Short Briefings on Long Term Thinking - Baillie Gifford

Emerging markets have sometimes promised more than they have delivered, but circumstances may be tipping in growth investors’ favour. Will Sutcliffe, head of our Emerging Markets Team, explains why it’s an opportune time to invest in the asset class. Background: Will Sutcliffe is the head of Baillie Gifford’s Emerging Markets Team and co-manager of our Emerging Markets Leading Companies Fund. In this episode of Short Briefings on Long Term Thinking, he brings his 23 years of experience in the field to explain what makes the specialism different from other types of growth investing. He makes the case that finding exceptional growth companies at attractive valuations is only part of the equation. Investors must be mindful of the broader macroeconomic environment, he explains, to avoid getting caught out by currency swings or spiralling debt costs. This leads him to conclude that recent resilience in emerging market economies could point to a favourable outlook for the asset class’s growth stocks. All this only matters to our portfolios if there are exceptional businesses to invest in, and Sutcliffe argues that the emerging markets are home to an increasing number of world-class companies. They range from the Taiwanese chip maker TSMC to the energy, retail and telecoms conglomerate Reliance Industries. Resources: Emerging markets: why bother? Stock story: Pinduoduo South-east Asia’s rising export stars Jio Financial Services Natura PDD Holdings Pinduoduo Reliance Industries Temu TSMC Gabriel Garcia Marquez: Until August Timecodes: 00:00 Introduction 01:45 Joining the Emerging Markets Team 03:15 A ‘terrifying’ baptism of fire 05:00 Emerging markets’ ‘dirty little secret’ 05:45 Qualifying for emerging markets status 06:45 Higher-calibre companies 08:00 Macroeconomic resilience 09:30 US-China tensions and Russia’s invasion of Ukraine 12:00 Investing in China 13:45 PDD Holding’s Pinduoduo and Temu

A new medicine that can help patients lose 15 per cent of their body weight could have far-reaching consequences for healthcare. Wegovy mimics a hormone the gut releases, reducing appetite and slowing digestion to delay hunger’s return. Research is also underway into other potential health benefits. In this podcast, Baillie Gifford investment manager Ross Mathison discusses its maker, the Danish pharmaceuticals manufacturer Novo Nordisk, which became Europe’s most valuable company in 2023. Background: Ross Mathison is an investment manager in our Global Income Growth Team, co-manager of our Global Income Growth Fund and deputy manager of the Scottish American Investment Company (SAINTS). In this episode of Short Briefings on Long Term Thinking, he discusses how medicines that mimic the glucagon-like peptide-1 (GLP-1) hormone could help tackle the growing problem of weight gain. Forecasts suggest that by 2035, more than half the world’s population will either be overweight or obese. That’s likely to lead to more people suffering associated diseases, putting health budgets under further strain. Novo Nordisk initially researched GLP-1s as a diabetes treatment. The company is the world’s biggest insulin producer, but it’s the release of its weight-loss drug Wegovy that’s transformed its growth prospects. News that medical trials suggest that the therapy could also reduce the likelihood of heart attacks, strokes and other cardiovascular threats among some patients has driven further investor interest. Mathison explains that there could be further health benefits beyond this, how even more effective treatments could follow and why Novo Nordisk’s manufacturing edge and connection to the world’s biggest charitable foundation bode well for its future. Resources: New England Journal of Medicine: Semaglutide trial Novo Nordisk cardiovascular trial press release Novo Nordisk kidney trial press release Novo Nordisk Foundation Wegovy World Health Organization obesity factsheet Hitting Against the Spin Timecodes: 00:00 Introduction 1:40 What are GLP-1s? 4:00 Scientific breakthrough 5:05 Obesity: a disease, not a choice 6:45 Novo Nordisk’s drug, Wegovy 08:10 Prescription costs

What distinguishes companies that will thrive from those that will perish? In this episode, we explore three traits that mark out the companies set to surge ahead from those more likely to struggle: 1. They solve real-world problems 2. They are financially strong and disciplined 3. They are highly adaptable Baillie Gifford partner Tim Garratt discusses these characteristics, gives examples of companies that exhibit them and explains why this feels like a once-in-a-generation opportunity to be a long-term growth investor. Background Tim Garratt is an investment specialist, overseeing the institutional clients who invest in our Long Term Global Growth strategy and leading our broader client specialist network. He recently co-authored the paper Why growth, why now?, which reaffirms our beliefs about how growth investing can generate attractive returns. In this episode of Short Briefings on Long Term Thinking, he discusses how interest rate rises, restricted amounts of capital and geopolitical tensions are causing a stock market shake-out. And he explains why this plays to the advantage of patient investors who focus on the fundamentals when picking growth stocks. Garratt gives examples of how companies, including Netflix, Roblox, Shopify and Amazon, fulfil the criteria we seek. And he explains how Baillie Gifford itself is adapting to the times, exploring the use of machine learning and other tools to hone our investment process. Resources: Why growth, why now? We’re all climate hypocrites now See & Spray Netflix engagement report Timecodes: 00:00 Introduction 1:30 From abundance to limitation 03:45 Implications for investors 05:20 Real world problems: supply chains 07:30 Deere and hi-tech farming 09:00 Financial strength and discipline 09:50 Netflix and pricing power 12:00 Keeping watch on margins 14:15 China’s electric vehicle makers 16:15 Adaptability and new business models 16:50 Roblox adds AI 19:30 Microsoft, Amazon and environmental costs 21:45 Sea and the importance of culture 23:00 How Baillie Gifford is adapting 25:05 ‘Why now?’ for growth investing 26:55 Book choice

Show notes Amazon and DoorDash take different approaches to bridging the physical and digital worlds. Amazon has built an extensive infrastructure of warehouses, logistics networks and data centres to directly control its operations. DoorDash instead relies on partnerships with restaurants and stores for deliveries, limiting its capital investment. In this podcast, Baillie Gifford investment manager Kirsty Gibson analyses the advantages of each model and how both approaches can pose a disruptive challenge to more traditional businesses. Amazon and DoorDash exemplify two distinct approaches to rooting a business in both the physical and digital worlds. Amazon has done so by investing deeply in physical infrastructure, including its vast logistics operations and data centres. DoorDash, by contrast, has focused on partnering with others to offer meal and grocery deliveries. Baillie Gifford investment manager Kirsty Gibson explores the merits of each approach and discusses how the two companies and others like them can pose a disruptive challenge. Background Kirsty Gibson is an investment manager in Baillie Gifford’s US Equity Growth Team and is joint manager of the American Fund and US Growth Trust. In this episode of Short Briefings on Long Term Thinking, she explores how a growing number of companies are posing a challenge to incumbents by innovating in both the digital and physical realms. The podcast draws on an interview she gave as part of Baillie Gifford’s Disruption Week 2023 event. In addition to discussing how Amazon and DoorDash put this into practice, Gibson also discusses the chemicals maker Solugen, self-driving lorries pioneer Aurora and electric car maker Rivian, among others. Resources: Where software meets steel Disruption Week 2023 articles and videos Growth waves: supporting companies and spotting opportunities Past podcasts Timecodes: 00:00 Introduction 1:30 Historical background 4:21 Capital-intensive and capital-light approaches 5:31 How Amazon blends its physical and digital operations 8:33 Rivian’s electric pickup trucks 9:57 Solugen: making chemicals with software 13:39 DoorDash’s capital-light approach 15:45 DashMart distribution centres 17:28 Aurora’s autonomous trucking business model 20:30 Reinvesting in Meta 23:25 Investing with conviction 24:18 Ginkgo Bioworks’ potential Follow us via: Twitter LinkedIn Companies mentioned include: Alphabet Amazon Aurora Innovation DoorDash Ginkgo Bioworks Meta Netflix Rivian Solugen Tesla Twilio

China became known as the world’s factory thanks to it offering companies a way to manufacture all kinds of goods at a high quality and relatively low cost. But in recent years, south-east Asian nations, including Vietnam and Indonesia, have begun challenging it for that status. Baillie Gifford investment manager Ben Durrant recently returned from a tour of the region. He discusses some of the long-term growth opportunities he unearthed on his trip. Background Ben Durrant invests on behalf of the Pacific Horizon Investment Trust, the Pacific Fund, and our Emerging Markets Equity Team. In this latest episode of Short Briefings on Long Term Thinking, he explores the factors that led China to become the world’s leading exporter and how its move up the value chain is now creating opportunities for other south-east Asian countries to grasp. Durrant reviews some of his most memorable encounters in Vietnam, Indonesia, Malaysia and Thailand and reveals which growth companies excited him the most. They include businesses using mined metals to make car batteries, banks serving populations with growing spending power and, perhaps surprisingly, one of the world’s leading catfish exporters. Resources: The Indonesian companies powering the green transition Ben Durrant LinkedIn page How Asia Works How the World Really Works Past podcasts Timecodes: 00:00 Introduction 01:30 China’s success as a low-cost exporter 03:15 Land reform’s role 04:00 Good quality, low-cost labour 05:45 South-east Asian countries’ advantage 07:15 Vietnam’s growth opportunity 09:30 Vin Hoan: exporting catfish 11:45 Sourcing local insights 13:30 Indonesia’s move up the value chain 16:15 Clusters of expertise in Malaysia 18:00 Looking beyond tourism in Thailand 20:15 Moving up the value chain 22:15 The attraction of growth investing in southeast Asian 23:15 Paying attention to macroeconomics 24:30 Book recommendation Follow us via: Twitter LinkedIn Companies mentioned include: FPT Hyundai Samsung Electronics Vinh Hoan

Is the time ripe for Japanese growth stocks? Donald Farquharson is Baillie Gifford’s head of Japanese equities and knows the market better than most. In the latest episode of Short Briefings on Long Term Thinking he draws on a recent visit to the country to explain why conditions seem favourable for a cohort of domestic companies with long-term mindsets. Background There’s a sense of renewed confidence and enthusiasm in the air in Japan. The country is home to the world’s second-largest market for equities after the US, but it doesn’t get a corresponding degree of attention from international investors. The reason is partly because of the nation’s past weak economic performance. But a recovery is underway, and critically, many of its growth stocks have strong balance sheets, big ambitions and a positive story to tell. In this episode, Baillie Gifford partner Donald Farquharson draws on his experience of investing in Japan since 1990 to explain why he’s particularly optimistic about the opportunities ahead for a select group of companies. They include the medical equipment maker Olympus, the car components manufacturer DENSO and the takeover advisory service Nihon M&A Center. He also shares why he thinks some misunderstand Japan and why it’s no coincidence that many of the companies he backs are founder-run. Resources: Discovering the unsung superstars of Japanese technology From Yahoo! to Z Holdings: the evolution of an online pioneer Japan: the small businesses with big opportunities Investing in Japan: distance lends perspective Donald Farquharson’s LinkedIn page Aiming High: Masayoshi Son, Softbank Group and Disrupting Silicon Valley Past podcasts Timecodes: 00.00 Introduction 01:40 Investing in Japan in the 1990s 03:00 ‘Undiscovered’ Japan 03:55 How banks and other businesses changed 05:30 A sustainable recovery? 06:45 An exciting time for growth companies 07:45 Strong balance sheets 08:15 Olympus and endoscopes 09:45 Diversity on the board 11:00 Nihon M&A Center and company takeovers 12:50 DENSO, a major supplier to Toyota and others 14:30 Toyota City, home to one million people 15:35 Competition for car batteries 16:30 Baillie Gifford’s advantage in Japan 17:45 Looking beyond the headlines 18:20 Book recommendation: Masayoshi Son and Aiming High 19:45 Investing in founder-led firms Follow us via: Twitter LinkedIn Email Companies mentioned include: DENSO Koganei Country Club Nihon M&S Center Olympus Panasonic ROHM Semiconductor Softbank Toyota

What counts as a growth stock is ever-changing. Mark Urquhart shares lessons from 27 years of investing to explain how he decides what to buy and how long to hold as he continues his hunt for outsized returns. Background: In 1996, our largest investments included oil and gas companies and high street banks. These days, our biggest holdings specialise in computer chips, ecommerce and biotech. We still pursue long-term growth – companies we believe will reach their potential given time. But we find it in different places. In this episode, partner Mark Urquhart explains how he tries to identify companies that can grow for a decade or longer, allowing their sales, profits and share prices to compound along the way. He discusses the changing nature of the businesses that qualify and what gives him the confidence to back maverick founders. Other topics he covers in conversation with managing editor Malcolm Borthwick include lessons from the pandemic and the growth companies that most excite him today. Resources: The changing face of growth Four cardinal questions for growth investors Mark Urquhart’s LinkedIn page 1599: A Year in the Life of William Shakespeare Past podcasts Timecodes: 00.00 Introduction 1:20 Joining Baillie Gifford in the pre-Google era 03:45 An evolving attitude to growth companies 05:20 Looking for stronger compound growth 06:35 Investing in Microsoft 08:00 The quest for companies like Hermès 09:55 Learning to be open-minded in Japan 12:10 The importance of mavericks 13:40 How Tesla hit its targets 14:40 Investing in times of crisis 17:35 What the Covid pandemic teaches growth investors 23:05 Today’s most exciting growth companies 25:15 Book recommendation Follow us via: Twitter LinkedIn Email Companies mentioned include: Alphabet (Google) Apple ASML Dexcom Don Quijote Hermès MercadoLibre Microsoft Netflix Peloton SpaceX Tesla

Stuart Dunbar explains why a long-term investment approach suits the new types of growth companies that are emerging. Background: It’s been five years since Baillie Gifford launched its ‘actual investors’ campaign. It focuses on the firm’s long-term, active approach to growth. In this episode, the effort’s mastermind Stuart Dunbar joins Malcolm Borthwick to take stock and explain why actual investing is more relevant than ever. As he explains, capital-intensive companies are seeking to transform healthcare, transport and entertainment, among other industries, and they need patient, supportive shareholders to fulfil their potential and deliver strong returns. Resources: Actual investors Let’s talk about actual investing Baillie Gifford’s investment beliefs The Premonition by Michael Lewis The Economics of Fund Management by Ed Moisson The Golfer’s Journal Timecodes: 0:00 Introduction 1:30 What is Actual investing? 3:30 Finding great companies 4:20 Investing with autonomy and conviction 6:10 Growth investing 8:00 Companies harnessing technology 9:10 The next decade of growth 12:00 Health innovation 14:45 Interest rates and inflation 19:00 Stress testing portfolios 21:15 Guarding against group think 22:30 Book recommendations Follow us via: Twitter LinkedIn Email Companies mentioned include: Amazon Apple ASML Moderna Netflix Samsung TSMC

To mark the pioneering Trust’s anniversary, James Dow delves into SAINTS’ origins and explains how he helped reinvigorate it for a new age. Background: The Scottish American Investment Company (SAINTS) made its debut in 1873, introducing the first trust to prevent shareholders from facing ruin if a business they backed failed. This groundbreaking approach instilled confidence, paving the way for the public to invest in a vital US railway among other enticing overseas opportunities. Nearly 20 years ago, Baillie Gifford took over the Trust’s management. Joint manager James Dow helped revitalise SAINTS by focusing on exceptional income-driven global companies. As he tells podcast host Malcolm Borthwick, their activities range from making AI-enhanced factory cameras to creating some of the world’s most sought-after cosmetics. Resources: The Scottish American Investment Trust Company Order a copy of the SAINTS: 150 Years book SAINTS Manager Insights video, April 2023 The SAINTS approach webinar video, March 2023 Shoemaker by Reebok founder Joe Foster My Years at Volkswagen by Carl Hahn Baillie Gifford’s Trust magazine Follow us via: Twitter LinkedIn Email Companies mentioned include: Analog Devices Atlas Copco Cognex L'Oréal

Keystone Positive Change’s Kate Fox on thinking about the world in 2050 to spot opportunities today. Background: Kate’s conversation with Malcolm Borthwick covers her work with the Deep Transitions Futures project, coordinated by the University of Sussex and Utrecht University and supported by Baillie Gifford. The project aims to identify patterns and insights from past ‘deep transitions’, such as the Industrial Revolution, to inform and guide our approach to identifying solutions to present and future challenges. These include climate change, social inequality, and biodiversity loss. The initiative seeks to develop strategies for fostering radical innovation. It engages investors, policymakers and researchers, among other stakeholders, to promote a transformative investment philosophy and drive systemic change. Resources: The second deep transition: Johan Schot’s theory of radical change Deep Transitions Futures project Previous Short Briefings on Long Term Thinking episodes Follow us via: Twitter LinkedIn Companies mentioned include: Beyond Meat Deere Northvolt Tesla Umicore

Meet the lesser-known niche players thriving in the shadow of the country’s big brands Think of Japanese companies and chances are giants such as Sony, Hitachi and Mitsubishi come to mind. You probably don't think of Shima Seiki - a maker of automated knitting machines, Descente, which owns licences to use brands such as Le Coq Sportif and Umbro, or Shoei, a maker of handmade motorcycle helmets. But these kinds of companies are the beating heart of its economy. Japan’s three and a half million small and medium-sized businesses (SMEs) employ about seven in 10 private sector workers. These firms are sometimes overlooked by investors in Japan, but not by Praveen Kumar, manager of Baillie Gifford Shin Nippon, who explains why they provide ample opportunities for growth investors. Praveen Kumar is manager of the Baillie Gifford Shin Nippon and Baillie Gifford Japan Trust. You can read more about his and his colleagues’ thoughts about the positive outlook for Japan’s most inventive and disruptive companies at our Japan Forum: Steering through rough seas. For the thoughts of his colleague Donald Farquharson, Head of Japanese Equities, on the country’s post-Covid return to normality, go to Investing in Japan: Distance lends perspective. And to find out more about how Praveen and his team get to hear about exciting SMEs, watch Investing in Japan: Insights with our Japan researchers.

As many question the future of growth investing, the American Fund’s Dave Bujnowski explores the new engines powering progress.

Kirsty Gibson and Julia Angeles on how technology is changing the way we do business.

Rose Nguyen on the companies seeking to overcome the scourge of heart disease.

Today’s outsized growth rarely follows a steady or predictable path, according to Kirsty Gibson of Baillie Gifford’s US Equities Team.

It’s a small country with a large number of businesses that can keep innovating and growing for decades. Stephen Paice explores what’s so great about Sweden.

Apps and online courses have upended the economics of education, making learning more accessible, fun and relevant. Positive Change’s Thaiha Nguyen explains.

For Peter Singlehurst, head of the Private Companies Team, the difference between investing in a private company and a public company is that private companies choose their shareholders. So, why choose Baillie Gifford?

‘Growth or value’ has framed many investment narratives. But Monks’ Malcolm MacColl explains the two aren’t at odds.

Over four decades Japan has seen 21 prime ministers come and go. Exporters such as Toyota and Toshiba have flourished but the country has also struggled with debt and deflation. Matthew Brett, manager of The Baillie Gifford Japan Trust, discusses what’s next.