Blue Whale Growth has just won a best fund award. Should I invest more?

Over the last three years, Blue Whale Growth fund has beaten Fundsmith and Lindsell Train Global Equity. Here, Edward Sheldon looks at the investment case.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In May last year, I took a look at the Blue Whale Growth fund. At the time, the fund was quite new. It had only been around for about 20 months. However, I was very impressed with what portfolio manager Stephen Yiu had achieved in that time. So, shortly after I wrote that article, I invested some money in Blue Whale.

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.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

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.

This AI stock is becoming a digital juggernaut in a £ 12.5 billion market!

🤖 Curious about the next big player in AI? 🤖

Our leading industry analysts have uncovered a trailblazing content platform that's revolutionising the industry with its unparalleled generative AI technology, setting new standards in creativity and efficiency.

Care for a sneak peek?

Trusted by global giants like Amazon, Disney, and Netflix, this innovative company is not just transforming digital media with AI-generated 3D content but is also capturing a significant share of a £12.7 billion market!

With a remarkable 62% gross margin, indicating exceptional profitability and operational efficiency, this company's growth trajectory positions it as a must-watch for savvy investors.

Best of all, we're offering exclusive access to the name of this game-changing stock, absolutely free!

Discover your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »