After Baillie Gifford won the mandate to run the former Schroder UK Growth Trust, the portfolio of the newly named Baillie Gifford UK Growth (BGUK) is taking shape.
Despite the word “growth” in the name, as would be expected, the Schroders team, led by Philip Matthews, ran it with a value tilt.
The top five holdings in Schroders’ version of the trust included UK blue-chips Shell (RDSB), BP (BP.), Tesco (TSCO), Standard Chartered (STAN) and Balfour Beatty (BBY).
None of those remain anywhere in Baillie Gifford’s reincarnation, with the top five now including Hargreaves Lansdown (HL.), Prudential (PRU), St James’s Place (STJ), Renishaw (RSW) and Ted Baker (TED).
New co-manager Milena Mileva says the portfolio is now “there or thereabouts what we want it to be”, after the overhaul. “It is a different portfolio to what we inherited, and it’s one very much in line with the way we run money at Baillie Gifford.”
The Edinburgh-based team of seven runs almost £6 billion of UK specialist assets for institutional clients. Mileva notes the turnover on their UK institutional mandates is around 5-7%, “so we’re talking about holding things on average for seven to 10 years”.
Below, Mileva outlines three of her favourite stocks that the team has held for over a decade and have recently added to the new Baillie Gifford UK Growth Trust:
Renishaw
A maker of precision measurement systems, Renishaw helps companies to manufacture products for use in industries such as automotive, semi-conductors and aerospace. These are all industries where advanced manufacturing is vital, with very precise measurements needed for each component. It also helps to make medical devices for use by hospitals and dental surgeries.
Its current area of focus is on metal 3D printing, “which is very exciting” for Mileva. “It is a very mature industry with great potential to disrupt traditional manufacturing,” she explains.
Elsewhere, its flagship product, machine tool probes, is the number one of its kind globally, with practically no competition.
However, what makes Renishaw really interesting to Baillie Gifford is its “unwavering commitment to long-term investment”.
“What makes them an exceptional company with an exceptional corporate culture is the fact that despite their earnings are quite volatile because they are in these wildly cyclical industries, they’ve never stopped investing,” she continues.
“For an industrial company, Renishaw spends an incredibly high percentage of returns on R&D, about 15-16% and it has done that consistently since it listed. It’s that commitment to investing in the business that has made them so successful.”
Genus (GNS)
Genus is an animal genetics company that supplies farmers with animals that have “superior genetics” that can produce higher-quality meat and dairy products more efficiently.
Again, it is a firm that is working on “radical new projects” that Mileva believes will be transformational if they can crack them, although it is uncertain whether they will be able to.
One of these projects is trying to breed pigs using gene editing that are resistant to porcine respiratory reproductive syndrome. This is a devastating disease that causes reproductive failure in breeding stock and currently has no cure.
Elsewhere, Mileva says she likes companies that put customers at the heart of what they do, which Genus does. “These guys are definitely a perfect example of that,” she says.
Ted Baker
Retailers with bricks and mortar stores sound more of a hunting ground for Schroders than Baillie Gifford. One would expect the latter to be more on the other side of the disruption trend, and they do own Boohoo.com.
One big reason Mileva likes Ted Baker, which does have an estate of physical stores, is its differentiated strategy for expansion.
While most retailers attempt to grow by indiscriminately opening store after store, Ted Baker “has always been very measured and careful in how they approach expansion and store rollout”, Mileva says.
It’s another company that puts the customer first and management has preferred to focus on getting its brand and product right first and foremost.
Mileva adds: “Their focus has been to want to have a lot of customers that will love the product and come back and the way they do that is through the product team. They use that to drive expansion and nothing else.
“Everything they do revolves around this obsession and focus on the product and the customer and that is what has made them successful and what will continue to make them successful both in the UK, but also elsewhere.”
In addition to this, she adds, they have a good mix of a manageable store estate and a very fast-growing and profitable online operation, which makes them more nimble than some of their competitors and less susceptible to disruption.
