Back in May 2019, I covered the Blue Whale Growth fund for the first time. The global equity fund was relatively new and had less than £200m in assets under management. However, I was impressed with its performance and said that it looked interesting. I also invested in the fund shortly after that article.
Fast forward to today, and Blue Whale is now just over four years old. So, let’s take a look at how this fund has performed in the four years since launch, and the outlook from here.
Blue Whale Growth review
Before I analyse Blue Whale’s performance since launch, it’s worth touching on the investment strategy that portfolio manager Stephen Yiu employs.
This fund is all about growth. However, when it comes to picking growth stocks for the portfolio, Yiu is very selective. His goal is to invest in high-quality companies that a) have the ability to grow and improve profitability over the long term, and b) have a valuation that’s attractive relative to their future growth potential and profitability.
Ultimately, Yiu’s strategy is quite similar to that of Fundsmith manager Terry Smith, who also focuses on high-quality businesses. However, compared to Smith, who’s known for his buy-and-hold approach, Yiu is a little more active. For example, he won’t hesitate to take some profits off the table if a stock’s valuation rises to an excessive level.
Performance
Has this strategy worked? Absolutely. Here’s a look at the fund’s performance since the start of 2018 (to 30 September).
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I can see that Blue Whale comfortably beat both the MSCI World index and the Investment Association’s Global Sector average every year between 2018 and 2020 and is outperforming both this year. It has also beaten Fundsmith over the same period.
Overall, the fund has delivered a return of 107.2% since launch versus a return of 56% for the IA Global Sector average. That’s an excellent return.
Outlook
In terms of the outlook, I’m confident Blue Whale can continue to deliver strong long-term returns going forward. One reason I say this is that the fund owns some really great companies. At 30 September, the top 10 holdings were:
Adobe, Alphabet (Google), Atlassian, Facebook, Intuit, Mastercard, Microsoft, Nvidia, Veeva
and Visa.
I’m very bullish on most of these companies. I really like Alphabet and Microsoft, which are well positioned to benefit from the growth of cloud computing. Both just posted amazing earnings for the quarter.
I also like Mastercard and Visa, which look set to benefit from the growth of e-commerce and electronic payments.
And then there’s Nvidia, which makes high-performance graphics processing units (GPUs) and looks set to be a major player in the artificial intelligence space.
Overall, it’s a great list of stocks, in my opinion.
Risks
Of course, there are risks to be aware of.
One is that this fund has a very specific investment style. If growth stocks fall out of favour, Blue Whale could underperform.
Another is stock-specific risk. This fund is concentrated and only holds around 30 stocks. If a handful were to underperform, it could impact overall performance.
Overall, I really like Blue Whale. For me personally, it’s a core ‘growth’ holding in my portfolio. I see it as a good way for me to get exposure to high-growth businesses listed internationally.
