Capital at risk

Actual investors look at the big picture. Not just the small print.

  • Large shifts in how people meet their needs and wants are inevitable and often foreseeable. Identifying such change allows investors with long horizons to position for growth, regardless of broader economic progress.
  • Not every disruptive company is a successful investment. Management alignment, strong execution, adaptability and financial strength are other common ingredients. 
  • Assessing top-down opportunity is not enough, but it strongly helps to guide investment research to the most fruitful areas.

The companies that flourish in the long term understand how the world is changing or how they might change the world themselves. They anticipate what customers need and want and make the right decisions at the right time.

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imagine what kinds of businesses will benefit from the disruptive changes we see coming and which will be sidelined and superseded.

Investing in disruption

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.

What are some of these motors? In coming years, we see a huge shift in society’s approach to managing health as our understanding of genes, proteins and biological processes multiplies and combines with huge processing power. We see financial services – particularly banking – being turned upside down by a new generation of seamless apps offering multiple functionality at much lower cost. We see the coming green electrification of the global economy as still in its infancy, and we see food supply and distribution systems being completely re-imagined. Only in time will we discover how these seismic shifts play out, but they are surely inevitable.

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.

Changing attitudes

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 fuels 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, or their willingness to make decisions based on it. If consumers choose not to buy products and services from companies they consider irresponsible then it is surely very pertinent to the investment case, wherever you stand on the underlying issue.

The right questions

The big picture often emerges from asking what a company is making possible that wasn’t possible before. It could be mobile apps that connect people in remote parts of Africa or China to micro-lenders, 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, some of the 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 be that than precisely wrong. Because anticipating big change over 10 years is always going to be worth more than being slightly more accurate than our fellow investors in forecasting next year’s profits.

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Important information

The content of this website is intended exclusively for professional investors in accordance with MiFID legislation. ’Professional investors’ are potential investors who are deemed to have the status of “professional clients”, within the meaning of MiFID (2004/39/EC), as transposed in Ireland. It is not intended for retail investors.

Baillie Gifford Investment Management (Europe) Limited is authorised and regulated by the Central Bank of Ireland (Reference number C182354) as an Alternative Investment Fund Manager and UCITS Manager to Baillie Gifford Worldwide Funds plc. Its registered office is 4/5 School House Lane East, Dublin 2, D02 N279, Ireland.

This website is informative only and the information provided should not be considered as investment or other advice or a recommendation to buy, sell or hold a particular investment. Read our Legal and regulatory information for further details.

Any stock examples, or images, used on this website are not intended to represent recommendations to buy or sell, neither is it implied that they will prove profitable in the future. It is not known whether they will feature in any future portfolio produced by us.