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Blue Whale sets sights on ‘beautiful companies’

Blue Whale sets sights on ‘beautiful companies’

The Blue Whale Growth fund has set its sights on ‘beautiful companies’ in a new concept introduced this month.

Under the concept the fund will avoid investing in companies where "beauty is only skin-deep" and instead opt for those that generate consistent significant outperformance, are well managed, operate in attractive industries and grow sustainably. 

Stephen Yiu, chief investment officer at Blue Whale Capital and lead manager of the £700m Blue Whale Growth fund, said: “Our interpretation of beauty is most closely aligned with the Ancient Greek idea of ‘kalos kai agathos’ where both form and function are important. 

“We avoid companies where beauty is only skin-deep. We see them in ‘narrative stocks’ where the share price is sustained by stories, not fundamentals. 

“A truly beautiful company must not only have a compelling narrative but also the fundamentals to back it up. We look for exceptional businesses that are well managed, operating in attractive industries and that can grow sustainably.” 

The Blue Whale Growth fund has returned 19.9 per cent over the past year, while its sector, the IA Global, has returned 19 per cent.

Over three years the fund has returned 61 per cent while its sector has returned 35 per cent.

More recently however, the fund has underperformed its sector, losing 1.6 per cent over the past six months while its sector returned 10.6 per cent

Yiu added that it was rare to find companies which meet this strict criteria. 

Writing in his monthly blog, Yiu, said: “With truly beautiful companies rare and those at attractive valuations even more so, it is not often that we have the opportunity to buy them.

"However, there are times when beauty is underappreciated by the market and at these times, we act decisively.” 

Commenting of the Blue Whale’s new criteria and use of the word ‘beautiful’, Mel Kenny, chartered financial planner at London-based Radcliffe & Newlands, said: “It is rare that the word beautiful is used within the grey and complex world of investment management.

"The investment firm are using a set of investment criteria which is not too removed from what their competitors do, but stepping outside of their suits with the ‘beautiful companies’ concept could appeal to the everyday person.” 

Aamina Zafar is a freelance writer for FTAdviser