Blue Whale manager: Facebook is good value but I wouldn’t buy Tesla

The high-flying Blue Whale Growth fund has reaped the rewards of the US stock market’s bounce back from the coronavirus crash – delivering a 34 per cent gain for investors over the past six months.

The global fund – run by Stephen Yiu and backed by Peter Hargreaves – is invested heavily in the US, which accounts for 72 per cent of its holdings and its top ten features a raft of technology-related companies, including Adobe, Facebook and Microsoft.

Considering the remarkable run that US shares and the tech sector have been since the coronavirus crash lows at the end of March, has the market become detached from reality – as some suggest – or have the world’s well-known digital names proved themselves far more resilient than people thought?

Stephen joins Simon Lambert on this episode of the Investing Show to share his views on what has happened with the market – and also why he sees some big names such as Facebook as value investments but would not buy Tesla or Netflix. 

The Blue Whale fund holds just 25 companies from around the world, which it considers to have the best prospects, resilient business models and – perhaps surprisingly for a US and tech heavy growth fund – and to be good value.

In fact, Stephen describes himself as a value investor, but says that this involves looking to pick up companies at a good price, rather than the kind of bargain basement value investing strategy once described by legendary investor Ben Graham as picking up pennies in front of a steamroller.

Stephen discusses how this philosophy fitted with using a high proportion of cash in the fund as the coronavirus crisis hit to add to holdings of Amazon and PayPal at a knock down price, but also then selling down some of those holdings after their share prices rocketed in the sharp recovery.

He also reveals why despite Tesla riding out the storm, he doesn’t see the company as one he would invest in and why although Netflix’s subscription model is highly attractive it suffers from the same business model problems as Premier League football clubs.

Blue Whale Growth Fund 

Manager: Stephen Yiu

Ongoing charges: 0.89%

Fund size: £520million

Holdings: 25   

Sector: Global 

Year-to-date (vs sector): 24.1% (4.6%)

Six months (vs sector):  

One-year (vs sector): 21.8% (6.1%)

Three-year (vs sector): 72.8% (26.4%)

Sector rank over three years: 13/338

The Blue Whale Growth fund holdings and performance to 28/9/2020