Funds Updates
31/07/2020
Blue Whale Update: Where opportunity is seen after COVID

Stephen Yiu - Blue Whale Fund Manager 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 2017 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.


 

When we launched the Blue Whale Growth Fund in 2017 – long before the notion that pandemics could become a material impediment to global growth – the investment team and I set out simply to find high quality companies which would contribute to consistent significant outperformance.

I am happy to report that during the March sell-off and the subsequent stock market rebound, our strategy has withstood its toughest test yet.

Looking ahead, we aim to continue investing in high quality businesses with a strict valuation discipline. Among these, we highlight two types of companies where we see opportunity:

Lockdown Survivors

With lockdown easing globally, many companies in industries that suffered under lockdown are embracing the current re-opening.

Among these are companies where foregone revenues during lockdown are lost forever – such as hotels and restaurants. In contrast to these, there are companies which were not immune to the effects of lockdown, with a slow-down in the sale of products and services, but whose demand is pent up with revenues being delayed, not lost.

Medical device companies, such as Boston Scientific, are an excellent example. Often, they are involved in procedures like cancer-related endoscopy, heart surgery or chronic illnesses, which, though classified as “elective”, are by no means optional. These are the companies we prefer in a recovery.

Beneficiaries of accelerated adoption

Many of the sectors we invest in benefit from strong and sustained secular growth, some of which have accelerated during lockdown.

Benefiting from changes in consumer habits are sectors like eCommerce and Payments, where COVID has been a catalyst for accelerated adoption of contactless and online payments – benefitting companies such as PayPal and VISA. Even considering the boost provided by COVID, these segments of the market still have a long runway of growth ahead of them.

Enterprise demand has also progressed, with recent experiences highlighting the increased need for digital transformation, be it for productivity software that better enables working from home (such as Adobe’s Creative Cloud) or the Cloud architecture that powers both the software and the ease of digital collaboration – Amazon’s AWS.

Of particular interest in this area is Microsoft, which not only offer their omnipresent digital Office – enabling the new obligatory trends and requirements for working-from-home – but also, their Azure cloud service powering and platforming other apps and services operating in this field.

Satya Nadella, CEO of Microsoft (a top 10 holding since launch) described in April seeing “two years’ worth of digital transformation happening in two months” among their enterprise customers. From our investment team’s research, we are still only at the beginning of a long, sustained journey in enterprise digital transformation.

In the above examples of where we see opportunity, we are identifying companies and sectors that we have appreciated for some time. Although the quality of a business does not change rapidly, stock markets can be capricious.

The danger, especially as our fund enjoys peer-beating performance, is to unquestioningly stick with the status quo, resting on our laurels, and failing to adapt to changing times.

We know we cannot afford to be complacent and will continue to exercise rigorous valuation discipline while honing our approach with a view to continuing to achieve our aim of delivering consistent significant outperformance.

LF 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 opinions, data, and analyses presented herein is issued for information only by Blue Whale Capital LLP (“Blue Whale”) which is a limited liability partnership incorporated in England and Wales under number OC414255. Blue Whale is authorised and regulated by the Financial Conduct Authority (“FCA”).

The contents presented herein are based upon sources of information believed to be reliable, however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to its accuracy or completeness and, Blue Whale, its members, officers and employees do not accept any liability or responsibility in respect of the information or any views expressed herein. All data is sourced from Blue Whale unless otherwise stated.

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There are significant risks associated with investment in the Fund referred to herein. Investment in the Fund is intended for investors who understand and can accept the risks associated with such an investment including potentially a substantial or complete loss of their investment.

Past performance is not a guide to future performance. The value of investments and any income derived from them can go down as well as up and the value of your investment may be volatile and be subject to sudden and substantial falls.

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Income from investments may fluctuate. Changes in rates of exchange may have an adverse effect on the value, price or income of investments. Fund charges may be applied in whole or part to capital, which may result in capital erosion. The Authorised Corporate Director may apply a dilution adjustment as detailed in the Prospectus. The Fund is not traded on an exchange or recognised market.

The foregoing list of risk factors is not complete, and reference should be made to the Fund’s Prospectus, KIID and application form.


MeDirect Disclaimers:

This information has been accurately reproduced, as received from Blue Whale Capital LLP. No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

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