The winners, and how they did it
SCOTTISH Mortgage, spearheaded by James Anderson, has produced the strongest return over 20 years and is consistently in the top ten performing UK funds.
Part of the fund’s strategy is similar to Buffett’s: it too strives to buy and hold.
Corporate strategy director Catharine Flood says: ‘It’s not complicated. We buy things that stand a good chance of becoming the leader in their sector. It may not be glamorous, but that’s what we do. We’re patient, long-term owners of exciting growth companies.’
However, the types of companies Scottish Mortgage invests in are different to those in the Berkshire
Hathaway portfolio. Scottish Mortgage looks for growth companies that are disrupting markets, rather than large, stable companies.
Disruptors have been in technology, but the fund managers believe they are now increasingly in biology and they’re adapting the portfolio accordingly. ‘The 20th Century was the century of the computer,’ says Flood. ‘The 21st Century looks like it will be the century of biology. Our portfolio has changed in shape as we have looked at the new developments.’ The gene-sequencing giant Illumina is the trust’s largest holding and it has major investments in Moderna as well as other biotech companies.
Scottish Mortgage is also known for its large and long-term holdings in technology stocks such as Amazon and Tesla, both of which remain in the portfolio even though they may not have the astounding growth potential over the next decade that they had when they were first bought.
Energy, transport and the materials they require are also popular with the managers. ‘It’s likely that there will be a nickel shortage by 2023, a lithium shortage by 2028 and a cobalt shortage by 2025,’ says Flood.
‘As long-term investors, you want to see who’s going to be solving the problems that are coming down the line and how good their management teams are.’