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Blue Whale Growth has just won a best fund award. Should I invest more?

Edward Sheldon, CFA
·4-min read
Chart showing an upwards trend, possibly in the FTSE 100
Chart showing an upwards trend, possibly in the FTSE 100

In May last year, I took a look at the Blue Whale Growth fund. At the time, the fund was quite new. It had only been around for about 20 months. However, I was very impressed with what portfolio manager Stephen Yiu had achieved in that time. So, shortly after I wrote that article, I invested some money in Blue Whale.

In hindsight, that was a good move. So far, Blue Whale has performed very well for me. Over the last year, it has returned about 23%. As a result of this excellent performance, it has recently won an award for best fund 2020.

Should I invest more in Blue Whale now? Let’s take another look at this global equity fund.

Blue Whale Growth: investment philosophy

One thing that appeals to me about Blue Whale is its high-conviction approach to investing. Instead of playing it safe and buying a wide range of stocks for the portfolio, Yiu only invests in around 25-35 companies at a time. His aim is to invest in leading businesses that will benefit from structural growth trends and grow their profits significantly over time, at attractive valuations. I see this as a good investment strategy.

Portfolio breakdown

Looking at the portfolio, I like what I see. The top 10 holdings at 31 October 2020 were:

Adobe
Autodesk
Boston Scientific
Facebook
Intuit
Mastercard
Microsoft
PayPal
Stryker
Visa

There are some top companies on that list. I’m particularly bullish on Microsoft, Mastercard, PayPal and Visa.

The top three sectors at 31 October were technology (55%), healthcare (15%) and communication services (9%).

Meanwhile, the top three geographic regions were the US (69%), Europe (21%) and the UK (2%).

Performance

Performance is where Blue Whale Growth really stands out. Between its launch in September 2017 and 31 October 2020, the fund was one of the best performing funds in its class, delivering a return of 67%. By contrast, the Investment Association Global sector average was 24%.

It’s worth pointing out that it’s done better than a lot of the big hitters in the global equity sector. According to figures from Hargreaves Lansdown, over the last three years, Fundsmith has returned 45% while Lindsell Train Global Equity has returned 39%. Over the same period, Blue Whale has returned 58%

Risks

There are risks to consider here, as always. One is the fund’s exposure to the technology sector. Another is the fund’s exposure to the US. The concentrated nature of the fund is also a key risk to consider.

Blue Whale: I’m bullish

Overall, however, I like this global equity fund a lot. Given its investment philosophy, holdings, and performance, I’d be happy to invest more into the Blue Whale Growth fund.

Of course, while Blue Whale has a lot going for it, I don’t see it as a ‘one-stop shop’. With just 25-35 holdings, it’s not going to provide me with full diversification.

So, I will continue to invest in other funds, as well as high-quality individual stocks that have strong growth potential.

The post Blue Whale Growth has just won a best fund award. Should I invest more? appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Microsoft, Mastercard, Hargreaves Lansdown, and PayPal and has a position in the Blue Whale Growth fund, Fundsmith, and Lindsell Train Global Equity. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Facebook, Intuit, Mastercard, Microsoft, Hargreaves Lansdown, PayPal Holdings, and Visa and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and long January 2022 $75 calls on PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020