Shares we’ve bought and sold on the long pathway to growth

Ian Mortimer, co-manager of the Guinness Global Innovators fund, discusses what’s been fuelling the equally weighted portfolio’s strong performance, AI spending and how the team are approaching the software sell-off, investing beyond the US, and recent buys and sells.

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Dave Baxter, senior fund content specialist at interactive investor: Hello and welcome back to our Insider Interview series. I’m Dave Baxter, senior fund content specialist here at ii and today, I’m joined by Ian Mortimer, co-manager of the Guinness Global Innovators Z GBP ACC (BQXX3N1) fund. Ian, thanks very much for joining me.

Ian Mortimer, co-manager of the Guinness Global Innovators fund: Pleasure, thanks for having me. 

Dave Baxter: If we look at performance, it’s been pretty strong in the last year. What would you say have been the main contributors there, both in terms of the good returns and anything that might have dented performance somewhat? 

Ian Mortimer: If you’re thinking over the 2026 sort of calendar year, I guess two things have driven performance on a positive and a slightly negative point of view. A lot of that is to do with tech. 

So clearly, we’ve had this big divergence between what’s perceived as the winners within tech and what’s perceived as the losers. This is all about the AI trade and Anthropic and co-work and all these tools we’re seeing. 

The difference has really been that growth and outperformance of the semiconductor space, and maybe the underperformance of software.

If you look at the portfolio, we’ve had, from a positive perspective, a big overweight to semiconductors for quite a long time. I think we were quite early on that. I don’t think we were necessarily increasing our weights to the semiconductor space in 2018 based on our view of what AI was going to be.

But I think what we were seeing back then was, if we think about those themes, we were talking about the themes at the beginning of our strategy, the secular growth themes, a lot of those were to do with semiconductor demand. Electric vehicles, The Internet of Things (IoT), the building out of data centres and cloud, for example. 

Our view there was all about that these were companies that were very cyclical in nature, and our view was that maybe if that demand was broadening, perhaps they’d become less cyclical. So, it wasn’t necessarily that they’d become out-and-out growth plays, but the troughs would become shallower, the return on capital would generally be higher, and they’d have this good opportunity to reinvest and grow.

So, I think that’s an area of the portfolio that’s been a really big tailwind, and that’s continued throughout 2026. 

On the other side, it’s been companies like Salesforce Inc (NYSE:CRM), for example, that have been hit harder from the expectation that that’s going to affect their business negatively. Or other companies like Roper Technologies Inc (NASDAQ:ROP), for instance, that owns a number of vertically integrated software businesses. 

The thing the market’s trying to figure out on the software side is that it’s not necessarily completely clear yet which of those software companies potentially will benefit from AI, whether that’s using AI within their business, or the potential shift of business model from software as a service to maybe use of software, so kind of a seat-based pricing model, to how much are you using our products? And you can see that in terms of the earnings.

If you look at the next three years consensus analyst earnings expectations for a lot of these software companies, you’re not seeing any changes, you’re actually seeing quite a lot of improvements.

I think a lot of what the markets are doing is saying, in, say, three years, four years, five years, what’s going to happen to these companies? You can see the big shifts in terms of some of that performance. Salesforce will sell off. It’s definitely been a drag to our portfolio, as an example. Then there’ll be periods where it rallies again because I think the market, the narrative, is not yet completely clear.

So, that’s been the two big drivers of the performance, but obviously our overweight semiconductors has generally been the kind of tailwind.

But we do own some software companies and that’s something we’re actively looking at and reviewing to try and think about, should we keep owning these? Should we be topping them up? But from a valuation perspective, there could be opportunities there. But not all of them are going to work. 

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Dave Baxter: On the AI theme, how worried are you about the so-called hyperscalers and their massive level of spending on AI infrastructure? 

Ian Mortimer: Yeah, it’s something we look at very closely. There’s pros, I guess there’s a balance, if you like. Clearly the market has, if you think back to 2025, slightly simplifying here, when the hyperscalers increased capex, which was one of the big drivers of market performance throughout Q2, Q3 last year, the market was essentially saying, the more you’re increasing capex, we’re going to take that as a proxy for increased demand. Therefore, we are going to reward you for that. Increased capex? You’ve got more demand, this is a growth story, stocks rise.

As we’ve moved through into 2026, we’ve still seen those increases in capex but that jump has been a bit higher through the last quarter of what we’re seeing. I think the market is beginning to question, what is the return on investment of that big capex spend, and is that going to come through? 

In many cases you can see that growth come through, whether it’s Microsoft Corp (NASDAQ:MSFT) or Azure or otherwise. I think you can see it, but we still haven’t got the data points yet. In our view, the valuations, on the flip side is if that’s wrong, are pretty moderate. And if you look at the valuations relative to the market, in some cases, they’re actually trading at a discount to the broad market for these big businesses today. If you compare those valuations to other bubbles, whether it’s the 2001 tech bust, for example, they are completely different. 

If you then look at their balance sheets, they are still really strong. So, even though they’re spending a lot of this money, it’s still within cash flows from operations. So, they can afford to do it. If you look at their debt levels, whether it’s net to EBITDA, or in absolute terms, you still see they’re very robust, they’ve got a lot of cash, and they can manage that. So, in terms of the risk side, you can see some balances. 

If you look at something like Oracle Corp (NYSE:ORCL) though, as the outlier, that’s very different. That’s why the Oracle share price has reacted very differently. They’re spending more than their cash flows, their debt levels are much, much higher, they’re having to raise a lot of debt to pay for this capex spend, and you can see the diversion in terms of how the markets are pricing it. 

So, from our perspective, if we add up the balances, we remain relatively positive on those stocks. I think they still make up a reasonable portion of our portfolio, but I’d also note we run an equally weighted portfolio. So, we don’t have really big weights in those stocks. So, to some extent we’re managing that risk in terms of a stock-specific risk through our portfolio construction, as well as some of that work we’re doing on valuation. 

Dave Baxter: On the equal weight approach, that’s quite an interesting trait. It is something many of the Guinness funds do have, but how tempted do you get to run your winners a bit more? Because with some of those names, you could have made a lot more money if you’d just stuck and allowed the position to grow larger. 

Ian Mortimer: Yeah. Hindsight is a wonderful thing, number one, I would say. Like you say, if we’d have just kept NVIDIA Corp (NASDAQ:NVDA) for the last 20 years and hadn’t touched it, we’d have this incredible track record, but we would have had a very significant stock-specific risk. 

Remember that over our holding period for Nvidia, as an example, it halved twice. So, this is not always completely plain sailing in terms of that straight line. That’s my comment in terms of hindsight bias.

What we’re trying to do is balance the idea of letting your winners run, but then also managing the stock-specific risk side. There are loads of examples where you can see stocks that had great runs – and then they fell sharply. Great runs that fell sharply and the ones that the market tends to remember is the straight line up.

What we’re saying is, we’re happy for stocks to run, say, 5%, 5.5% of our portfolio. We may even trim them. That doesn’t have to go all the way back to 3.3%. It might be that we take 50 basis points or 1% potentially. That way, we’re taking profits as we go up. But we’re not just trimming it every single day and not benefiting from that share price rally.

I think the flip side is also interesting. If the stock is underperforming, we’ve got to really think about, do we want to add more capital? And if we don’t, then maybe we should be thinking about selling it. 

So, it works both ways in terms of giving you some guide rails, trying to avoid some of those behavioural biases, and then just giving yourself a good nudge or a good point of systematically questioning your thoughts, because it’s really easy to fall in love with the company and think it’s absolutely brilliant.

And, actually, what you really want to do is to have a more objective view and say, well, it’s got to this point of the portfolio, its had this run, the valuation now looks like this, should we still be owning it in that way, or maybe we should be taking some profits?

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Dave Baxter: The fund does have a substantial allocation to the US. But if we look at themes like AI, some of the big returns in the last year have actually come from Taiwan and areas like Korea. How tempted do you get to look a bit more beyond the US? 

Ian Mortimer: Yeah. So, I’ve been running this strategy with my colleague Matthew Page since 2009. If you go back all the way to then, at the MSCI World, our benchmark, I think the US weight was 52%. Today, it’s about 72%. 

So, what you have seen over this period is the dominance of the US equity market, but also the dominance of those very large companies within the US equity market, which therefore reflect in terms of that big weight in the benchmark.

So, if you look at our relative weight to the US, it’s about the same, and that’s partly a reflection of what I just described. We absolutely do look at other companies outside the US, and I think we would be to some extent agnostic in terms of where they are.

Obviously, we’d want to be thinking about it if it was more an EM, for example, there’s currency risks and things one would need to consider. But we have had lower weights to the US and maybe more weighting towards, say, Asia-Pacific or Europe.

Today, if you look at something like Taiwan, we do own Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM) as an example. If you look at something like South Korea, that’s been very dominated by the memory makers, and that’s been SK Hynix and Samsung Electronics Co Ltd DR (LSE:SMSN), for example. That’s been a somewhat unique story in the sense that you’ve had this massive demand and a big curtailment of supply effectively not being able to meet that, and it’s been massively price driven.

When we look at those types of businesses, they are generally more commoditised. So, actually, it’s not that it’s technologically difficult to create more supply, but they just can’t keep up with what’s been an absolutely rip-roaring demand that we’ve seen in a very short period of time.

That’s not something that we’re necessarily chasing, by the way, but we would be open to looking at those different countries and different areas. At the moment, again, it’s more bottom-up driven, and we’re generally finding better opportunities in the US. 

But remembering again, most of these companies are very global in nature. It’s not really necessarily a bet on the US, if you like. These are global businesses and if you look at, say, the kind of revenue distribution in terms of the economic exposures, it is going to look more broad than just happening to be where the domicile of these companies that we own are. 

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Dave Baxter: What recent activity has there been in the fund? 

Ian Mortimer: It’s been relatively light this year. We’ve generally been pretty happy with what we owned. The one change we’ve made this year is we sold our position at Adobe Inc (NASDAQ:ADBE). That had been a very strong position in the portfolio and then obviously that’s turned. 

We’d been watching that for some time and, ultimately, this year we took the view, particularly with what was happening in terms of the software sell-off, that we think this is a company, although it’s offering very good value - I think it’s probably single-digit price/earnings (PE) at the moment – but that it’s difficult to see how they could come through that competitive threat. We’ve subsequently seen the CEO has left, the CFO left. There’s a lot of question marks on that company. 

In its place, we bought Advanced Micro Devices Inc (NASDAQ:AMD). So, a company that had been performing more strongly, again, more exposure to the semiconductor space, but we also like that there’s a number of ways to win for that company, so not only are they challenging within graphics processing units (GPUs), it’s done particularly well more recently within central processing units (CPUs). 

We think that’s quite an interesting area where it’s not necessarily that pure-play bet, if you like, it’s slightly broader, and we think that’s something that has that long pathway to growth. So far, that’s been working quite well. 

Dave Baxter: Finally, our usual question, do you have skin in the game? 

Ian Mortimer: I do, yes. We run two global strategies, myself, my colleague and all my pension’s invested in those two strategies. So, I don’t have any kind of external investments otherwise within my pension. 

Dave Baxter: Ian, many thanks for your time. 

Ian Mortimer: Thank you.

Dave Baxter: And thank you for watching. Do let us know, as always, what you think in the comments. And if you’re a fan of this series, hit the like button and hit the subscribe button. Thanks and take care.