed Motorola’s attributes as quality, the company’s relatively weak stock price year-to-date provided an entry point for us. The reasons for weakness are moderating top-line growth, as well as the market digesting a historically large acquisition. In our view, the weakness is not due to a fundamental deterioration of competitive advantages, creating an opportunity for long-term investors to initiate a position.

Although we have liked the competitive advantages and fundamentals of the business, our model previously signaled that the stock was too expensive relative to intrinsic value.

Outlook

Motorola’s organic revenue has slowed somewhat after several years of exceptional growth related to U.S. federal stimulus. Despite slower top-line growth (closer to historical performance), margins are expected to continue expanding in the near term. The company is currently integrating a large acquisition geared toward defense that shows promising potential.

Longer-term, we believe Motorola should maintain its dominant position in its core radio business. The company’s investments into video and software adjacencies provide an avenue to boost topline growth and continued strong double digits EPS growth.