Top-performing US trust bullish on pace of tech innovation

Driving this trust’s eye-catching performance has beenpositions in some of the US’s top innovative disruptors. Hannah Smith examines its favoured holdings.

The Baillie Gifford US Growth Trust (LSE:USA)has boasted stellar performance as its management team backs the technological innovators of the future.

In its results for the six months to 30 November 2020, the £942 million trust reported a share price rise of more than 50%, and a net asset value return of 54% compared to 11% from the S&P 500 index.

Driving this performance has been positions in some of the US’s top innovative disruptors, such as pharma and biotech company Moderna (NASDAQ:MRNA), which is at the forefront of Covid-19 vaccine development and has been held in the portfolio since its IPO in 2018.

Baillie Gifford US Growth’s performance has caught the eye of investors, with the trust entering interactive investor’s top 10 list of most-purchased trusts for the month of December 2020. 

“For decades, drug discovery has largely been a process of trial and error,” the management team said. “But we may be entering a new era for drug development. A cohort of biotechnology companies are emerging that are built upon foundational technologies which may be reusable across multiple diseases and disease categories. We think Moderna could be one such company.”

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The final frontier

The trust has also made a private company investment in Elon Musk’s SpaceX, which has been “innovating at a breathtaking pace”. It has launched a beta version of its high-speed broadband service Starlink, delivered by 900 satellites orbiting the earth. The company is currently working on its Starship rocket, which it hopes will take passengers to the moon and Mars.

The development of electric vehicles has also benefited the fund, which had a 9.5% position in Musk’s Tesla (NASDAQ:TSLA) as at 30 November 2020. The investment team said alternative energy sources, such as solar power, have been getting cheaper and more competitive with carbon-based fuels, energy storage costs are falling, and the “end of carbon is getting closer”.

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A year at home

Other top holdings included stocks that have been able to take advantage of the work from home, stay at home norm of 2020, including technology and e-commerce names. These include Shopify (NYSE:SHOP), Amazon (NASDAQ:AMZN), Wayfair (NYSE:W), Roku (NASDAQ:ROKU), Peloton Interactive (NASDAQ:PTON), Zoom Video Communications (NASDAQ:ZM), and Netflix (NASDAQ:NFLX) are held by the trust.  

At the sector level, in November the trust was most heavily weighted towards consumer discretionary and information technology, each accounting for around 30% of the portfolio, and healthcare at around 12%.

“It has been a year of great pain and loss. But there has also been some important progress. As we look forward, we are optimistic about what the future holds. As we have said many times before, the pace of innovation is speeding up and spreading out. This ought to be a fruitful environment for growth investors,” the team said.

Co-manager reshuffle

Meanwhile, the board has announced a co-manager change for the trust, with Kirsty Gibson replacing Helen Xiong to work alongside Gary Robinson on 1 March. Gibson is an investment manager on Baillie Gifford’s US equities team, and co-manager of its American fund.

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The trust has returned 119.5% over the last year compared to a 17.3% return from the IT North America peer group and is currently trading on a 0.8% premium to net asset value, according to FE.