Baillie Gifford US Growth Trust PLC picked an interesting time to release its interim results, what with US investors bailing out of tech stocks.
The message from the investment firm is keep the faith.
“Technologies such as the internet, mobile and AI [artificial intelligence] are spreading out and impacting a far broader range of industries. The golden era may yet be ahead of us,” the trust said in its results for the six months to the end of November.
Over the course of the reporting period the company's share price and net asset value (after deducting borrowings at fair value) returned 9.4% and 17.2% respectively. This compares with a total return of 17.2% for the S&P 500 Index (in sterling terms).
The trust launched in March 2018, since when its share price and net asset value (NAV) have returned 235.3% and 254.3% respectively, compared to the total return (i.e. with dividends reinvested) of the S&P 500, so it is probably worth listening to what its gurus have to say.
The trust seeks to invest predominantly in listed and unlisted US companies that have the potential to grow substantially faster than the average company, and to hold onto them for long periods of time, in order to produce long-term capital growth.
The trust made six additional private company investments over the last six months, Blockstream (blockchain technology), Databricks (cloud platform operator), Discord (gamers-focused comms software), Faire Wholesale (online marketplace), Snyk (software security vulnerabilities identifier) and Solugen (synthetic biology), while three of its existing private company holdings, Aurora Innovation (self-driving vehicles), Ginkgo Bioworks (biotech) and Warby Parker (online spectacles seller), went public in the period.
At the end of November, the trust held positions in twenty-three private companies that collectively comprised 20.8% of total assets.
In reviewing its investment performance since launch, the trust admitted the period had not been a smooth journey with the top fifteen listed holdings of the current portfolio having experienced forty-seven reversals of greater than 20%.
The largest single peak to trough hit was 86% for Wayfair in March 2019, and this is a stock that has delivered a 267% return for the company.
“Total average return of the top fifteen since we first invested is 548% with Tesla topping the list with a 1,798% return. This is asymmetry in action,” the trust said.
“The increased volatility of stock prices over the past six months has led to questions of bubbles, overheating, growth vs. value and what remains exciting. These questions are not unfounded, but most interestingly they are representative of the human condition; the human brain is wired to handle incremental change. The changes the pandemic has rendered have been fast and wide reaching. It is easier to believe we are heading toward a period of stasis, where the new 'normal' is bedded down but what if we are at the tip of the iceberg of what change is still to come?” the trust’s interim management report wondered.
The self-declared “bottom-up stock-picker” said it looks to buy exceptional businesses, not themes or sectors.
Share price volatility comes with the territory, is the message.
“ In a world of asymmetric returns, we believe it is better to venture, than not venture at all,” it concluded.