Phishing is a social engineering tactic where scammers seek to convince you to hand over your personal details. Phishing usually happens by email, although it can also happen by SMS (Smishing) or by Voice (Vishing). There are several red flags you should look out for to avoid becoming a victim of such an attack and steps you can take to protect yourself.
How does a Phishing attack work?
Hackers are after one thing – your data. Their aim is to get you to hand over sensitive information, including, amongst other things, bank account details. To do this they create fake email addresses and websites and use these to contact potential victims while pretending to be a legitimate organisation. The messages sent by hackers almost always include a sense of urgency or a threat of negative consequences if you do not act immediately. This urgency or the use of threats should always raise suspicion.
There are other tell-tale signs than a phishing attack is underway. These include the language used in the message. Spelling and grammatical mistakes are a sign that the message has not been properly vetted by a brand’s communications team.
Another thing to always be wary of is the type of information that is requested, and the actions you are asked to take. Personal details and sensitive information like passwords to access accounts should never be requested by email, SMS or via a voice call. This also applies to requests to resubmit details which an organisation already has via websites or to download files or software on to your devices. Always check the sender email address and the web links you are being asked to visit to ensure these are legitimate and if in doubt, contact the organisation through a safe channel that you have used before.
Tips to stay safe
The first, and most obvious, tip to help you stay safe from phishing attacks is to exercise caution when opening or responding to messages. In addition to checking domains and web links to make sure they match the company or organisation’s official domain, you can also make sure a website is safe by seeing that the url starts with ‘https://’ and that it has a closed lock icon next to it, immediately to the left, in the address bar (as shown in the image below).
It is also important to regularly check your accounts. If a hacker has gained access, the quicker you spot suspicious activity the better. Not only will you minimise your losses but the quicker an organisation and the authorities know about an incident the more likely they will be able to stop the attack affecting other people.
You should also think very seriously about what protection you have installed on your devices. Most browsers have anti-phishing tool bars. Use them. You can also install anti-virus software and firewalls. Hackers are always trying to find new ways to obtain information and access accounts and so it is important to keep your browser, anti-virus software and firewalls updated as these evolve to meet the changing nature of the threat.
At the end of the day, just remember to stop and think before you click. Ask yourself whether the organisation that has sent you this message normally contacts you in this way. There is no one single action you can take to prevent phishing attacks, but a combination of caution and software will go a very long way to keeping you safe.
Finally, remember that at MeDirect we will never ask you for personal or account details via email or SMS so never share any of this information through these channels with anyone. If you do receive a suspicions message, do not respond, open any files or click on any links. Instead, call us on (+356) 2557 4400. The information you provide will be used to help reduce financial fraud.
Stephen Yiu is the Chief Investment Officer at Blue Whale Capital and Lead Manager of the Blue Whale Growth Fund.
Stephen co-founded Blue Whale Capital with Peter Hargreaves, co-founder of Hargreaves Lansdown, in 2016. The Blue Whale Growth Fund was launched in September 2020 and is a long-only global equity fund focusing on developed markets.
Stephen adopts a high conviction, active approach based on bottom-up, fundamental research.
The story of Blue Whale has been to invest according to the environment we see before us. Having launched the LF Blue Whale Growth Fund in 2017, we had no track record to speak of. Instead, we focussed on what we saw as the potential our investment philosophy could deliver for early investors. At the time our lack of long-term performance meant many were cautious about investing, but a brave few joined us at our £1 launch price, sold on our vision for how best to invest for the future (please note the Blue Whale Investment Funds ICAV – Blue Whale Growth Fund was launched in September 2020 at a NAV per share $10).
Whilst we could not have predicted much of what has transpired since the funds’ inception, our investment philosophy held strong. But it was not the key global events that shaped our funds and their subsequent performance, it was the characteristics of the era in which we found ourselves that informed how we chose our portfolio companies.
Following the financial crisis of 2007, the world entered a new era, in part characterised by “cheap money”. The credit crunch of 2008/09 saw central banks around the world start reducing interest rates. Having sat at around 2-3%, they were suddenly cut down to negligible levels, with certain economies even offering negative rates for a time.
This undoubtedly stimulated spending amongst consumers the world over. Those that were of the age and financial means to buy property were able to secure mortgages at record-low rates, sparking an investment in property. Property prices subsequently rose to dumbfounding heights as everyone scrambled for a piece of the property boom.
In the UK, anecdotal stories of studio flats in prestigious parts of London selling for seven figures and comparisons of tiny city dwellings on offer for the same price as sprawling Highland estates abound.
Another key characteristic of this era was that of cheap goods. Here, it is worth considering the effect China has had on the world economy over the past 15 years.
Under Xi Jinping China has become a powerhouse of industrial productivity. There is a good chance that any electrical goods you buy, the clothes you own or the furniture you have in your house is made in China.
Whilst this has come at a cost – an undermining of democracy and freedom and a questionable human rights record in China – the “benefit” to the Western world was the ability to buy products cheaply, taking advantage of the low labour costs of producing goods in China.
The final characteristic of the post-financial crisis era was that of cheap energy. Despite the price of crude oil reaching an all-time high in 2011, energy costs for the consumer remained manageable as governmental pressure was placed on energy companies to keep prices low in the wake of the credit crunch. This combined with relative political stability among oil producing nations kept energy prices at manageable levels.
This was therefore the era of cheap money, cheap goods, and cheap energy.
The changing environment
But as is often the case following a significant event – in this case global pandemic – the world has now changed. The days of cheap money, cheap goods and cheap energy are over. At least for the time being.
In the current inflationary environment, central banks are raising interest rates to try to keep inflation under control. Many are reluctant to make the hard decision to drive rates to a point at which inflation will be under control due to the politically unpalatable risk of recession. The knock-on effect is that borrowing money is far more expensive than it has been for the past 15 years, and cash reserves are being eroded as inflation takes hold. Mortgage repayments will be higher for homeowners, and for those that rent, prices have been increased to cover these higher repayments levied on the owner.
The pandemic was a wake-up call for Western economies. Over the past couple of years, it has become clear that off-shoring key industry, inadequate spending on infrastructure and aggressive globalisation leaves you incredibly open should any economy you depend on to create things decide to stop producing – even worse if that economy becomes politically and diplomatically harder to trade with. This has been the case with East Asia, with production slowed during the pandemic on everything from everyday consumer goods to complicated high-tech components such as semiconductors. Political tensions between China and the US only serve to exacerbate this problem. An equilibrium currently exists where the West relies on the East’s producers, and the East relies on the West’s consumers – but that could quickly change.
Finally, a global underinvestment in energy production, combined with a political unease of nuclear power usage and a now geopolitically unpalatable relationship with Russia has left Western economies with a problem of how to deliver cheap energy. Whilst solutions will be sought, there will be considerable time lags as new energy provision, through the building of nuclear reactors for example, takes considerable time to get up and running.
We have seen the effect on Germany being hand-tied by a reliance on Russian oil and gas.
As such an effort to re-shore key industries is under way. Whilst this will take time, the effect will be an increase in the price of goods and services as Western economies can no longer take advantage of the cheap labour supplied by the Far East.
The new era
This environment of high interest rates, high energy costs and high price of goods serves to reduce consumer discretionary spend. For investors, the fallout from this is most likely to affect those companies that are consumer facing businesses – advertisers, retailers, and producers of discretionary goods. This is therefore a huge shift for investors – stock market darlings since the mid 2000s, such as the FAANGs, now look far less attractive given their reliance on a buoyant consumer base.
Coming to terms with inflation is something equity investors may struggle with. One way to look at this, however, is to consider some key company fundamentals – namely balance sheet health, cash on deposit and reliability of earnings given a consumer base spending more money on necessities, and less on discretionary goods. The two key inflation plays in the portfolio are Visa and Mastercard. Sitting at a fortunate confluence of finance and tech, this makes them a great inflation hedge. The companies not only benefit from the structural changes to the world’s payments systems, and the move to a cashless society, but they are also to benefit as inflation forces the consumer to ramp up their spend. With prices up across the board, when consumers go to top up their car with fuel, or buy their weekly groceries, Visa or Mastercard will take their percentage of each inflated debit/credit card payment. In addition, as people look to maintain their current standard of living, they may be forced to put more on their credit card, where these two companies will levy their interest charges.
As tech businesses they hold another ace up their sleeves with extremely high gross margins, meaning they are less affected by inflationary pressures on the external costs of doing business.
To say that an inflationary environment benefits home-grown industry is putting the cart before the horse. Instead, it is the fact that more goods will be produced in the West (due to complicated geopolitical circumstances following the pandemic) and this will be an inflationary event, given the higher price of labour in the West. However, beneficiaries here are those companies which facilitate renewed industry and those that are already producing key items in benign territories.
To play this reshoring theme most comprehensively, we started to build our positions in two railroad companies in North America – Union Pacific and Canadian National Railway. With a comprehensive rail network between the two, they provide key infrastructure for North America to drive this era of reshoring.
Finally looking at energy more closely, renewed investment in this area and a supply shock caused by Russia attacking Ukraine has led to a revitalisation of the sector. When we started the fund in 2017, nothing was further from our minds than investment in energy stocks. But as the situation has changed, so has our outlook for this sector, and now we are selectively exploring energy stocks with potential to deliver outperformance for the portfolio.
Currently sitting in our top 10 holdings is Canadian Natural Resources. As a North American energy stock, benefitting from an increased oil price, reshoring themes and delivering on the level of quality we look for in portfolio companies, it is thoroughly deserving of its place in the portfolio.
High interest rates are a symptom of inflation. Inflationary events such as “quantitative easing,” supply disruption due to the pandemic, and re-shoring of industry to the West, have all led to central banks raising rates. But in here, there are two winners – first are those that benefit from higher interest rates, the second are those that benefit from a reshoring of industry.
The stock best positioned in our portfolio to benefit from higher interest rates is Charles Schwab, simply due to earning higher rates of interest on cash on deposit. For anyone watching this stock over the past few months, you will have seen the share price take a sizeable hit following news of bank solvency issues in the US and Switzerland. Here we would draw comparisons to the tech sell off in 2021/22, where indiscriminate selling took place across the sector, regardless of the quality of the underlying business. Where Schwab differs, however, is that it can be seen as a beneficiary of consolidation in the banking space, as customers of smaller, riskier depositories reallocate their cash into Schwab and similar larger institutions. Accordingly, over $130 billion was brought into the investment platform in Q1 2023, and new customer signups topped one million – March being the strongest month for both inflows and new clients. Management has described Schwab as a “safe port in a storm,” and with over 80% of deposits covered by FDIC insurance, we are inclined to agree.
Where there was concern with Schwab was in the movement of uninvested client cash into money market funds. However, this “cash sorting” exercise slowed in Q1, and management have reported a further “meaningful” slowdown in April. We would have preferred Schwab not to have taken a nosedive in March, however, with the stock now trading on a low double-digit multiple of normalised earnings, and with management expecting to expand its net interest margin (NIM), we expect the resumption of healthy earnings growth. Put simply, now would not be the time to sell – quite the opposite, we see it as an attractive opportunity given the lack of impairment to the franchise following the solvency issues seen in the banking industry.
Some things never change
Above we have shown how we are investing according to some key structural changes to the global economy. Those themes account for about a quarter of the portfolio.
Making up the majority of the portfolio, including many of our top 10 holdings, is a theme that has run since we started the funds. We believe digital and technological transformation still offers the greatest growth opportunity for investors. But the structural changes highlighted above have influenced where the best places are now going to be to invest in the tech space.
Prior to and during the pandemic consumer-facing technology proved to be a place of bounty when it came to investment returns. The FAANGs epitomised this, through their leveraging of technology to provide consumer goods and services, and the advertising and social platforms to promote them.
The rate of change during the pandemic drove a technological boom that saw investors make healthy returns as digital transformation accelerated due to a consumer base sat at home, freer to explore the online world rather than the physical one.
With pressure now on consumers’ discretionary spend, investors need to look to different pockets of opportunity to drive investment returns.
At Blue Whale, we have been especially interested in the technology that will drive an increasingly digitised world, beyond that of just consumer-facing tech. Of particular interest are companies like Nvidia, ASML and Lam Research. As producers of key high-tech components (semiconductors, processors, microchips, and the machinery used to create them) they offer incredibly exciting growth potential through their inevitable involvement in the next phase of technological development and discovery – AI (Artificial Intelligence), the metaverse and automation.
What is before us
Investors in the funds will have read over the past year how our portfolio has changed. Many of the things we have mentioned have demonstrated a broadening of our sector exposure into areas previously ostracised from growth portfolios – namely railroads, energy stocks and financials. These new sectors, we believe, will take a greater share of global GDP over the medium to long term.
There has also been a clearing out of large tech names that have experienced growth to a point where investors now need to be wary of their long-term prospects – especially given the pressure now on consumer spending. We have mentioned before that we no longer hold any of the FAANGs in the portfolio.
What has not been mentioned is that we believe the funds lead the way in finding new pockets of incredible opportunity in the technological space. Recent results from Nvidia serve to vindicate our belief in this fantastic business (and sector more broadly), especially given the rough ride the stock endured in 2022.
For investors in the funds, whilst the investment landscape has changed considerably in the nearly six years since our inception, it is important to note that our investment objectives have not changed. Our mission has always been to deliver significant outperformance for our investors, through investment in high quality companies, at attractive valuations.
This new era represents different opportunities, challenges, and traps. We are cognisant of this and will invest, as always, according to the landscape we see before us.
Blue Whale Growth Fund is manufactured by Blue Whale Capital LLP and represented in Malta by MeDirect Bank (Malta) plc.
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The Blue Whale Growth Fund was launched in September 2020. All references to actions before this date relate to the LF Blue Whale Growth Fund. Information on the LF Blue Whale Growth Fund is provided for comparison purposes only; it is a UK UCITS which is not registered for sale in nor is it promoted to investors in the EEA. Whilst the investment objectives and charges are not identical, both funds are run on the same investment process.
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