Actual investors look at the big picture. Not just the small print:
Understanding how the world is changing is a better guide to investment than picking over the detail of analysts’ research.
The big picture often emerges from asking what a company is making possible that didn’t used to be possible. If what’s being made possible is big enough and important enough, companies probing at the frontiers will succeed. For Actual investors it’s about finding companies where profits just might compound at significant rates, year after year after year.
For Actual investors, the first task is to understand the dynamic environment in which those big strategic calls are made. Then we assess whether a company has what it takes to realise its vision.
It’s that big picture, not current financial performance or quarter-to-quarter market movements, that matters most to Baillie Gifford. It helps us to imagine what kinds of businesses will benefit from the disruptive changes we see coming, and which will be sidelined and superseded.
Informed by our academic and entrepreneurial contacts worldwide, we seek to understand the motors of disruption, and to keep pace with pioneering businesses as they equip themselves for a thriving future.
The personalisation of medicines; the spread of payment apps for lending; the online consolidation of property advertising: technological and behavioural changes like these are key to the prospects of many of the companies in which we invest clients’ money.
With disruption at its current scale, traditional, quantitative investment research has little chance of telling us what we need to know about a company’s fortunes five or ten years in the future. Of course, we must be satisfied that a firm’s figures add up and that its operations and approach to business are robust. But we focus on the scale of the market opportunity, the ambition and adaptability of management, the potential of its entrepreneurial leadership and intellectual property, and on the new customers it might create. We don’t fixate on today’s market share or the minutiae of quarterly figures.
Take energy and transport, where we invest billions of pounds for clients in companies pioneering a cleaner world. There’s no bigger picture than the quality of life on the planet, and the phasing out of fossil fuel is central to preserving that. In this field, shifting societal attitudes matter far more to a fossil fuel or car company than the extrapolation of today’s sales into a world transformed. Who will want the inconvenience of owning a fossil-fuelled, manually piloted car when an electric self-driving one can be summoned at a minute’s notice? The big picture matters. Electric vehicle companies with autonomous driving ambitions such as Tesla and Nio are examples of where we invest in transformational change.
No spreadsheet column will tell you about the importance people place on the threat of global warming, but it matters that consumers are choosing not to buy products and services from companies they consider irresponsible. So, for Actual investors, the starting point might be: Is this company doing enough to mitigate climate change and greenhouse gas emissions? Is it achieving something worthwhile? Is it benefiting from behavioural change? If the answers to those questions is yes, then there’s a better than average chance of long-term success and we will then look in detail. And to be clear, sometimes that detail does matter – but it’s not our starting point.
The big picture often emerges from asking what a company is making possible that didn’t used to be possible. It could be mobile apps that connect people in remote parts of Africa or China to micro-lenders, or health innovators improving drug therapies by tailoring them to our genetic makeup, or microchip makers achieving new levels of miniaturisation through ultra-violet technology: if what’s being made possible is big enough and important enough, companies probing at the frontiers will succeed. For Actual investors it’s about finding companies where profits just might compound at significant rates, year after year after year.
In short, looking at the big picture means we may only be roughly right, but we’d rather that than be precisely wrong. Because anticipating big change over 10 years is always going to be worth more than being slightly more accurate than fellow investors in forecasting next year’s profits.
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We have a great range of strategies available, each offering you access to Baillie Gifford’s investment expertise. All you have to do now is choose which ones.
The value of investments and any income from them may go down as well as up and you or your client may not get back the amount originally invested.