The Meta Platforms (NASDAQ: FB) share price fell off a cliff yesterday. That came as a less-than-encouraging quarterly report alarmed already-battered tech investors. Revenue in Q1 is expected to be somewhere between $27bn and $29bn, rather than the $30bn expected by analysts. The number of active users also declined, a first in the company’s 18-year history. 

Should I be using this weakness as an opportunity to load up on the owner of Facebook, WhatsApp and Instagram? Like the relationship status on some of its users’ home pages, “it’s complicated“.

Meta share price: is the reaction overdone?

In certain respects, I think the reaction is too extreme. A fall from 1.93bn to 1.929bn active users in the last three months of 2021 is nothing to worry about, I feel. But the market reaction suggests Facebook’s growth is history. That strikes me as somewhat ludicrous.

In reality, I expect the company will adapt and overcome, as any good business does. Meta owns a staggering amount of data and information on users that it can then sell to advertisers. It also remains a hugely profitable business.

Like him or not, founder Mark Zuckerberg isn’t going anywhere either. At just 37, this isn’t the first challenging period faced by Meta’s chief and it won’t be the last. For me, the Cambridge Analytica scandal in 2018 was far more concerning. Even the best stocks miss earnings targets now and then.

Reasons to be fearful

This isn’t to say the company doesn’t face substantial challenges going forward. Some or all of these could put further pressure on the Meta share price. 

The popularity of rival apps such as TikTok and Alphabet-owned YouTube will certainly be playing on owners’ minds. The introduction of the App Tracking Transparency Policy by fellow tech titan Apple is another potentially huge headwind. Yes, the so-called metaverse being created by the company could be the solution to both problems. But this will take time to develop and cost billions of dollars in the process. 

And if all of this weren’t enough, there’s the much-discussed rotation into value stocks in 2022. Investors become rattled over the prospect of quicker-than-expected interest rate hikes are leading this. Meta may get back on track in the next quarter. But wider market sentiment could still delay a recovery. The mere whiff of increased regulation won’t help.

I’m a buyer (sort of)

On balance, I’m inclined to think Thursday’s movement in the Meta share price was another example of stock market myopia. A good company doesn’t become a bad one in three months. Being able to look further ahead than a few weeks is one of the few, very powerful, advantages I have over professional investors whose careers are on the line.

I’m perfectly content to increase my exposure to the company via quality-focused funds such as Fundsmith Equity and LF Blue Whale Growth rather than buy the stock directly. This strategy may reduce my gains in the event of Meta making a strong recovery. But it’s much easier than trying to time my entry when growth stocks are being hammered across the board.

The post The Meta share price has crashed. Here’s what I’m doing about the earnings bombshell appeared first on The Twelfth Magpie.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Paul Summers owns shares in Fundsmith Equity and LF Blue Whale Growth. The Motley Fool UK has recommended Alphabet (A shares) and Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As scary as such drops can be, I’ve been taking the opportunity to load up on a fund whose performance prior to the start of 2022 had been excellent.

Solid gains

Managed by Stephen Yiu, LF Blue Whale Growth returned 20.8% in 2021, according to its most recent fact sheet.  That’s a better return than its benchmark. The IA Global Sector average was 18%. All told, the fund has more than doubled investors’ money in a little over four years.

One reason for this stellar performance is the number of tech-related stocks owned by Blue Whale. These include Microsoft, Adobe and Alphabet. Another relates to just how concentrated the fund is.

Blue Whale’s portfolio is made up of just 27 holdings, almost 73% of which are US-listed firms. You probably don’t need me to tell you any strategy that embraced being overweight in stocks from across the pond paid off handsomely in 2021.

Unfortunately, the first month of 2022 has taken a rather large chunk out of last year’s gains. So the question to ask is whether the current market crash is a great opportunity to buy more. 

New bear market?

On the one hand, the recent rout in tech stocks could continue if the Federal Reserve keeps giving out signs that it’s ready to shift its monetary policy. That’s potentially problematic for Blue Whale’s portfolio, given how concentrated (and potentially more volatile) it is.

Regardless of what the Fed does, it’s possible traders will move more of their money into value stocks hit most by the pandemic anyway. Rising tensions in between Ukraine and Russia, while seemingly not all that relevant to the performance of a US-focused fund, could also push investors to the exit as a cautionary measure.

Is this the dawn of a new bear market? It’s entirely possible.

Back quality

Of course, there are reasons to stay bullish too. One argument is that all this will prove transitory. With so many US stocks now at least in correction territory, the worst could already be over.  And when we get big sell-offs, the recovery can be just as swift. Thanks to inflation, staying in cash is hardly appealing. 

Perhaps the biggest motivation for feeding my money into Blue Whale specifically is its attitude to stock selection. Like rival Fundsmith Equity, Yiu looks for high-quality shares. He also avoids those “at the mercy of cyclical economic gravity“. The fund has a strict approach to valuation too. This means investors don’t need to worry about owning unprofitable story stocks.

Another potential tailwind is Blue Whale’s size. As a relatively young fund with ‘just’ £1bn in assets, Yiu has considerable flexibility in what he is able to buy. I’d be amazed if he hasn’t put some money to work in recent days.

Long-term focus

The reversal in the fund’s fortunes is a reminder of how quickly sentiment can change. So long as I adopt a long-term mentality (not dissimilar to Yiu) while also maintaining a degree of diversification, I’m confident that increasing my investment here will pay off. I’m still backing Blue Whale.

The post 1 fund I’ve been buying during the market crash appeared first on The Twelfth Magpie.

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Paul Summers owns shares in LF Blue Whale Growth and Fundsmith Equity. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Fast forward to today, and Blue Whale is now just over four years old. So, let’s take a look at how this fund has performed in the four years since launch, and the outlook from here.

Blue Whale Growth review

Before I analyse Blue Whale’s performance since launch, it’s worth touching on the investment strategy that portfolio manager Stephen Yiu employs.

This fund is all about growth. However, when it comes to picking growth stocks for the portfolio, Yiu is very selective. His goal is to invest in high-quality companies that a) have the ability to grow and improve profitability over the long term, and b) have a valuation that’s attractive relative to their future growth potential and profitability.

Ultimately, Yiu’s strategy is quite similar to that of Fundsmith manager Terry Smith, who also focuses on high-quality businesses. However, compared to Smith, who’s known for his buy-and-hold approach, Yiu is a little more active. For example, he won’t hesitate to take some profits off the table if a stock’s valuation rises to an excessive level.

Performance

Has this strategy worked? Absolutely. Here’s a look at the fund’s performance since the start of 2018 (to 30 September).

I can see that Blue Whale comfortably beat both the MSCI World index and the Investment Association’s Global Sector average every year between 2018 and 2020 and is outperforming both this year. It has also beaten Fundsmith over the same period.

Overall, the fund has delivered a return of 107.2% since launch versus a return of 56% for the IA Global Sector average. That’s an excellent return.

Outlook

In terms of the outlook, I’m confident Blue Whale can continue to deliver strong long-term returns going forward. One reason I say this is that the fund owns some really great companies. At 30 September, the top 10 holdings were:

Adobe, Alphabet (Google), Atlassian, Facebook, Intuit, Mastercard, Microsoft, Nvidia, Veeva
and Visa.

I’m very bullish on most of these companies. I really like Alphabet and Microsoft, which are well positioned to benefit from the growth of cloud computing. Both just posted amazing earnings for the quarter. 

I also like Mastercard and Visa, which look set to benefit from the growth of e-commerce and electronic payments.

And then there’s Nvidia, which makes high-performance graphics processing units (GPUs) and looks set to be a major player in the artificial intelligence space.

Overall, it’s a great list of stocks, in my opinion. 

Risks

Of course, there are risks to be aware of.

One is that this fund has a very specific investment style. If growth stocks fall out of favour, Blue Whale could underperform.

Another is stock-specific risk. This fund is concentrated and only holds around 30 stocks. If a handful were to underperform, it could impact overall performance.

Overall, I really like Blue Whale. For me personally, it’s a core ‘growth’ holding in my portfolio. I see it as a good way for me to get exposure to high-growth businesses listed internationally.

The post The Blue Whale Growth fund: my 4-year review appeared first on The Twelfth Magpie.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Edward Sheldon owns shares of Alphabet (C shares), Mastercard, Microsoft, Nvidia, and Visa. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Facebook, Intuit, Mastercard, Microsoft, Nvidia, and Visa. The Motley Fool UK has recommended Adobe Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The LF Blue Whale Growth fund might not be as well known as other actively-managed vehicles such as Fundsmith Equity, but this looks set to change. Today, I’ll explain why I’m still investing on a near-monthly basis. 

Blue Whale Growth: making a splash

Since its launch back in 2017, Blue Whale Growth has generated an annualised return of 19.9%, based on its most recent factsheet. That’s a stunning return. It’s all the more impressive considering the stock market volatility we’ve seen over the last year or two.

It’s also far higher than that achieved by its benchmark. The IA Global Sector average comes in at 11.8% over the same period. The fund outperformed in 2020 too — 26.4% vs 14.8% 

This points to some sound stock-picking by Stephen Yiu and his team. Blue Whale Growth adopts a quality-focused strategy. This means it’s looking for, among other things, companies able to make really good returns on the money they invest into their respective businesses. Think of this as a company’s internal interest rate. Anything regularly approaching or exceeding, say, 20%, is a great thing. 

Can this form continue?

Based on the sort of stocks that feature in its portfolio, I’m minded to think Blue Whale Growth is a great investment for the long term. It’s hard to imagine not using payment services such as Visa or Mastercard. Elsewhere, the presence of Nintendo within the portfolio provides some exposure to the lucrative gaming market. The inclusion of Kering — owner of a host of luxury brands such as Gucci — is a tick in the box for accessing the luxury goods industry. 

What’s more, Blue Whale features many stocks that Fundsmith doesn’t and vice versa. This means that investors like me won’t be ‘doubling up’ by investing in both funds, even though they follow a similar strategy. In fact, this is exactly what I do. 

Notwithstanding this, there are a few caveats.

Tech-heavy

The LF Blue Whale Growth fund might not be for me if I had concerns about the performance of tech shares going forward. As things stand, a little over 54% of the 30-stock portfolio is invested in companies from this sector. Many of the usual suspects feature: Alphabet (Google), Microsoft and Facebook. Some/all of these names may be subject to increased regulation. 

There’s also the fact that 70% of the fund is invested in US-listed companies. These may have high growth potential but, my goodness, does this come at a cost right now! Should markets wobble again, perhaps due to concerns that inflation isn’t as ‘transitory’ as some think, investors could quite reasonably assume that these will be shaken harder than most.

A final point worth highlighting is that the fund is blue-chip-focused. This provides reassurance that the stocks I hold should have the clout to weather most market storms. However, it also means I won’t be able to benefit from the outperformance generally seen in small-cap shares over time. For this, I use another strategy. 

Long-term hold

At ‘just’ £850m, Blue Whale Growth is still a tiddler in a big pond. However, should it be able to continue posting such stellar gains, I’m confident it’ll substantially increase in size over the years.

This is a ‘bottom drawer’ investment, in my view, and one that could/should prove an excellent wealth-builder as part of my balanced portfolio.

The post LF Blue Whale Growth: why I’m still buying appeared first on The Twelfth Magpie.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Paul Summers owns shares in LF Blue Whale Growth Fund and Fundsmith Equity. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Facebook, Mastercard, Microsoft, and Visa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Look at things from a different perspective however, and this result isn’t quite so positive.

Nick Train has underperformed!

To properly measure just how good a manager is, it makes sense to compare ‘oranges with oranges’. Forget the FTSE 100. Train’s performance against rival managers adopting similar strategies is a better yardstick. 

It’s here there’s possible concerned. Terry Smith’s Fundsmith Equity fund, for example, has returned 17.2% in the last year. The promising LF Blue Whale Growth has achieved a stonking 24.1% gain over the same timescale. This is despite all three managers having concentrated portfolios of between 25-29 quality-focused stocks. This concentration matters because it means investors are relying more on the active stock-picking skills of the fund manager, and less on general market sentiment, to grow their wealth.

On this basis, Nick Train is really lagging his peers.

So, what gives?

There are arguably two main reasons to explain this underperformance. One is the geographical mix of Train’s holdings.

Unlike Fundsmith and Blue Whale, Train has a third of his portfolio invested in UK companies. However, Smith and Blue Whale manager Stephen Yiu have just 14% and a minuscule 3% exposure to London-listed stocks respectively. This matters, because the UK stock market hasn’t recovered as well as others around the world.

A second, related reason why Global Equity hasn’t done as well is due to the sort of companies Nick Train’s invested in. Consumer goods giant Unilever and premium spirit maker Diageo occupy the largest and third-largest positions in his portfolio. The share prices of both have recovered from March’s market crash but they’ve hardly set the world on fire.

By sharp contrast, both of Train’s peers have big stakes in US companies, such as Facebook, Microsoft and Paypal. Thanks to global lockdowns, these have thrived in 2020. 

Keeping the faith

I don’t think any of the above should matter to Foolish investors. A year is simply not long enough to judge whether a stock picker has lost his or her touch. Far more important is that Nick Train’s fund is up 122% in five years, handsomely beating his chosen benchmark: the MSCI World Index (developed markets).

I’m also inclined to think that many of Nick Train’s holdings will recover strongly (and potentially do better than those of rivals) in 2021. It’s unfathomable, for instance, that people won’t return to bars and pubs eventually.

As an aside, we also need to consider the possibility that the US market — which Fundsmith and Blue Whale are heavily exposed to — is now seriously overpriced. In spite of Brexit-related concerns, the UK market still looks reasonably valued.

Buying opportunity

I certainly wouldn’t rely on the skills of just one manager, even Nick Train, for growing my wealth (n.b. I hold all three of the funds mentioned). Nevertheless, I don’t see any reason to become concerned about the Global Equity Fund’s performance. In fact, I think now might be a great time for me to top up my stake!

The post Nick Train is underperforming, but I’m not worried appeared first on The Twelfth Magpie.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Paul Summers owns shares in Lindsell Train Global Equity, Fundsmith Equity and LF Blue Whale Growth Fund.. The Motley Fool UK owns shares of and has recommended Facebook, Microsoft, and PayPal Holdings. The Motley Fool UK has recommended Diageo and Unilever and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and long January 2022 $75 calls on PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In hindsight, that was a good move. So far, Blue Whale has performed very well for me. Over the last year, it has returned about 23%. As a result of this excellent performance, it has recently won an award for best fund 2020.

Should I invest more in Blue Whale now? Let’s take another look at this global equity fund.

Blue Whale Growth: investment philosophy

One thing that appeals to me about Blue Whale is its high-conviction approach to investing. Instead of playing it safe and buying a wide range of stocks for the portfolio, Yiu only invests in around 25-35 companies at a time. His aim is to invest in leading businesses that will benefit from structural growth trends and grow their profits significantly over time, at attractive valuations. I see this as a good investment strategy.

Portfolio breakdown

Looking at the portfolio, I like what I see. The top 10 holdings at 31 October 2020 were:

Adobe
Autodesk
Boston Scientific
Facebook
Intuit
Mastercard
Microsoft
PayPal
Stryker
Visa

There are some top companies on that list. I’m particularly bullish on Microsoft, Mastercard, PayPal and Visa.

The top three sectors at 31 October were technology (55%), healthcare (15%) and communication services (9%).

Meanwhile, the top three geographic regions were the US (69%), Europe (21%) and the UK (2%).

Performance

Performance is where Blue Whale Growth really stands out. Between its launch in September 2017 and 31 October 2020, the fund was one of the best performing funds in its class, delivering a return of 67%. By contrast, the Investment Association Global sector average was 24%.

It’s worth pointing out that it’s done better than a lot of the big hitters in the global equity sector. According to figures from Hargreaves Lansdown, over the last three years, Fundsmith has returned 45% while Lindsell Train Global Equity has returned 39%. Over the same period, Blue Whale has returned 58%

Risks

There are risks to consider here, as always. One is the fund’s exposure to the technology sector. Another is the fund’s exposure to the US. The concentrated nature of the fund is also a key risk to consider.

Blue Whale: I’m bullish

Overall, however, I like this global equity fund a lot. Given its investment philosophy, holdings, and performance, I’d be happy to invest more into the Blue Whale Growth fund.

Of course, while Blue Whale has a lot going for it, I don’t see it as a ‘one-stop shop’. With just 25-35 holdings, it’s not going to provide me with full diversification.

So, I will continue to invest in other funds, as well as high-quality individual stocks that have strong growth potential.

The post Blue Whale Growth has just won a best fund award. Should I invest more? appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Edward Sheldon owns shares in Microsoft, Mastercard, Hargreaves Lansdown, and PayPal and has a position in the Blue Whale Growth fund, Fundsmith, and Lindsell Train Global Equity. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Facebook, Intuit, Mastercard, Microsoft, Hargreaves Lansdown, PayPal Holdings, and Visa and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and long January 2022 $75 calls on PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

You may be surprised at some of the funds on the list. 

Hargreaves Lansdown investors bought these funds

The top 10 funds Hargreaves Lansdown clients bought for their ISAs in August (in alphabetical order) were:

• Baillie Gifford American

• Baillie Gifford European

• Baillie Gifford Global Discovery

• Baillie Gifford Long Term Global Growth

• Baillie Gifford Managed

• Baillie Gifford Positive Change    

• Fundsmith Equity

• Legal & General Global Technology Index

• LF Blue Whale Growth

• Rathbone Global Opportunities 

Global focus 

The thing that stands out about this list is that Hargreaves Lansdown investors are diversifying into international shares. This is great news. The UK has many world-class companies. But to fully diversify your portfolio, you need to have exposure to international shares too. 

Traditionally, UK investors mainly stuck to the UK stock market when investing in shares. This is known as investing with a ‘home bias’. However, it seems that Hargreaves Lansdown investors are not making this mistake. This list of funds suggests that they are thinking globally, which is a very smart move. 

Technology theme 

Secondly, technology is a dominant theme here. Most of these funds have high weightings to the tech sector. Baillie Gifford American, for example, had 28.3% weighting to the tech sector at 31 July. Its top holdings include Shopify, Tesla, and Amazon. 

The Legal & General Global Technology Index is a low-cost index fund that tracks technology companies in the FTSE World index. Personally, I see this fund as a slightly riskier way to play the technology theme. That’s because around 30% of the fund is allocated to just two stocks – Apple and Microsoft. This means there’s a higher level of stock-specific risk. Having some exposure to technology in your portfolio, however, is a wise move.    

Sustainable investing

Another observation is that there’s a sustainable fund in the mix – the Baillie Gifford Positive Change fund. This fund aims to invest in companies that are contributing towards a more sustainable and inclusive world. I’ve commented before that interest in sustainable investing has increased significantly in recent years. 

In the past, many sustainable funds underperformed the broader market. However, today, plenty of sustainable funds are delivering fantastic returns for investors. This particular fund has returned 67% over the last year according to Hargreaves Lansdown, which is a phenomenal return. 

Under-the-radar funds

Finally, it’s good to see some under-the-radar funds, such as Blue Whale Growth, on the list. This is a fantastic little fund that has delivered excellent returns for investors since its launch just over three years ago. Over the last 12 months, it has returned 24.3% according to Hargreaves Lansdown, comfortably beating some of its bigger rivals such as Fundsmith (13.7%) and Lindsell Train Global Equity (1.6%). 

The takeaway here, if you invest in actively-managed funds, is that diversifying your portfolio across a number of different funds with different investment styles can pay off. Not only can it potentially enhance your returns but it can also potentially lower your overall portfolio risk. 

The post Here are the top 10 funds that Hargreaves Lansdown investors bought for their ISAs last month appeared first on The Twelfth Magpie.

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• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Edward Sheldon owns shares in Hargreaves Lansdown, Apple and Microsoft, and has positions in Fundsmith Equity and Blue Whale GrowthJohn Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Apple, Microsoft, Shopify, and Tesla. The Motley Fool UK has recommended Hargreaves Lansdown and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This is not to say, however, that the Fundsmith team can afford to relax. Assuming it is able to maintain the performance it has shown so far, I think the LF Blue Whale Growth Fund managed by Stephen Yiu could become a rival to their crown in the future.

Top growth fund

Like Smith, Yiu and his team attempt to grow holders’ money by investing in high-quality companies trading at “attractive” prices. Microsoft, Facebook and Visa are all big holdings in the fund.

Like Smith, Yiu also favours a high-conviction approach, holding only 25 to 35 stocks at any one time. As the former has shown, this level of concentration can turbocharge returns as long as the chosen few perform as hoped (the opposite is always a possibility, of course). That’s exactly what has happened in the three years Blue Whale has been around for. 

By the end of August, the growth fund had returned a stunning 75.9% since it was launched on September 11 2017 (or 21% annualised). In 2020 to date, the share price is up 23.4%. This compares favourably to Fundsmith’s still-really-rather-good 13.1%.

These numbers look even better when compared to Blue Whale’s sector (IA Global Average). This has returned 25.7% since the former’s launch or 8% annualised. Out of interest, the FTSE 100 is down 20% over the same three-year period, highlighting how rewarding it can be to deviate from indices. 

But let’s not get carried away. The £520m of assets under management at Blue Whale is a drop in the ocean compared to Fundsmith’s £21.5bn. Yiu has clearly got his work cut out if he’s to get anywhere near the size of the rival fund in a few years.

There are a few other things worth mentioning to would-be investors. 

Before you buy

First, a three-year track record is still too short to be able to make a definitive judgement on Yiu and his team. Investing is about the long game. The best managers prove their worth over many years, often decades. This growth fund is just getting started.

Another thing worth highlighting is that 72% of Blue Whale’s portfolio is made up of US-listed stocks. Fundsmith has 68% exposure. The fact that valuations over the pond are once again looking frothy could prove problematic in the event of a significant second coronavirus wave later this year.

Third, one must always remember that having someone else invest on your behalf incurs fees that ultimately eat into returns. At 1.14%, this growth fund’s annual fee is undeniably high. Remember that an investor can gain exposure to the S&P 500 index via a cheap exchange-traded fund, albeit without the tilt towards ‘quality’. These have ongoing charges as low as 0.07%. Anyone choosing this option over recent years would still have done very well. 

Why choose?

Caveats aside, I suspect the performance of Blue Whale to date will lead to more investors gravitating towards it. There is, after all, nothing to stop anyone from building a diversified portfolio containing a mixture of active and passive funds, as well as their own stock picks.

Blue Whale or Fundsmith? Why not both? 

The post Watch out Fundsmith. I think LF Blue Whale Growth Fund is out for your crown! appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
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Paul Summers owns shares in Fundsmith Equity Fund and LF Blue Whale Growth Fund. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Taking this on board, I think anyone in the position to continue investing in the top tier over next few months should do so.

But while a cheap exchange-traded fund is perfect for those desiring a fuss-free approach, this strategy won’t suit everyone. Those wanting to outperform the market (be it the FTSE 100 index or something else) will need to pick their own stocks, get others to do it for them, or a bit of both.

Personally, I’m in the third camp. Today, I’m going to cover two funds I’ve been adding to my own portfolio lately.

Making a splash

Set up by Hargreaves Lansdown founder Peter Hargreaves and Stephen Yiu, the LF Blue Whale Growth fund invests in a concentrated portfolio of 25 large-cap, mostly US-based stocks. Tech titans Amazon, Adobe and Microsoft are some of the largest holdings.

While manager Yiu has a penchant for tech stocks, there are some things he definitely won’t buy. Like fellow fund managers such as Terry Smith, Yu also won’t have anything to do with cyclical companies such as those in the oil and gas or mining spaces. He’s also wary of banks and pharmaceuticals. Many such businesses feature in the FTSE 100.

Blue Whale aims to outperform similar funds every 12-month period, which it has since launch in September 2017. From here to the end of April this year, it had returned 46.3% compared to its sector average of 11.8%. Encouragingly, the fund is also up 2.6% in 2020 so far. The sector average is down 7.1%.

Naturally, it’s still early days. The real test for Yiu is whether he can sustain this performance over the medium-to-long term. If he can, we could be looking at a potential rival to Fundsmith’s crown. At £300m, there’s certainly lots of room left to grow. 

Likely FTSE 100 beater

A second fund likely to generate far better returns than a FTSE 100 tracker is Liontrust UK Smaller Companies.

Some may consider buying such a fund very risky when the outlook for small businesses is especially bleak. Even if a second wave of the coronavirus is contained, the economic wounds sustained so far will take time to heal. There’s also Brexit to think about.

The importance of focusing on the long term, however, can’t be overstated.  Research has consistently shown that investing in minnows can deliver exceptional outperformance over the long term, certainly compared to the likes of the FTSE 100. Given this, it surely makes sense for younger investors to have some exposure.

Yes, it’s expensive to hold compared to your typical top tier tracker (the annual management charge is 1.25%). On the flip side, performance over the years suggests the Liontrust team members earn their pay.

In the last five years, the fund has delivered a near-84% return compared to the sector’s 26%. It’s also fared better over the last three months of market mayhem (-12% compared to -22%).

If you can trust yourself not to meddle and can handle the volatility, I feel confident this fund will prove a long-term winner.

The post The FTSE 100 still looks great value but I’m buying these top funds instead appeared first on The Twelfth Magpie.

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• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Paul Summers owns shares in LF Blue Whale Growth and Liontrust UK Smaller Companies. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, my view is that a mix of top actively-managed funds and high-quality stocks could potentially deliver higher returns than a FTSE 100 tracker in the long run. Here’s a look at three top global equity funds that have outperformed the FTSE 100 by a wide margin recently.

Outperforming a FTSE 100 tracker

One fund that I view as a good investment is Fundsmith Equity. This is a large global equity fund that is managed by portfolio manager Terry Smith.

Since its launch in late 2010, Fundsmith has delivered outstanding returns for investors. For example, for the five-year period ending 31 December 2019, Fundsmith delivered a return of around 132% versus 41% for the FTSE 100. More recently, the fund has held up very well in the stock market crash, returning -8% in the first quarter of 2020, versus -24% for the FTSE 100.

One reason this fund has delivered such great returns for investors is that Smith has very strict investment criteria when it comes to picking stocks. Instead of investing in a wide range of companies, he only invests in a handful of high-quality, resilient businesses that have advantages that are difficult to replicate.

Fundsmith is significantly more expensive than your average FTSE 100 tracker. Fees through Hargreaves Lansdown are 0.95% per year plus platform fees. But I believe this is well worth it, given the fund’s track record.

A focus on ‘exceptional’ companies 

Another actively-managed fund I hold in high regard is Lindsell Train Global Equity.

Like Fundsmith, Lindsell Train Global Equity has delivered stunning returns for investors in recent years. For the five-year period to the end of 2019, the fund returned a very impressive 147%. And for the first quarter of 2020, it returned -11%, outperforming FTSE 100 tracker funds by a long way.

This is another fund that focuses on high-quality businesses. Specifically, portfolio managers Nick Train and Michael Lindsell look for ‘exceptional’ companies that demonstrate long-term durability in cash and profit generation. Looking at the fund’s long-term performance track record, this approach seems to deliver.

This fund is available on the Hargreaves Lansdown platform with a low fee of 0.5% plus platform fees. At that price, I believe it’s a great core investment.

Superb performance 

Finally, a third fund I’d buy over a FTSE 100 tracker is Blue Whale Growth.

This is a relatively new global equity fund that was only launched in September 2017. I wouldn’t let the lack of a long-term track record put you off though. Since its inception, its performance has been fantastic. Last year, Blue Whale Growth returned 28%, and the year before it returned 9%. By contrast, the FTSE 100 returned 17% and -9%.

Like the two funds above, Blue Whale is a concentrated fund that focuses on high-quality companies. Specifically, portfolio manager Stephen Yiu looks for companies that have the ability to grow over the long term, and that are attractively valued. Judging by the performance of the fund, Yiu is a good stock picker.

Overall, there’s a lot I like about this under-the-radar global equity fund. Fees are 0.89% per year plus platform fees through Hargreaves Lansdown.

The post FTSE 100 trackers have advantages. But I’d rather invest in these top global equity funds appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Edward Sheldon owns shares in Hargreaves Lansdownm Unilever, Diageo and Sage and has positions in Fundsmith Equity, Lindsell Train Global Equity, and Blue Whale Growth. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, and Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.