As with any investment, your capital is at risk.
We have been discussing, and positioning for, the potential outcomes of these trends for some time now, but the USA’s abrupt announcements represent a system shock that warrants a re-examination of our previous assumptions.
Mapping the portfolio by structural edge helps. Compounders reinvest systematically, Disruptors stretch market boundaries and Capital Allocators deploy cash when others hesitate.
Balancing exposure across these profiles, and diversifying within them, has broadened the drivers of growth within Global Alpha over the past couple of years. We entered April in a strong position, though by no means immune, to the immediate reactions to tariffs.
Stress-testing
This resilient starting point provides time and space for careful examination. We’re mindful of the very human behavioural pitfalls that can emerge in times of market stress. We must resist the natural desire to be responsive and take action unless we have a clear view of why it improves the long-term positioning of the portfolio.
At the same time, we must remain open-minded to change and avoid becoming penned in by our prior assumptions. So we test and re-test our thinking. We do that methodically, openly and across a wide range of possible futures.
We have examined every holding against the new trade backdrop, asking whether projected cash flows withstand higher friction and whether managements possess the temperament - and finances - to treat disruption as an opening rather than a threat.
Underpinning this exercise is a search for companies that improve, not just survive, in changeable conditions. These are antifragile businesses in Nassim Taleb’s language.
Strong cash flow, optionality in investment, and cultures that treat disruption as a chance to take share or acquire assets can all be features.
Recognising antifragility offers two practical advantages:
- First, it helps us stay the course when separating temporary sentiment from genuine impairment.
- Second, it can help us to understand how volatility may accelerate growth for some special businesses rather than simply be endured.
We already own several companies with this feature in the portfolio. Martin Marietta, an aggregates producer, and CoStar, a real-estate data and marketplace business, illustrate the trait. They operate in markets that are exposed to all kinds of disturbances. Both wield fortress-like balance sheets and a record of acquiring assets on attractive terms when others pull back. Both companies can make competitive progress during, and in some cases because of, turbulent times.
By recognising these traits, we become more effective owners of these businesses for our clients, by holding them for the right reasons through cycles.
Over the past 18 months, we have sold positions in some businesses whose margins rely on uninterrupted global consumer flows—Estée Lauder and Adidas among them—and reshaped our Chinese exposure toward firms that earn most revenue locally or serve clear national priorities.
In recent months, we have trimmed select US technology names after strong share-price runs and redeployed capital into areas where markets have offered us great growth businesses at undemanding valuations. We have added Japanese semiconductor-equipment makers, US construction suppliers and Brazilian online banking to the portfolio so far this year as we further widen the range of growth that the portfolio is exposed to.
An opportunity seeking mindset
Our growth ambition remains high. Our Trusted Advisors network, where we draw from the best ideas across all Baillie Gifford investment strategies, provides us with valuable additional perspectives and look-out points.
A highly valued US digital advertising platform might not feel like it fits the anti-fragile mould but we have found a place for the disruptive growth potential of AppLovin in the portfolio this year.
AppLovin’s advertising platform is disrupting mobile marketing at scale and its share price does not appear to recognise how large this opportunity is. Salesforce, the ubiquitous customer relationship management business, may be entering a new growth phase as generative-AI agents unlock fresh productivity layers for its vast customer base.
We are also interested in the chance to bring in high-quality industrial businesses that may be temporarily on sale—businesses with durable competitive positions that are well positioned across a range of trade scenarios. This environment may well provide tremendous opportunities for the cool-headed stock picker.
In summary, the portfolio is well set and broadly positioned. It will be exposed to the near-term ups and downs of stock markets but we are confident that it is built to make progress through them.
We will avoid the very human temptation to simply ‘do something’ by continuing to test the strength of what we own against the opportunities to bring new thinking into the portfolio via our own research and our network of trusted advisors.
By forming a view on the deeper currents, stress-testing the existing portfolio for antifragility and continually scouting for opportunities, we can convert today’s policy turbulence into tomorrow’s compounding.
Risk factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in May 2025 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
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