Focus on ‘exceptional’ companies makes this an invest and forget option
Thursday 08 Aug 2019 Author: Steven Frazer

Escalating trade tensions and ongoing Brexit unknowns can make the world feel like a scary place but history has a way of putting  these things into context. Investing early and for the long-haul is the road to real wealth creation and we believe the Baillie Gifford US Growth Trust (USA) is worth backing.

Launched in March 2018 by the same team that runs the hugely popular Scottish Mortgage Investment Trust (SMT), manager Gary Robinson is not concerned with the here and now, his strategy is to identify and own the exceptional growth companies in America.

The US has for decades been one of the best and safest markets for finding top-drawer growth companies, like Amazon, Facebook, Google and Netflix. Yes, the main S&P 500 benchmark crashed during the financial crisis but in the 10 years since it has soared 276%, far beyond pre-crisis peaks of 1,560-odd.

Baillie Gifford US Growth still has large stakes in many of the above growth companies but has also built stakes in giants of tomorrow. Firms like Shopify, which helps retailers embrace online sales, posh homewares business Wayfair, and Illumina, which is building advanced equipment to unlock the power of genetic science for all of us.

These illustrate long-run growth themes that change behaviour, and lives.

FLEXIBLE APPROACH

One of the challenges for many growth funds is that they are barred from owning stakes in private businesses, meaning they miss out on early growth opportunities.

Baillie Gifford US Growth is not, although it keeps private stakes small to avoid liquidity issues, of which there have been some high profile examples of late. Just 10.8% of the portfolio is in 11 private stocks.

Some of the ones you may have heard of include Slack, the workplace text tool, and Peloton, the at-home cycling connected fitness platform. It also has a 2.1% stake in SpaceX, the Elon Musk-founded firm that runs Nasa space missions and developed the first re-usable rockets.

This is just a flavour of the 50 or so companies in which the trust is invested, so it has in-built diversification.

This week Baillie Gifford US Growth reported its first set of annual results to 31 May 2019, albeit covering the slightly extended period since launch. The trust’s share price beat the S&P 500 (up 22.2%) by about a third with a 28.4% return. Net asset value (NAV) did even better, up 28.8%, in sterling terms.

Since launch the share price has rallied from 98.5p yet the shares premium to NAV remains thin at 0.35% despite this impressive performance. An ongoing charge of 0.88% is pretty reasonable making the Baillie Gifford US Growth very attractive for growth seekers over the long-run.

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