1 top Baillie Gifford investment trust I’d buy for my ISA and hold for decades

I reckon this FTSE 250 trust is poised to deliver strong returns in my ISA over the long run due to the strength of its portfolio.

| More on:
BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

For investors wanting to add a bit of oomph to their ISA portfolios, some of Baillie Gifford’s growth funds and trusts are well worth considering.

The Edinburgh-based investment management firm has a reputation for delivering strong returns. Lately though, it has been in the news after the Hay Festival dropped its sponsorship.

This was due to celebrity figures pulling out of the literary event and accusing the asset manager of investing billions in fossil fuels and firms with alleged links to the Israeli defence sector.

In response, the company said: “The suggestion that Baillie Gifford is a large investor in the Occupied Palestinian Territories is seriously misleading.”

Just as bizarre to my mind is the notion that Baillie Gifford is a major oil investor. It’s more famous for backing Tesla, many years before it was popular to do so.

The solar and electric vehicle pioneer has arguably done more than almost any other firm to move the world towards more sustainable forms of energy.

Anyway, here’s one Baillie Gifford investment trust that I’d buy today and hold long term.

Growth and income

The Scottish American Investment Company (LSE: SAIN) is a FTSE 250 member with a truly amazing track record of growing its dividend. It has now raised its payout for 50 straight years!

Founded in 1873, its objective is to deliver real dividend growth by increasing capital and income. Real dividend growth means above the rate of inflation, which it has achieved long term.

Source: SAINTS 2023 annual report

Now, as we can see above, the dividend yield isn’t that eye-catching. Based on the current share price, it’s just 2.75%. When I can bag 7%-10% yields in the FTSE 100, that doesn’t seem very appealing.

However, it targets firms with the potential to grow both their share prices and dividends for many years. And it only invests in those whose earnings and cash flows are likely to grow ahead of inflation.

Risk to consider

The downside to this approach is that there can be periods of underperformance when a small number of non-dividend-paying stocks drive the market forward.

This has happened recently with Nvidia, whose dividend is negligible and therefore not part of the portfolio. Partly because of this, the trust underperformed its benchmark (the FTSE All-World Index) last year.

If this happens again, investors might question the strategy and sell the shares.

Despite this risk, I’m bullish due to the quality and durability of the trust’s portfolio, which also contains a smattering of bonds, property and infrastructure assets that pay income.

I like that Novo Nordisk and Microsoft are among its top holdings. This pair are at the forefront of two of the largest trends I see unfolding over the next decade: weight-loss drugs and artificial intelligence (AI).

The number of adults living with obesity is expected to rise from 800m in 2020 to 1.53bn by 2035. So this is a truly gigantic addressable market opportunity for weight-loss treatments like Novo Nordisk’s Wegovy.

Meanwhile, we can’t go 24 hours nowadays without hearing about AI. Nvidia’s CEO Jensen Huang has just pronounced that a new AI “industrial revolution” has begun.

As a leader in cloud computing and major investor in ChatGPT parent OpenAI, Microsoft looks incredibly well-placed to benefit from this.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in Scottish American Investment Company P.l.c. and Tesla. The Motley Fool UK has recommended Microsoft, Novo Nordisk, Nvidia, and Tesla. 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.

More on Investing Articles

Black father holding daughter in a field of cows
Investing Articles

A FTSE 100 share that could create generational wealth

Investing in FTSE shares can help individuals pass down a significant chunk of cash to their children and grandchildren, data…

Read more »

Investing Articles

Here’s what the BT share price could mean for passive income investors

The BT share price has been falling for years, but that might be about to change. And dividends could be…

Read more »

Investing Articles

At £4.76, is the Aviva share price a steal? Here’s what the charts say!

Aviva has outperformed the Footsie over the last year. But is there still value in its share price? This Fool…

Read more »

Photo of a man going through financial problems
Investing Articles

Does a 43% price drop make this undervalued UK stalwart one of the best cheap shares to buy now?

After losing a third of its value of the past five years, this might be one of the most undervalued…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

My top 3 picks today for a £20,000 Stocks and Shares ISA

Here are three very different investments to consider for a Stocks and Shares ISA, covering both the UK and US…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The Darktrace share price has been surging — and it could climb higher

I think the Darktrace share price could have more room to run. Despite the competitive AI industry, the firm looks…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

With its 7% dividend, should I be watching the Aviva share price?

Dividend investors will struggle to find many companies with a yield above 7%, so should the Aviva share price be…

Read more »

Investing Articles

Could this be one of the FTSE 100’s best cheap dividend shares?

Looking for the best dividend growth shares to buy? Our writer Royston Wild thinks this FTSE 100 housebuilder might well…

Read more »