Capital at risk

Investment strategy

US Discovery

The strategy builds on the longer-running Global Discovery Strategy but looks exclusively at the US – which we consider unmatched in its appeal.  

Smaller businesses often utilise novel technologies or approaches to solve key problems. The companies we seek offer better and cheaper solutions than the status quo. They challenge today’s incumbents shaping our future.  

Green and orange smoke dispersing in the air over a black background.

Ambitious companies solving today’s problems

We carry out in-depth research to unearth immature, disruptive companies. Once found, we want to hold them for the long term as they grow and scale. We mainly consider opportunities below $10bn market cap. However, at least 80 per cent of assets will be invested in companies with a market cap of $30bn or smaller.

Immaturity, not size, is the proxy for potential

The attraction of investing in smaller companies is the range of possible outcomes.

This can lead the strategy to display pronounced volatility, especially over the short- to medium-term. Yet investing early increases the possibility of a highly asymmetrical outcome. We aim to harness this to deliver overall strategy returns.

The strategy aims to outperform (net of fees) the Russell 2500 Growth Index, predominantly through capital appreciation, over rolling five-year periods.

Harnessing asymmetry to deliver long term

Our portfolio is constructed entirely from the bottom up, disregarding the benchmark. It has an extremely high active share and operates in a large investible universe. We position ourselves along the frontiers of innovation and technological development. 

What unites the companies we invest in is immaturity. This we define as: innovating to solve significant problems and reshape an industry, emerging competitive edge, quality and ambition of management, and scalability. 

This pursuit of immaturity is unique to US Discovery. 

We established the Discovery Strategy to capture the opportunity in the enduring super cycle of innovation.
Douglas Brodie

Meet the managers

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Philosophy and process

Explore our investment philosophy and the processes around how the team constructs the portfolio.

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Strategy portfolio holdings

A list of the top 10 holdings that the representative portfolio invests in.

All figures up to: 31 December 2023

#Holding% of portfolio
1Axon Enterprise5.38
2TransMedics Group4.58
3AeroVironment4.29
4CyberArk 4.20
5LiveRamp3.65
6Sprout Social3.64
7Novanta3.30
8JFrog3.08
9Twist Bioscience3.06
10Varonis Systems2.98

Strategy holdings by sector

All figures up to: 31 January 2024

1Technology51.15%
2Health Care27.24%
3Industrials10.60%
4Consumer Staples3.04%
5Cash2.37%
6Consumer Discretionary1.95%
7Financials1.48%
8Telecommunications1.13%
9Basic Materials0.57%
10Real Estate0.48%
Total 100%

Strategy holdings by sector

All figures up to: 31 January 2024

Total: 100%

Strategy holdings by region

All figures up to: 31 January 2024

1North America88.28%
2Emerging Markets9.03%
3Cash2.37%
4UK0.33%
Total 100%

Strategy holdings by region

All figures up to: 31 January 2024

Total: 100%

Please note

The information contained on this page is intended as a guide only and should not be relied upon when making investment decisions. All holdings information is unaudited. Source Baillie Gifford & Co. Please note that totals may not add due to rounding.

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