The fund manager, which sets the bar of achieving five times the original investment in between 7 and 10 years, is pretty pedantic about their investment philosophy, and drives home that stocks like Tesla and FAANGs are what investors want for long-term returns.
“Unless we can get a clear idea that we can make that multiple, we wouldn’t buy, or if indeed if we already own, we’d sell,” said Baillie Gifford director, Colin Neilson. “So, we’ve sold Apple, and we’ve sold other stocks which are still very successful businesses.”
Neilson said in the case of Amazon, Netflix, Facebook and the like, the fund managers can unquestionably justify the stocks.
“We can virtually justify Amazon’s multiples on web sales alone,” he said. “There are so many threads and strands to these businesses that we believe are underappreciated – they have enormous growth potential ahead of them.”
Interestingly, while CFS has pretty strong sustainability guidelines, the Baillie Gifford fund invests in Tesla, which on the outset, doesn’t seem to fit the good governance mould.
But, Neilson said Tesla’s gotten a little too much bad press, and the company is selling more cars than Mercedes Benz and BMW combined in the US, and has the capability to lead the autonomous vehicle sector.
Neilson said the fund regularly engages with Tesla’s eccentric CEO, Elon Musk, and said the Securities and Exchange Commission findings permitted changes to the corporate governance structure to be implemented sooner, and split the top senior roles.
“Whilst we admire the foresight, energy and vision of Elon Musk, he really does have to bring more focus to executing the opportunities that we believe that modelled,” said Neilson.
CFS’ Scott Tully said that there is a lot of “short term noise” going on, but the Baillie Gifford fund aims to look through the noise at stocks that can withstand that.
Neilson said the autonomous vehicle space is growing, and the uncertainty around them is diminishing with some cars even permitted to drive in California.
