Page 35 - DIY Investor Magazine Issue 24

However, it had astutely built up CDS positions prior to the major sell-off, which made back any losses on the equity book.
Between 18th February and 31st March the trust’s NAV was up 3.9% as the S&P 500 fell 19.2%; Bill’s long- term track record is exceptional, with the share price languishing on a wide discount to NAV, and optimists will note he has started buying more of his portfolio, including reopening a position in Starbucks.
‘TRUSTS WITH HIGH WEIGHTINGS TO TECHNOLOGY HAVE DONE BETTER IN THIS CRISIS’
THE INTERNET OF EVERYTHING – TECHNOLOGY’S IMPACT
In more ‘vanilla’ equity funds, even the best performers have had a torrid time; however, some interesting patterns, such as the defensive performance of technology, may have implications for the future. Technology is often thought of as being a ‘risk-on’; successful stocks trade on higher multiples than
the market, making them considered growth stocks. However, trusts with high weightings to technology have done better in this crisis.
Technology indices themselves outperformed, but so did internet retailers and other online service providers which often appear in the consumer discretionary or communications sectors; Amazon, for example, was down just 6% in the sell-off.
Trusts run by Baillie Gifford in particular have done relatively well; in AIC UK All Companies sector, Bailie Gifford UK Growth massively outperformed, down 26.1% compared to an average loss of 35.6% and a worst performance of -40.7%.
In AIC North America sector, Baillie Gifford US Growth’s NAV was down just 19.8% when adjusted for its unlisted positions, which compares to a sector average decline of 25%, and the worst of -31%.
The best-performing AIC Europe trust was Baillie Gifford European Growth, down 17.4% against a sector average loss of 21.6% and a worst of -31.6%. Even Scottish Mortgage, which entered the crisis month with 8% gearing, was a relative outperformer in its AIC Global
sector; adjusting its 20% unlisted positions gets to an estimated loss of 18%, favourable to the 19.1% average peer group loss.
Tech has tech been defensive for two main reasons. Firstly, the online economy has been critical in keeping society running during lockdown; online learning, meeting, chat services and ordering systems have surged and in our view, there is no going back.
‘THERE WILL BE A PERMANENT CHANGE OF LIFESTYLE FOR MANY PEOPLE, AND THE ONLINE ECONOMY WILL BE KEY’
Those who have discovered online groceries shopping are the aged told to self-isolate; they would have been less likely to shop online before, but are unlikely to go back to lugging shopping bags home on the bus. There will be a permanent change of lifestyle for many people, and the online economy will be key; four hours a day on the train, or will Zoom et al retain many new users?
Second is the impressive way that logistics businesses such as Amazon have shifted their network to provide essentials to the self-isolating; it is so dominant in this sphere that the UK is handing it the task of delivering testing kits to citizens, possibly the ticket back to a normal life.
Accordingly, Amazon is behaving like a defensive consumer staples company on the downside and a high growth consumer discretionary on the upside, a potent combination. It is in a strong position; as is its Chinese peer Alibaba.
Amazon is a major holding in Mid Wynd (MWY), another relatively strong performer in AIC Global, down just 16.3% in the drawdown; its managers told us that many of the themes built into the portfolio helped relative returns in the crisis
35 DIY Investor Magazine | Apr 2020