Edinburgh-based investment house Baillie Gifford held nearly 14 million Tesla shares as of December.
Photo: russell cheyne/ReutersEDINBURGH—One of the biggest winners from Tesla Inc.’s TSLA 0.65% wild ride is a 112-year-old Scottish asset-management firm that has become a specialist in holding some of the world’s most hyped stocks for the long term.
Baillie Gifford & Co., the Edinburgh-based investment house with £218.6 billion ($282.6 billion) in assets under management, is electric-car maker Tesla’s largest institutional shareholder and the second-largest shareholder after Chief Executive Elon Musk.
Baillie Gifford first bought 2.3 million shares worth $89 million in Tesla in 2013, building its holding to nearly 14 million shares by December 2019. Its stake, which it revealed this week it had boosted to 7.67% of Tesla, is worth $10.35 billion.
A spokeswoman for Baillie Gifford said the firm thinks Tesla has largely driven the global shift toward electric vehicles and retains a substantial competitive advantage for the future. Baillie Gifford believes Tesla will be several times its current size in five to 10 years, she said.
Tesla has been on a tear, with shares up 79% this year and a new closing high achieved this week. The company said it notched record deliveries in the fourth quarter and some analysts have raised their price targets. Still, there is fierce debate over the company’s actual value, given that it has never made an annual profit in a notoriously competitive industry.
Tesla was Baillie Gifford’s biggest holding in December, accounting for 5.25% of its overall portfolio, according to FactSet. Since March 2013, the firm has spent on average $202.01 per Tesla share. Several Baillie Gifford funds hold the stock and there is no house view on when to buy or sell.
“[Tesla’s] quarterly numbers don’t matter,” said Catharine Flood, corporate strategy director for Scottish Mortgage Investment Trust PLC, a Baillie Gifford fund that holds Tesla. The most important question is what is happening in the transportation industry, she said, and the long-term implications for the sector’s transformation.
Catharine Flood, corporate strategy director of Scottish Mortgage Investment Trust.
Photo: Baillie GiffordScottish Mortgage, a closed-end fund that dates back to 1909, is the firm’s flagship vehicle and trades on the FTSE 100. James Anderson, the fund’s co-manager, has said he doesn’t think Mr. Musk needs to be CEO, while still making the investment case for the stock.
Tesla representatives didn’t respond to a request for comment.
Baillie Gifford’s approach to Tesla reflects the firm’s investment philosophy: buy “extraordinary” companies that can offer tremendous growth, keep the stock for five to 10 years and ignore daily market moves and quarterly earnings.
Founded in 1908, the firm made growth investing the centerpiece of its strategy for decades. It has sharpened its focus over the past few years, said Charles Plowden, joint senior partner, after reviewing research that showed that between 1926 and 2016, slightly more than 4% of U.S. stocks accounted for all the market’s gains.
That spurred the firm to seek out only top-tier companies, Mr. Plowden said, a conviction which was strengthened after further research showed just 1.3% of global companies accounted for the market’s gains between 1990 and 2018.
“We can ignore large swaths of the [investing] universe,” Mr. Plowden said, adding that the firm looks at the potential of a company rather than current profits. There is no guarantee the companies will succeed, he said.
Charles Plowden, a joint senior partner at Baillie Gifford, oversees the investment departments.
Photo: Baillie GiffordOther investments include Chinese internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd.; Facebook Inc.; Amazon.com Inc.; Spotify Technology SA and a crop of unlisted firms including Airbnb Inc., eyeglasses seller Warby Parker Inc. and Bytedance Inc., which operates video-sharing app TikTok.
Baillie Gifford began investing in private companies in 2014 and spun out a dedicated team in 2017. The goal was to get to know companies before they went public and secure access to firms that are staying private longer, said Peter Singlehurst, head of unlisted equities. Nearly $4 billion of clients’ money is invested in private companies, he said.
The company said it leverages longtime positions to get access to up-and-comers. Its relationship with Alibaba, for example, helped the firm snag an investment in Ant Financial Services Group, now the world’s most valuable financial-technology startup.
Not all flashy technology companies have appealed. Baillie Gifford didn’t invest in Uber Technologies Inc. in 2014 due to what it saw as an aggressive culture, Mr. Singlehurst said. An Uber spokesman declined to comment. Facial-recognition companies have also brought pause due to public concerns over how governments might use the technology, Mr. Singlehurst said.
SHARE YOUR THOUGHTS
What lessons can be drawn from Baillie Gifford’s strategy? Join the conversation below.
Baillie Gifford is structured as a partnership, with 43 partners who sell their equity for the same price at which they bought in to the next generation once they leave. Employees say that has fostered discretion and a lack of external pressure.
So determined is the company to stay away from what it views as an undue focus on market short-termism that it tries to locate its offices away from cities’ main financial districts, a spokeswoman said.
Ms. Flood said the emphasis remains on encouraging companies to invest in research and development and capital expenditure, even if profits falter in the near term.
Alibaba noticed Scottish Mortgage hadn’t sold shares at or since the tech giant’s initial public offering, said Ms. Flood.
“We are not looking at what markets think of the trade war,” she added.
Related Video
Write to Julie Steinberg at julie.steinberg@wsj.com
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Bagikan Berita Ini
0 Response to "The Scottish Fund Manager That’s One of the Biggest Winners on Tesla - The Wall Street Journal"
Post a Comment