Fund of the week ‘The pandemic winners will keep their crowns’

Covid-19 has changed the way society operates forever, Kirsty Gibson of the Baillie Gifford US Growth Trust tells Jessica Beard

American technology stocks have tumbled over the past month as investors ditched last year’s winners amid an economic recovery and fears of rising inflation. Funds that thrived in 2020 have suffered and the Baillie Gifford US Growth Trust, which returned an impressive 133pc in 2020, lost 17pc in mid-February.

Kirsty Gibson, co- manager of the £ 920m trust, says investors should not be troubled by the turbulence. She has not been and expects plenty more gains to come.

She tells Telegraph Money why she thinks the way we live has been disrupted for good and highlights the stocks that will be the winners in the post-pandemic new normal.

WHO IS THE FUND FOR? Anyone who is looking to invest in public and private American companies whose value will grow substantially faster than the average. You need to invest for five to 10 years and be willing to tolerate volatility.

HOW DO YOU PICK STOCKS? There are three building blocks we look for. The first is for companies that are addressing large market opportunities. This gives them the ability to grow unimpeded at super-high rates.

The second is the ability to build a sustainable competitive advantage and the third is that they have to be run by founders who have skin in the game and own quite a lot of shares. They need to have an attachment to the company other than the share price.

YOU HOLD STOCKS THAT THRIVED LAST YEAR. CAN THEY KEEP IT UP? We owned stocks that did well but stuck to our process and didn’t make any knee-jerk reactions.

So we did not buy Moderna, the vaccine manufacturer, or Zoom, the video conferencing group, because of the pandemic – we owned them before. We believe in the long-term structural changes they are driving.

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According to science, evolution does not happen gradually. It is stable for a while then is radically disrupted and finds a new stability. That is what has happened. The pandemic has accelerated disruption and we are establishing a new normal.

As the world starts to open up we will not return to how things were. Trends we believed to be inevitable, and built the foundations of our portfolio on, have accelerated, such as e- commerce in retail, furniture, cars, even homes.

It is closer to the beginning than the end of those trends.

TECH STOCKS HAVE SOLD OFF. IS THERE MORE TROUBLE AHEAD? Given what happened in 2020, it’s easy to forget share prices can rise and fall significantly in the short term, and that’s what happened this year.

We can’t predict short- term price changes and don’t promise the same level of returns we experienced last year. It looks like there is more volatility ahead.

However, it’s wise to revisit our views and see if the share prices are still lined up with the fundamentals of a company. The one we cut back on was Tesla, but it’s still a large holding.

The strategy means we will always assess if a company has a good probability of being able to grow two and a half times. A random stock has a 20pc chance of growing that much, so our confidence has to be higher. Tesla can do that because it still has a lot of earlystage opportunities, such as in energy storage and solar power. But when the share price is so much higher than it was, it was prudent to trim our holding.

WHAT HAS BEEN YOUR BEST STOCK? Wayfair, the online homeware shop. We bought it in March 2016 at $41 a share; today it is at $336. It is still one of the largest holdings in the fund because we are still very excited about its potential.

AND YOUR WORST? 2U, an American education company.

We bought it in February 2019 at $71 a share. Then it halved. And then it fell by another 60pc. We finally sold it in March 2020 for $ 18.60. It was a bad combination. It had partnered with universities and had issues working with them. Rivals were also eating away at its market share and this combined into a big blow-up.

HAVE YOU INVESTED IN THE TRUST AND HOW ARE YOU PAID? I have money invested using both my Isa and pension. It is enough money that it matters to me.

If you’re asking other people to invest their savings in your convictions, you should be willing to put your own behind them too. I’m paid a base salary and a bonus based on the fund’s five-year performance.

What £1,000 invested at launch would be worth now

WHAT WOULD YOU BE IF NOT A FUND MANAGER? A ballet dancer was my childhood dream. I tried but it didn’t work out.