Short Briefings on Long Term Thinking - Baillie Gifford

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

Emerging markets have sometimes promised more than they have delivered, but circumstances may be tipping in growth investors’ favour. Will Sutcliffe, head of our Emerging Markets Team, explains why it’s an opportune time to invest in the asset class. Background: Will Sutcliffe is the head of Baillie Gifford’s Emerging Markets Team and co-manager of our Emerging Markets Leading Companies Fund. In this episode of Short Briefings on Long Term Thinking, he brings his 23 years of experience in the field to explain what makes the specialism different from other types of growth investing. He makes the case that finding exceptional growth companies at attractive valuations is only part of the equation. Investors must be mindful of the broader macroeconomic environment, he explains, to avoid getting caught out by currency swings or spiralling debt costs. This leads him to conclude that recent resilience in emerging market economies could point to a favourable outlook for the asset class’s growth stocks. All this only matters to our portfolios if there are exceptional businesses to invest in, and Sutcliffe argues that the emerging markets are home to an increasing number of world-class companies. They range from the Taiwanese chip maker TSMC to the energy, retail and telecoms conglomerate Reliance Industries. Resources: Emerging markets: why bother?Stock story: PinduoduoSouth-east Asia’s rising export starsJio Financial ServicesNaturaPDD HoldingsPinduoduoReliance IndustriesTemuTSMCGabriel Garcia Marquez: Until August Timecodes:00:00    Introduction01:45    Joining the Emerging Markets Team03:15    A ‘terrifying’ baptism of fire05:00    Emerging markets’ ‘dirty little secret’05:45    Qualifying for emerging markets status06:45    Higher-calibre companies08:00    Macroeconomic resilience09:30    US-China tensions and Russia’s invasion of Ukraine12:00    Investing in China13:45    PDD Holding’s Pinduoduo and Temu

A new medicine that can help patients lose 15 per cent of their body weight could have far-reaching consequences for healthcare. Wegovy mimics a hormone the gut releases, reducing appetite and slowing digestion to delay hunger’s return. Research is also underway into other potential health benefits. In this podcast, Baillie Gifford investment manager Ross Mathison discusses its maker, the Danish pharmaceuticals manufacturer Novo Nordisk, which became Europe’s most valuable company in 2023. Background:Ross Mathison is an investment manager in our Global Income Growth Team, co-manager of our Global Income Growth Fund and deputy manager of the Scottish American Investment Company (SAINTS). In this episode of Short Briefings on Long Term Thinking, he discusses how medicines that mimic the glucagon-like peptide-1 (GLP-1) hormone could help tackle the growing problem of weight gain. Forecasts suggest that by 2035, more than half the world’s population will either be overweight or obese. That’s likely to lead to more people suffering associated diseases, putting health budgets under further strain. Novo Nordisk initially researched GLP-1s as a diabetes treatment. The company is the world’s biggest insulin producer, but it’s the release of its weight-loss drug Wegovy that’s transformed its growth prospects. News that medical trials suggest that the therapy could also reduce the likelihood of heart attacks, strokes and other cardiovascular threats among some patients has driven further investor interest. Mathison explains that there could be further health benefits beyond this, how even more effective treatments could follow and why Novo Nordisk’s manufacturing edge and connection to the world’s biggest charitable foundation bode well for its future. Resources:New England Journal of Medicine: Semaglutide trialNovo Nordisk cardiovascular trial press releaseNovo Nordisk kidney trial press releaseNovo Nordisk FoundationWegovyWorld Health Organization obesity factsheetHitting Against the Spin Timecodes:00:00    Introduction1:40      What are GLP-1s?4:00      Scientific breakthrough5:05      Obesity: a disease, not a choice6:45      Novo Nordisk’s drug, Wegovy08:10    Prescription costs

Discover the three characteristics that define great growth companies: solving real-world problems, financial strength and discipline, and high adaptability. Baillie Gifford partner Tim Garratt explains why these traits are crucial for long-term growth investing and shares examples of companies like Netflix and Amazon that exhibit them. He also discusses the importance of adaptability in business during challenging times, the shift from abundance to limitations in capital supply and natural resources, and the use of automation and AI to address supply chain challenges.

This podcast explores Amazon and DoorDash's different approaches to bridging the physical and digital worlds. Amazon invests in its own extensive infrastructure while DoorDash relies on partnerships. The podcast discusses the advantages of each model and how they disrupt traditional businesses.

China became known as the world’s factory thanks to it offering companies a way to manufacture all kinds of goods at a high quality and relatively low cost. But in recent years, south-east Asian nations, including Vietnam and Indonesia, have begun challenging it for that status. Baillie Gifford investment manager Ben Durrant recently returned from a tour of the region. He discusses some of the long-term growth opportunities he unearthed on his trip. BackgroundBen Durrant invests on behalf of the Pacific Horizon Investment Trust, the Pacific Fund, and our Emerging Markets Equity Team. In this latest episode of Short Briefings on Long Term Thinking, he explores the factors that led China to become the world’s leading exporter and how its move up the value chain is now creating opportunities for other south-east Asian countries to grasp. Durrant reviews some of his most memorable encounters in Vietnam, Indonesia, Malaysia and Thailand and reveals which growth companies excited him the most. They include businesses using mined metals to make car batteries, banks serving populations with growing spending power and, perhaps surprisingly, one of the world’s leading catfish exporters.Resources: The Indonesian companies powering the green transitionBen Durrant LinkedIn pageHow Asia WorksHow the World Really WorksPast podcasts Timecodes:00:00        Introduction01:30      China’s success as a low-cost exporter03:15        Land reform’s role04:00        Good quality, low-cost labour05:45        South-east Asian countries’ advantage07:15        Vietnam’s growth opportunity09:30        Vin Hoan: exporting catfish11:45        Sourcing local insights13:30        Indonesia’s move up the value chain16:15        Clusters of expertise in Malaysia18:00        Looking beyond tourism in Thailand20:15        Moving up the value chain22:15        The attraction of growth investing in southeast Asian23:15        Paying attention to macroeconomics24:30        Book recommendation Follow us via:TwitterLinkedIn Companies mentioned include:FPTHyundaiSamsung ElectronicsVinh Hoan

Donald Farquharson, Baillie Gifford's head of Japanese equities, discusses why conditions seem favorable for a cohort of Japanese growth stocks. He highlights companies like Olympus, DENSO, and Nihon M&A Center. They also explore the history of Japan's economy, the importance of research and development in the automotive industry, misconceptions about Japan's market, and the investment strategies of Masayoshi Son.