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.
