High-flying Blue Whale Growth reveals post-coronavirus tech opportunities
Blue Whale Growth up 17.4% YTD
Lead manager of the Peter Hargreaves-backed Blue Whale Growth fund Stephen Yiu has outlined some of the top tech sector opportunities available in a post-coronavirus world, with his top performing fund currently targeting stocks across medical technology, card payments and traditional tech giants.
The £410m AUM Blue Whale Growth fund has returned 66.5% since its September 2017 launch, surpassing its IA Global sector's average of 22.7% over the same period, according to FE fundinfo.
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It has also performed well throughout the coronavirus-induced market volatility seen in 2020, returning 17.4% YTD, compared to its sector's 2.3% return, reflecting the outperformance of technology stocks over the period.
Some of Blue Whale Growth's largest holdings include constituents of the Nasdaq 100, which is up 26.5% YTD, such as Adobe, Microsoft and Facebook.
Yiu, who is also CIO of Blue Whale Capital, said the fund had "withstood its toughest test yet" amid the March sell-off and subsequent rebound, and was now targeting two types of companies where the firm sees opportunities; lockdown survivors and beneficiaries of accelerated adoption.
With regard to "lockdown survivors", Yiu explained that while many companies have suffered during lockdown with "forgone revenues…lost forever", there are some companies that have seen pent up demand "with revenues being delayed, not lost".
One example he cited was medical device company Boston Scientific, which he said should be set to perform well in the recovery.
In terms of beneficiaries of accelerated adoption, he cited PayPal and VISA as "benefiting from changes in consumer habits" as Covid-19 "has been a catalyst for accelerated adoption of contactless and online payments".
Yiu added: "Even considering the boost provided by COVID, these segments of the market still have a long runway of growth ahead of them."
"Enterprise demand has also progressed", Yiu said, "with recent experiences highlighting the increased need for digital transformation".
He explained this can be seen in demand for productivity software "that better enables working from home", such as Adobe's Creative Cloud, or cloud architecture that powers software and the ease of digital collaboration, such as Amazon's AWS.
Top-ten holding Microsoft is also set to benefit, Yiu said, with its "omnipresent digital Office" enabling "the new obligatory trends and requirements for working-from-home" and its Azure cloud service "powering and platforming other apps and services operating in this field".
He added: "Satya Nadella, CEO of Microsoft described in April seeing ‘two years' worth of digital transformation happening in two months' among their enterprise customers.
"From our investment team's research, we are still only at the beginning of a long, sustained journey in enterprise digital transformation."
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Yiu also told investors he was aware of "the danger" the fund faces amid its outperformance, adding that the investment team would not "unquestioningly stick with the status quo, [rest] on our laurels and [fail] to adapt to changing times".
He said: "We know we cannot afford to be complacent and will continue to exercise rigorous valuation discipline while honing our approach with a view to continuing to achieve our aim of delivering consistent significant outperformance."
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