American large-cap fund managers who consistently beat the index are few and far between. Mick Brewis at Baillie Gifford’s American Fund is one of them. His fund has outperformed the S&P 500 index by an average of 2.4% each year for the past decade, putting it in the top ten in its sector. A return of 38.7% over five years comfortably beats an IMA North America sector average of 20.6%, based on Morningstar data.
So, what’s his secret? “Wall Street’s big weakness is short-termism and an obsession with quarterly results,” Brewis tells This is Money. Instead, his 41-stock fund takes a bottom-up, long-term view, looking for firms with “hidden value” and holding stocks for between three and five years. The fund’s 30% a year stockturnover rate is well below the 100%-plus level at the New York Stock Exchange. Being based in Edinburgh has its benefits too. “Distance from the markets can lend a perspective.”
Brewis is bullish on America. He thinks rising employment, increased lending by banks to small businesses, and a reduced consumer debt service ratio should boost domestic consumption. As he told Jenna Voigt at FT Adviser, “the US economic outlook is positive. Domestic-orientated stocks are going to do well.” Technology stocks, including Apple and eBay, make up around a quarter of the portfolio.
To stay ahead of the pack, Brewis says his fund will never be a “closet index hugger”. He looks for opportunities others have missed or underpriced. “This could mean searching for under-appreciated growth in earnings, a management turnaround, or an upswing in secular growth.”
Contact: 0800-917 2112.
Baillie Gifford American Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| Apple | 8.1% |
| eBay | 4.6% |
| F5 Networks | 4.3% |
| Home Depot | 4.3% |
| Progressive Corporation | 3.8% |
| O’Reilly Automotive | 3.7 |
| Bed Bath & Beyond | 3.6 |
| Exxon Mobil | 3.4 |
| Brown Forman Corp | 3.2 |
| Monsanto | 3.2 |