How Baillie Gifford American became a star fund

TL;DR

Bailey Gifford American Fund aims for long-term capital growth by outperforming the S&P 500 index, backed by its 23-year track record. The fund focuses on finding exceptional growth companies in North America and holding them for extended periods.

Transcript

hello with me today i have dave bishnowski portfolio manager at the bailey gifford american fund dave the fund has been around for over 20 years but can you please tell us about its objectives and how you go about getting a good outcome for shareholders the objective of the fund uh the american fund is to produce long-term capital growth specifical... Read More

Key Insights

• 🫰 Bailey Gifford American Fund aims for long-term capital growth and has a track record of outperforming the S&P 500 index.
• 🥹 The fund's strategy focuses on finding exceptional growth companies, investing in them at scale, and holding them for a very long time.
• 💪 Recent success can be attributed to investments in companies like Shopify and Tesla, which experienced strong fundamentals and progress in their industries.
• 😘 During market volatility, the fund focused on stress-testing holdings and assessing potential threats posed by COVID-19, rather than making new purchases at the March lows.
• 😶‍🌫️ Recent stock purchases include disruptors in the used car buying process (Carvana and Vroom), innovative insurance models (Lemonade), and cloud software companies (Cloudflare, Datadog, and Twilio).
• 💆 The fund believes in staying true to their philosophy, process, and fundamental analysis, rather than getting distracted by short-term market movements.

Questions & Answers

Q: What is the objective of the Bailey Gifford American Fund?

The fund aims for long-term capital growth and outperformance of the S&P 500 index over five-year periods by investing in exceptional growth companies in North America.

Q: How does the fund select investments?

The fund focuses on finding exceptional growth companies, investing in them at scale, and holding on to them for a long time. This strategy takes advantage of asymmetrical equity returns, where a few stocks generate the majority of wealth creation in the market.

Q: Why has the fund performed exceptionally well recently?

The fund's recent success can be attributed to investments in companies like Shopify and Tesla. Both companies experienced strengthening fundamentals and significant progress in their respective industries, even prior to the COVID-19 pandemic.

Q: Did the fund take advantage of lower prices during the market sell-off in March?

The fund's approach during the volatile market period was measured and calm. They focused on stress-testing their holdings, assessing potential threats posed by COVID-19, and emphasized the resiliency of their investments. They did not make significant new purchases during the March lows.

Q: Which stocks have the fund been buying recently and why?

The fund has been buying stocks like Carvana and Vroom, which disrupt the used car buying process, and Lemonade, which brings an innovative AI-driven model to the insurance industry. They have also added software companies like Cloudflare, Datadog, and Twilio, who are well-positioned as enterprises shift to the cloud.

Q: Did the surge in tech sector share prices surprise the fund?

The fund acknowledges that surprises are part of the investment landscape every year. While this year's surge in tech share prices was unexpected, they emphasize the importance of staying true to their philosophy, process, and focusing on the fundamentals of the businesses they invest in.

Q: Does the fund believe that the current tech boom is overheating?

The fund does not think much about sectors but instead evaluates each holding individually. They consider whether a particular holding has overheated by assessing if the share price has extended beyond the fundamental opportunity. They focus on the potential for significant returns based on the current opportunity and a 5 to 10-year time horizon.

Q: What is the current strategy of the Bailey Gifford American Fund?

The fund constructs its portfolio stock by stock, focusing on the fundamental opportunity for significant returns. They do not sell a stock solely based on recent performance but consider the long-term potential of the business. Their process aims to identify companies with an enduring edge in large markets.

Summary & Key Takeaways

• Bailey Gifford American Fund's objective is long-term capital growth and to outperform the S&P 500 index over five-year periods.

• The fund achieves its goals by investing in exceptional growth companies in North America and holding them for a long time.

• The fund has an impressive history of outperforming its benchmark, with recent success attributed to investments in companies like Shopify and Tesla.