The world’s greatest investors: Sarah Whitley

Sarah Whitley studied experimental psychology at Oxford University, graduating in 1980. That year she joined Baillie Gifford, moving to the Japanese Equities team in 1982, and becoming a co-manager of the Baillie Gifford Japanese Smaller Companies fund between 1983 and 2001. She was promoted to partner in 1986. In 1991, she became lead manager of Baillie’s Japan Trust. Ten years ago she also became co-manager of the Japanese fund (along with Matthew Brett).

What is her strategy?

Whitley considers herself to be a flexible fund manager. However, she notes that most of her successes have been from buying secular growth stocks, the type of companies that she thinks will enjoy strong growth whatever the economic conditions.

Her process is to look at the quality of the business (including its management), growth prospects, and the industry it operates in. Only after she and her team have convinced themselves that a company should do well in the future, does she start considering valuation. Her fund has also borrowed money to boost returns.

Did it work?

Very much so. Since March 1991, the Baillie Gifford Japan Trust has returned a total of 563.92%, compared with 38.7% for the Topix (in sterling terms). This works
out to an annual return of 7.4%, compared with 2.6% for the index.

Over the past ten years, Baillie’s Japanese Fund has returned 182.85%, nearly 4% better than the Topix during this period. One of her most successful investments has been Fuji Heavy Industries, which she bought in 2012 after they ditched minivans to focus on sports cars. This has returned 598% since June 2012 (more than 40% a year).

The lessons for investors

Until recently, Japan’s market hasn’t performed especially well. Yet Whitley’s successful record shows that by focusing on the quality of the companies you invest in, you can still profit, even when the economy is struggling. When valuations do start to rise, companies that are already enjoying strong growth will see the extra benefit. Equally, you shouldn’t entirely ignore valuation – you don’t have to buy at dirt cheap levels, but don’t overpay either.

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