I’ve long been an advocate of investment trusts. I think they’re a great way for retail investors to gain exposure to a variety of stocks in a simple way. There’s also the bonus of, hopefully, some meaty long-term gains.

There are many trusts available to invest in. And many specialise in different areas. However, right now I have my eye on F&C Investment Trust (LSE: FCIT). Here’s why.

The lowdown

So, what exactly does this trust do? And how has it performed across this difficult year?

F&C invests in over 400 companies in 35 countries with the aim “to secure long-term growth in capital and income through a policy of investing primarily in an internationally diversified portfolio of publicly listed equities, as well as unlisted securities and private equity.”

The trust is run by fund manager Paul Niven, who’s been at the helm since 2014. Overall, it manages around £5bn worth of assets.

It’s been a tough year for the stock as it’s fallen around 9% year to date. This is largely due to the bleak economic environment. And with inflation on the charge across the globe, investor sentiment has been dented. The FTSE 100 is down 3% year to date. And in the US, the S&P 500 has plummeted by 18%.

Why I’d buy

With all of this, why would I buy the trust?

My main attraction is the diversification mentioned above. It holds hundreds of companies, including names like Microsoft, Amazon, and AstraZeneca.

By owning the stock, what I essentially do is offset my risk. This is because with a single investment I own a small slither of all of these companies. In the volatile times we’re experiencing, this is important for me.

What’s also an added bonus is the fact that its investment strategy aligns with mine. By this, I mean it buys for the long term. And as a Fool, I believe this is the best way to invest. While past returns are no indication of future performance, the last decade has seen the trust return 170% to its shareholders.

I also like the stock due to its stable nature. The trust is the oldest in the world, meanings it’s survived multiple crises. On top of this, it has increased its dividend payment for the last 51 years, highlighting its consistency.

The risks

With this said, there are risks with F&C.

They largely exist through its exposure to emerging markets, which make up 7.6% of its asset allocation. While these markets can offer great opportunities, they can also be volatile. And given the current economic conditions, these markets could suffer in the near future.

However, as mentioned above, this short-term volatility is of little concern to me. With a long-term approach, issues should be ironed out. In the long run, I back the trust to discover the opportunities that exist within emerging markets. I also like the diversification it could provide my portfolio with. While I don’t have the spare cash right now, if I did, I’d happily buy its shares today.

The post I’d buy this top investment trust today! appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon and Microsoft. 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.

A strong economy

The next US Federal Reserve meeting is expected to mean a 50 basis points hike in the Fed funds rate. This is equivalent of a 0.5% interest rate hike and has sparked fear of a still-bigger stock market correction. The Fed has a history of being too hawkish and spurring recessions, which affects markets globally, including here in the UK. Nonetheless, Moore thinks that the US economy is strong enough to handle multiple rate hikes this year. This is backed by strong employment numbers, heavy assets, and positive earnings results. He also believes inflation is close to reaching its peak. Nonetheless, oil remains the biggest issuing affecting consumer prices. The black gold could spark chaos again if it spikes above $100 per barrel.

Moore sees this year’s stock market correction as being short-lived due to the positive economic data coming in. He expects new market highs to come at some point next year. This should happen once inflation cools down and supply chain bottlenecks ease. Unfortunately, that’s where his bullishness ends. He thinks those new highs could be followed by a potential recession soon after, and into early 2024. This is most likely to happen once ‘stagflation’ (High inflation, but slow or no real economic growth) starts to take effect.

Time is my best friend

Will all that deter me from investing? No. There are four cycles in investing — accumulation, mark-up, distribution, and legacy. This was mentioned by Moore in my interview with him. As a young investor, I’m currently in the accumulation phase. This phase is where I see buying opportunities with attractive valuations during a bear market. Moore sees the current US market correction as a buy-the-dip opportunity for me, as I begin to pick up good discounts on mega-cap companies with healthy balance sheets, attractive margins, and pricing power. The tech-heavy Nasdaq in the US is down over 12% so far this year. That presents plenty of opportunities for me to buy shares in big US-listed tech companies such as Amazon, Alphabet, and Microsoft.

My buy the dip strategy

As Warren Buffett once said: “A diversified portfolio with exposure to different sectors is protection against ignorance.” This same advice was alluded to by Moore in our interview. The main takeaway was for me to invest more in a variety of value and dividend stocks. These can include commodities, insurance, and healthcare.

I was also pleasantly surprised to find out that Moore follows a similar buying strategy to mine. And he continued to encourage me to buy the dip. This means buying when I see around a 5% to 10% decline in a specific stock. When I asked him how much cash I should be leaving on the side to buy those dips, he mentioned 15-20% of my investment portfolio.

Ultimately, my purchases would be dependent on my risk assessment during any market fall, of course. But I will be buying the dip in mega-cap companies with excellent fundamentals for my portfolio.

The post Should I buy the dip in this stock market correction? appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. 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.

With the New Year just around the corner, now is a great time for me to look at additions for my portfolio for 2022 and beyond. One standout for me in this respect is F&C Investment Trust (LSE: FCIT). Since I last looked at FCIT back in July, the share price is up 7%. And the stock has seen healthy growth of 15% year-to-date.

I have always been an advocate of investment trusts, as they offer exposure to a variety of sectors in a single investment. As such, here’s why I would buy shares today.

The portfolio

The main reason I like F&C is because of its diverse portfolio. With nearly £6bn in assets under management, investing in over 400 companies globally, the trust adds real range to my portfolio. As of October 2021, its top holdings included Alphabet, Goldman Sachs, and Apple. All three of these stocks have seen at least 20% growth in price this year, showing the potential of the trust’s portfolio.

What I also like about it is its investment style. Simply put, it buys for the long term. And for me, this is perfect. It means issues surrounding volatility that may be experienced in the short term are less relevant. The trust has prospered under the guidance of manager Paul Niven, who has been at the helm since 2014. The last five years have seen a return of 70%, showing the positive impact he has had.

On top of this, the trust, founded in 1868, is the oldest in the world and therefore has stood the test of time. Its bounce-back from the crash we saw in March last year is proof of this. This is a major factor when I think about adding it to my portfolio.

My concerns

With this said, I do have concerns about F&C. It third-largest asset allocation is emerging markets (9.2%). And as much as I see value here, the spread of the Omicron variant globally could have a negative impact on these markets. Cases have been confirmed in countries such as India and Brazil, both states that have struggled to contain Covid, even prior to the emergence of Omicron. However, as I mentioned above – these short-term periods of volatility should not pose a long-term threat. The trust has a proven track record over long periods, and I think its weighting in emerging markets will eventually bear fruit.

Why I’d buy

Although investor confidence may have taken a hit as we see Omicron impact our lives, F&C has proved it can weather storms such as these. The main attraction for me is the diversity it offers to my portfolio – and while past performance does not guarantee success in the future, for me it provides a good indication. Its record shows it has the potential to continue to flourish. As such, I would look to buy shares today and hold them for the long run.

The post Why I’d buy this top investment trust in 2022 appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Apple and Microsoft. 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.

Having delivered an annual return of over 18% since Fundsmith Equity was launched in 2010, Terry Smith is widely regarded as one of the UK’s finest fund managers.  I think I can benefit from his approach, especially if I have a limited amount of cash at my disposal.

Buy quality

£1,000 is a great sum to begin investing. That said, any mistakes I make can have a far more significant impact than if I had a larger amount at my disposal to buy a greater number of stocks. For this reason, I’d be tempted to prioritise parking my cash with established businesses of the sort favoured by Fundsmith’s manager.

First and foremost, Terry Smith looks for quality. For this reason, he steers clear of what may be regarded as ‘value’ stocks. In Smith’s view, the vast majority of lowly-priced companies tend to be cheap for a reason. Instead, he looks for blue-chip companies that will “shoot the lights out” by generating high returns on the money they invest in themselves. They also tend to have a competitive advantage of some kind and are resilient to change. Think tech titan Microsoft and payments firm Paypal.

By adopting this approach, Smith has generated a return of 534% in 11 years according to Fundsmith’s latest factsheet. Put another way, my £1,000 will have turned into a little over £6,000. This shows that I don’t need to take outrageous risks to outperform the market.

No trading

Terry Smith is about as far removed from a trader as you can get, describing Fundsmith’s transaction frequency as a ‘black armband’ day for the brokerage industry. In other words, Smith buys and sells very irregularly. Theoretically, this should mean a better return for holders because Fundsmith pays out less in fees.

Of course, this approach isn’t new. US investing legend Warren Buffett has adopted the same ‘buy and hold’ mentality for decades. Armed with £1,000 to invest, I’d try to do the same.

In addition to not ramping up costs unnecessarily, I’d also consider actively saving money where I can. This could involve taking advantage of regular investment plans offered by brokers. These invest a proportion of my cash at a fixed date every month at a far lower cost than I’d pay for buying on the fly. Depending on the provider, there might not be any fees at all! 

No market timing

A final thing that Terry Smith has taught me is the folly of trying to time the markets. The fact is, nobody knows what will happen in the world next. Anyone waiting for a crash in arguably-overvalued US tech stocks in 2021, for example, will have been disappointed. Bar the odd wobble, their value has only increased.

Smith encourages investors to recognise that, over time, “it’s what the companies do that matters, not what you do“. Accordingly, he urges us to focus more on the potential long-term returns of staying invested in great businesses rather than speculating about the exact moment to buy or sell them.

This is not to say that he doesn’t take advantage of opportunities when they do appear. No investor wants to pay more than they have to. But staying on the sidelines for too long is dangerous, especially if inflation is galloping upwards. It’s better to get started than never start at all.

The post What can Fundsmith’s Terry Smith teach an investor with £1,000? 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. Paul Summers owns shares of Fundsmith Equity. The Motley Fool UK has recommended Microsoft and 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.

Why buy Amazon stock now?

In many ways, the purchase of Amazon can be seen as an example of Smith sticking to his knitting. His £27bn-cap, highly-concentrated fund is founded on a clear strategy of buying quality stocks trading at reasonable prices, and then doing nothing.

Instead of looking for blue-sky shares, Smith buys established ‘winners’ such as market leaders Microsoft, L’Oréal and Philip Morris.

Investors might argue that Amazon’s dominance of online shopping earns it a place at Smith’s table. I’m not so sure. Actually, he’s never been a fan of its sprawling, barely profitable e-commerce division. That said, he has long admired the US giant’s far-more-lucrative Web Services arm.

And now that the latter brings in more revenue than the former, it would seem Smith is more inclined to get involved.

The celebrated stock-picker clearly regards Amazon as also being reasonably valued for the growth on offer. What we do know for sure is that its performance has not been as stellar as other tech-related mega shares in the past 12 months. A 10% rise since last November is dwarfed by Alphabet‘s 77% climb. Tesla is now up 200% over the same time period. 

Threat of regulation

The addition of Amazon stock to Fundsmith’s portfolio should not be taken as an indication that the company is now a slam-dunk investment. In fact, I can think of a few reasons why this is actually a brave call by Smith.

One thing that Amazon and other tech titans are wary of is the potential for increased regulation. Recent headlines surrounding Facebook (now Meta Platforms) have only served to fan the flames that the US tech giants wield far too much power. There’s also a possibility that galloping inflation could push consumers and clients to tighten their belts for a while. 

Another thing worth pondering is Fundsmith Equity’s sector split. Amazon isn’t currently a top 10 holding. Even so, Smith’s purchase now means that technology shares take up almost 29% of the portfolio.

Potentially even more concerning is the fact that almost three-quarters of holdings are based across the pond. According to the often-cited ‘Shiller ratio’, US stocks have only been more expensive on one occasion in history. This was just prior to the dotcom crash at the turn of the millenium.

I’ve gradually learned to expect corrections and crashes as an inevitable drawback of growing my wealth. This is the Foolish way, after all. That said, I’m not sure I’d be dramatically increasing my US exposure right now, even if Smith is no fan of market timing himself. 

Great track record

It remains to be seen whether Amazon stock will do the business for Fundsmith Equity holders like me. However, it’s hard to criticise Smith’s track record to date. Since launching 11 years ago, the fund has delivered annualised gains of 18.3%.

Regardless of whether I agree with his every selection, that sort of performance makes paying up for Smith’s skills and experience worth the risk, in my opinion. I’m happy to continue holding.

The post Terry Smith finally buys Amazon stock for Fundsmith Equity! Here’s why appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 Fundmsith Equity.The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Meta Platforms, Inc., Microsoft, and Tesla. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 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.

The Bluejay Mining share price (LSE: JAY) jumped today following news of a joint venture agreement with fellow exploration firm KoBold Metals. While a positive announcement in itself, it’s who is behind the deal that’s getting the market excited. 

Big backers

KoBold “uses machine learning to guide exploration for new deposits rich in the critical materials for electric vehicles“. Among its backers is a climate and technology fund called Breakthrough Energy Ventures. This fund is overseen by none other than Microsoft founder (and now committed philanthropist) Bill Gates. 

But Gates isn’t the only name that will be familiar to Foolish readers. Investors in his fund include former Amazon CEO Jeff Bezos, Alibaba‘s Jack Ma, and legendary money manager Ray Dalio. Michael Bloomberg and Norweigian energy giant Equinor are also on board. As rosters go, I’m not sure they get much better. 

So, what’s the deal?

The agreement will see Bluejay and KoBold develop the former’s Disko-Nuussuaq project in Central West Greenland. Once up and running, this “world-class battery deposit” will hopefully produce nickel, copper, and cobalt. We already know the electric vehicle revolution will place huge demand on miners to generate sufficient quantities of metals. Since this should push prices up, it’s fair to say this has the potential to be a highly lucrative investment for those involved. 

For its trouble, KoBold will be entitled to 51% of Bluejay’s licence for the area under a “two-stage earn-in” agreement. The remainder stays with the AIM-listed stock who will also manage field operations over this period. 

Unsurprisingly, Bluejay CEO Bo Stensgaard described today’s agreement as “transformative” for the company. So, where might the JAY share price go from here?

Where next for the JAY share price?

Today’s big uplift will naturally be welcomed by those already invested. However, it’s important to put this rise in perspective.

I last looked at Bluejay almost four years ago. Back then, the stock was available for a little over 18p a pop. Since then the JAY share price has been as high as 26p. This huge volatility tends to be the norm with junior miners, however promising they might be. Even so, it’s sobering that those who took positions back then will still be underwater.  

Of course, those that picked up the stock for around 3.5p as the first UK lockdown kicked in will have done very well indeed. So, the fact that JAY’s share price has been all over the shop doesn’t mean it hasn’t generated great returns for some investors already. Whether the announcement of a new partner means it now follows in the footsteps of Greatland Gold and multi-bags from here remains to be seen. 

Cautiously optimistic

It’s hard to look at today’s announcement and be anything but optimistic. Having some of the world’s best business minds on board certainly won’t do the JAY share price any harm either. 

As with other investment themes, however, a truckload of patience will be required. Drilling using KoBold’s tech will take time and a slowdown in global growth could be a catalyst for yet more volatility. For this reason, I’d need to make sure I was properly diversified elsewhere before taking a stake.

Bluejay could prove very rewarding in a few years’ time but one should never overlook the potential perils of penny stock investing.

The post Here’s why the JAY share price is rocketing 25% today! appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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John 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. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alibaba Group Holding Ltd., Amazon, and Microsoft. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 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.

One example of this is the video games industry. While multiple lockdowns have proved a huge tailwind for games developers, the medium-to-long term outlook for this part of the market also looks very rosy indeed. 

Picks and shovels play

Video games services provider Keywords Studios (LSE: KWS) is one way of playing this trend. Just a minnow a few years ago, the Dublin-based business is now a multi-billion pound company. Clients include top dogs such as Nintendo and Microsoft.

Based on today’s trading update, I see no reason why this growth story is about to end. Keywords expects to report revenues of roughly €238m for the first six months of 2021. This would be a 37% increase on the same period last year, demonstrating that the company has bounced back well from the disruption caused by Covid-19. A “buoyant video games market” also saw adjusted pre-tax profit jump 80% to around €40m.

As you’d expect, shares command a high price. A P/E of 46 for FY21 looks punchy considering some parts of its business “continue to experience some COVID-19 related operational constraints.” Margins look set to be squeezed too as costs return following the lifting of restrictions. 

Investors may also be concerned by the departure of CEO Andrew Day. While not rudderless (joint interim CEOs are in place), the loss of someone who oversaw such dramatic growth is a blow.

Nevertheless, I think the rising trend for developers to outsource work to companies like Keywords, coupled with its acquisitive strategy, should help support growth going forward. As far as the latter’s concerned, the AIM-listed stock isn’t short of cash either. Keywords had €84m in its coffers at the end of the trading period. 

Another top growth stock

Of course, Keywords isn’t the only way of playing the rise and rise of video gaming. Publisher Team17 (LSE: TM17) is another growth stock I’ve been bullish on for some time. Its shares are up almost 260% since listing on AIM back in May 2018. 

Also reporting to the market today, TM17 said trading to June had been in line with management expectations. Having snapped up app developer StoryToys last month, the company said it entered the second half of 2021 “in great shape.“

Once again however, shares are pricey (44 times earnings). Such a valuation could come back to bite if the global economic recovery slows. In fact, I’d say Team17 was a more risky proposition than Keywords since the latter’s multiple clients arguably mean its earnings are better diversified.

Then again, I wonder if the TM17’s interest in educational titles sets it apart from the competition. Following on from last month’s news on Sumo Group, I also wouldn’t be surprised if the firm was in the sights of a deep-pocketed suitor.

Cautious buys

Whether it’s buying a picks and shovels play like Keywords, a publisher like Team 17, or a passive fund tracking the industry, I think it’s hard to ignore gaming as an investment theme. While undeniably pricey, I reckon these growth stocks could still be cautious buys at this level.

The post 2 UK growth stocks to buy now appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Microsoft. The Motley Fool UK has recommended Keywords Studios. 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.

Why has the S&P 500 outperformed?

That’s an easy one. Even those with only a passing interest in business and stock markets will know that US tech companies such as Apple, Amazon, Alphabet and Microsoft have been on an absolute tear over the last five years. All now have valuations in the trillions of dollars.

Since these companies have grown so big (and the S&P is weighted according to size), they now make up a much larger proportion of the index. This means those above have a far larger impact on overall performance compared to those lower down. So far, that’s been great news for investors.

The only problem is that the US market now looks extremely expensive, based on its CAPE (cyclically adjusted price-to-earnings) ratio. This calculates a valuation based on earnings per share over a 10-year period. As a result, it helps to smooth out fluctuations in earnings that occur naturally over the business cycle.

Right now, the US’s CAPE is around 38. The only time it’s been higher is before the dot com crash in 2000. By sharp contrast, a CAPE of 15 implies the UK market is still great value. The number of recent takeovers we’ve seen would tend to support this. UK plc is effectively on sale!

A few things to remember…

First, the UK and US markets aren’t the same. We lack tech titans, for example. This doesn’t mean it’s necessarily a waste of time to compare performance. But it does mean we probably shouldn’t base any investment decisions purely on the CAPE.

Second, the quality of UK companies — like in the US — varies greatly. Looking at shareholder returns, the FTSE 100 contains some awful businesses, a lot of average ones, and a few that are brilliant. If I’m going to pick stocks, it’s vital I can identify the latter. For this, I tend to use the same strategies favoured by top UK fund managers, such as Terry Smith and Nick Train.

A follow-on point is that the best UK shares rarely come with a bargain price tag. So when I mention buying the best UK stocks today, I’m talking about striking a balance between value and quality. In practice, this might mean buying an expensive-looking stock if I’m confident it could still deliver a great return over the long term. It also might mean avoiding something even though it appears ‘cheap’ at face value.

I’d buy British

If this sounds like I’m bearish on Uncle Sam, let me be clear. I won’t be ditching my holdings in quality US stocks (or funds holding them) because the S&P 500 is due a correction or crash. Experience has taught me that trying to time the market is something I can’t do. However, I do think there’s a potential for better gains from our home market as post-Brexit, post-Covid-19 sentiment improves.

There remain risks, of course, but I still think now’s the time for me to buy British.

The post The S&P 500 has more than doubled, but I’d buy the best UK stocks appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Netflix, and Zoom Video Communications. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on 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.

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.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.