Short Briefings on Long Term Thinking - Baillie Gifford

Andrew Keiller, a partner at Baillie Gifford and an expert in emerging markets, dives into the transformative shifts reshaping the global economy. He discusses the surging demand for commodities and the explosive growth of the middle class in developing nations. Keiller highlights standout companies like lithium miner SQM and AI chipmaker SK Hynix, which are perfectly positioned to benefit from these trends. The potential of companies like Kazakhstan's super-app, Kaspi.kz, also showcases how digital innovation is revolutionizing the market landscape.

In this discussion, Iain McCombie, a partner at Baillie Gifford and head of UK equity, shares insights on the UK growth landscape. He highlights ambitious companies in advanced manufacturing and digital technologies, like Renishaw and Wayve, navigating tariff challenges. McCombie underscores the importance of adaptability, active investing strategies, and strong fundamentals. He emphasizes the potential within creative industries and fintech, while optimistic about delivering long-term returns despite economic turbulence.

Stephen Paice, a partner at Baillie Gifford and head of European Equities, dives into the undervalued landscape of European stocks. He discusses the potential for significant gains as outdated views shift. Key sectors like biopharmaceuticals, digital platforms such as Spotify, and the booming semiconductor industry are highlighted as ripe for investment. Paice also explores the resilience of certain companies amid trade tariffs, emphasizing the impactful role of culture and leadership in driving growth. His insights reveal a promising future for European innovation and investment.

Three technologies – quantum computing, reusable space rockets and nuclear fusion – could change the trajectory of human progress. Investment manager Luke Ward explains how a trio of private companies are bringing them closer to fruition. Background:Luke Ward is an investment manager in Baillie Gifford’s Private Companies Team and recently became co-manager of the Edinburgh Worldwide Investment Trust.In this episode of Short Briefings…, he discusses three companies developing groundbreaking technologies and building innovative businesses as they do so:PsiQuantum, which aims to create the world’s first useful quantum computersSpaceX, which is well on its way to developing the first fully reusable space rocket, with a view to ultimately transporting people to MarsSHINE Technologies, which is commercialising applications of nuclear fusion on the path to delivering a clean and safe energy source for the futureAmong the topics Ward covers are how photon-based quantum computers could drive progress in agriculture and batteries, among other industries. He also discusses how the Starlink satellite broadband provides a stepping stone to SpaceX’s larger ambitions. And he explains how SHINE’s work on detecting flaws in mission-critical aerospace components and making a new cancer treatment possible bring it closer to harnessing the reaction that powers the sun. Resources:PsiQuantum: making the leap to quantum computingPsiQuantum: stock storySHINE Technologies: an interview with chief executive Greg PieferSpaceX and other private company trailblazersStarlink: broadband from aboveEdinburgh Worldwide Investment TrustYour vote, EWIT’s futureEWIT: Saba vote  Companies mentioned include:PsiQuantumSHINE TechnologiesSpaceXTimecodes:00:00 Introduction01:50  From mechanical engineering to investment02:55  Technological innovation informing business innovation03:45  Quantum computing versus the ‘classical’ approach04:55  Using quantum computers to disrupt chemical fertilisers06:10  PsiQuantum’s semiconductor supply chain advantage07:20  A photonic approach to computing08:05  Signs that PsiQuantum could succeed09:45  PsiQuantum’s potential business model10:30  Partnering with Mitsubishi Chemical and Mercedes-Benz11:35  SpaceX: satellite launches and advanced rockets12:35  Starlink’s high-speed internet from orbit13:40  Connecting smartphones directly to Starlink15:05  The investment case for Mars16:55  Leading Baillie Gifford’s SpaceX investment in 201819:35  Considering other space industry investments10:21  Nuclear fusion v fission22:25  SHINE Technologies’ stepping stone approach23:20  From advanced imaging to radiopharmaceuticals24:15  Clinical trials for prostate cancer treatment Lutetium-17724:40  Recycling nuclear waste25:50  Saba vote: giving the public access to private companies27:35  Investing in geothermal energy28:30  Seeking inspiration in Silicon Valley

Stuart Dunbar, a client relationship director at Baillie Gifford, shares insights on transformative investment themes. He highlights the rise of robotics and intelligent drug design aimed at making healthcare more affordable. Dunbar discusses the crucial energy transition to renewables and the growth of digital payment infrastructures. He also delves into the advancements in automated transport, including driverless trucks and drones. These topics address the pressing challenges of aging populations and labor shortages, unlocking new investment opportunities.

The US’s transformational upgrade of its drainage, power and road networks is a long-term investment opportunity hiding in plain sight. In this podcast, Michael Taylor reveals some of the outstanding companies involved and makes the case that the markets have yet to fully appreciate the advantages working in their favour. Background: Michael Taylor is an investment manager in Baillie Gifford’s US Alpha strategy. In this Disruption Week briefing, he explains why years of neglect coupled with the destructive consequences of wild weather and our insatiable appetite for data-processing power have led the US to embark on a massive renewal of its physical infrastructure.  Taylor suggests that many of the companies creating long-term value benefit from supply advantages, which help them defend their commoditised products’ prices. These range from ownership of gravel quarries, which are difficult to get planning permission for, to the use of a gigantic, portable plastic drain-making machine. In addition, Taylor discusses what a second Trump presidency might mean for the sector and why finding standout companies involves travelling off the beaten track. Resources: Disruption WeekBuilding back: the great US infrastructure opportunitySpotting the winners from the great US infrastructure renaissance Companies mentioned include: Advanced Drainage SystemsEatonComfort Systems USAMartin MariettaNVIDIAStella-Jones Timecodes:00:00 Introduction1:35    Exceptional businesses confronting an exceptional problem3:20   The US v global infrastructure opportunity4:35   Donald Trump’s second presidency6:40   The benefits of patience7:35   Wild weather8:45   Investing in Advanced Drainage Systems11:05  Labour shortages12:15  Stella-Jones’s wooden telegraph poles14:05  Tree-spotter specialists16:15  Martin Marietta’s supply-side advantage18:55  Recycled aggregates’ limitations20:15  Finding US infrastructure investments21:45  Comfort Systems USA and keeping datacentres cool24:20  “Massive in terms of magnitude of spend and duration”

In this engaging discussion, Alexander Nicolier, an investment manager at Baillie Gifford’s Private Companies Team, dives into the transformative impact of private companies on the market. He highlights the exceptional growth of companies like SpaceX and Epic Games, explaining why founders opt to remain private longer. Nicolier also underscores the importance of deep research in navigating early-stage investments and reveals the promising opportunities present in vibrant ecosystems like Latin America. He advocates for valuing the unique contributions of restless entrepreneurs in driving innovation.

China is transitioning from a property-led economy to one focused on advanced manufacturing. It already leads the world in electric car production and the batteries that power them. And it’s also a growing force in renewables, robotics and biotech. Investment manager Helen Xiong discusses some of the growth companies involved, why concerns about overcapacity seem overstated and why rising trade barriers have implications for stocks traded inside and outside China. Background:Helen Xiong is an investment manager in Baillie Gifford’s Global Alpha Team and recently became joint deputy manager of The Monks Investment Trust. In this episode of Short Briefings on Long Term Thinking she discusses why global growth investors can’t ignore China even if they don’t directly own stakes in any of its companies.She describes how the country has made ‘advanced manufacturing’ a strategic priority, laying the foundations for future growth. This has already yielded results, with companies such as the electric vehicle maker Li Auto and battery producer CATL creating long-term value for shareholders – with the prospect of more to come.Xiong suggests that ‘rising trade barriers’ are one consequence of Western nations’ seeking to protect domestic industries and discusses how she takes this into account when deciding which companies to back. In addition, she considers the implications of Chinese retaliation and what that might mean for some of the US and Europe’s leading exporters.Xiong also shares her view on recent stimulus by the Chinese central bank and government agencies, focusing on signals of a shift that could create long-term shareholder value. Resources: China: finding the new shoots of growthJonathan Haidt: The Righteous Mind – Why Good People are Divided by Politics and Religion More from Helen Xiong:Beyond NVIDIA: investing across the semiconductor ecosystemGlobal Alpha Investor Forum 2024 Companies mentioned include:Li AutoCATL Timecodes:00:00    Introduction1:30      The advantage of being Chinese, African and European3:00      Relationships v individualism5:15      China’s post-Covid economy7:00      Why China matters to global investors8:30      Overcapacity: a feature, not a bug10:15    Brutal competition10:55    Investing in Li Auto13:45    Li Xiang’s attention to detail14:30    The car industry’s iPhone moment16:25    Trade tariffs18:20    Potential Chinese retaliation19:35    Chinese regulators20:35    Stimulus21:35    Focusing on long-term shareholder value22:20    Book choice23:45    Conclusion

Matthew Brett, an investment manager at Baillie Gifford specializing in Japan, explores transformative forces reshaping the Japanese market. He discusses Japan's delayed digitalization, the increasing purchasing power of Asian neighbors, and the surge in industrial automation. Brett highlights how the country's aging population drives innovation in healthcare, featuring companies like Eisai and Rakuten. His insights shed light on how disruption fosters growth, making Japan a hotspot for forward-thinking investments.

Sometimes, you have to take a step back to leap forward. Over the past couple of years, Meta, Amazon, Block and Shopify are among the growth companies to have made efficiency cuts following the pandemic. Gary Robinson, an investor in Baillie Gifford’s US Equity Team, says that’s made them more agile and resilient – qualities that will let them take advantage of artificial intelligence and other opportunities to drive long-term growth. Background: Gary Robinson is joint manager of the Baillie Gifford US Growth Trust, a manager of the American Fund and a partner in our firm. In this episode of Short Briefings on Long Term Thinking, he explores how four leading internet-focused firms have streamlined their operations and reallocated resources to become more adaptable during a period of rapid change.Robinson draws a parallel with companies that made cutbacks after the global financial crisis to suggest that the markets may have underestimated how much growth can be unlocked by leaders taking a hard look at their firm’s spending, organisational structure and business priorities.Robinson suggests that recent efficiency drives will help Shopify, Meta and Amazon pursue AI-related opportunities that could meaningfully increase their earnings. And at Block, efforts to bring two products closer together could help the firm challenge Visa, Mastercard and American Express. Resources: Behind The Tech: Tobi Lütke: CEO and Founder, ShopifyDwarkesh Podcast: Mark Zuckerberg – Llama 3, Open Sourcing $10b Models & Caesar AugustusBent Flyvberg: How Big Things Get DoneCyril Northcote Parkinson: Parkinson’s Law, and Other Studies in Administration More from Gary Robinson: Lessons from evolutionary biologyWhy companies should embrace chaos Companies mentioned include: AmazonBlockMetaNetflixShopify Timecodes: 00:00    Introduction01:40    A background in biochemistry02:55    The appeal of American companies03:30    Parallels with the global financial crisis04:40   Post-Covid efficiency efforts06:25    Addressing overhiring and patched-together processes07:40    Future-proofed businesses08:00    The potential of AI08:10    Shopify and the distraction of side quests10:45    Shopify’s Sidekick assistant12:50    Engineering Shopify’s internal operations14:20    The authority of founder-leaders16:00    Meta’s ‘year of efficiency’18:00    How AI can drive further growth at Facebook and Instagram20:10    Business chatbots on WhatsApp and Messenger21:15    Investing in Block22:30    Capping employee numbers without compromising growth24:40    Square and Cash App’s potential to rival Visa and Mastercard26:35    Meeting Jack Dorsey27:40    Discipline and focus at Amazon29:00    Amazon’s fast-growing advertising business30:20    Generative AI’s trillion-dollar opportunity for AWS31:25    Offloading routine tasks to artificial intelligence32:25    Book recommendation33:40    Outro