Top performing global growth manager Stephen Yiu backs ecommerce companies, firms involved in digital transformation and “pent up” businesses as the stocks in line to maintain the Blue Whale Growth fund’s strong returns.
Writing to investors today (July 7), Mr Yiu said the team at Blue Whale aimed to continue investing in “high quality businesses” with a strict valuation discipline, noting that throughout the March sell-off and subsequent market rebound the strategy had “withstood its toughest test yet”.
Looking forward, Mr Yiu thought there were two types of companies where he saw opportunity: “lockdown survivors” and “beneficiaries of accelerated adoption”.
In terms of the survivors, Mr Yiu said: “With lockdown easing globally, many companies in industries that suffered under lockdown are embracing the current re-opening.
“Among these are companies where foregone revenues during lockdown are lost forever – such as hotels and restaurants.
“In contrast to these are companies which were not immune to the effects of lockdown, with a slow-down in the sale of products and services, but whose demand is pent up with revenues being delayed, not lost.”
Mr Yiu pointed to medical device companies, such as Boston Scientific, as an example of such a firm.
The devices made by Boston Scientific are used in procedures such as cancer-related endoscopy, heart surgery or chronic illnesses, which are likely to be in demand post-crisis.
Boston Scientific’s share price has tumbled 22 per cent since the start of the year but, according to Mr Yiu, is likely to recover.
Elsewhere, Mr Yiu was looking for sectors which benefit from “strong and sustained growth” which has “accelerated during lockdown”.
He pointed to Paypal and Visa which had benefited from the increased adoption of contactless and online payments, and software companies which enable employees to work more effectively from home, such as Adobe’s Creative Cloud or Amazon’s Web Services arm.
Mr Yiu said: “We are identifying companies and sectors that we have appreciated for some time. Although the quality of a business does not change rapidly, stock markets can be capricious.
“We know we cannot afford to be complacent and will continue to exercise rigorous valuation discipline while honing our approach with a view to continuing to achieve our aim of delivering consistent significant outperformance.”
The Blue Whale Growth fund is in the top quartile of the IA Global Sector over a three-month, six-month and one-year period, returning 15 per cent over the past 12 months compared to its peers’ average of 4 per cent.
It is heavily exposed to the US, with 70 per cent of the fund weighted in North America as at May 31. A similar weighting is in telecom, media and technology firms.
Mr Yiu’s top holdings include Adobe, Microsoft, Facebook and Visa.
imogen.tew@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
