BG US Growth Trust lags in year it sold Peleton but bought Roblox

Baillie Gifford US Growth Trust has had a rough year underperforming the benchmark, but the managers say it will deliver results for investors as it doubles down on its strategy.

The comments came as it released its semi-annual report, in which the trust detailed how it had sold online fitness company Peleton but bought into online platform popular with kids Roblox.

Amid the tilt away from growth, the BG US Growth Confidence said its stock price and NAV fell -4.6 percent and -2.1 percent, respectively, in the six months to Nov. 30, 2022, compared to a 5.4 percent return for the S&P 500.

In a year, both confidence and the broader US market fell by more. Figures from the AIC show BG US growth is down 40 percent over the past 12 months, while the S&P 500 is down 9 percent.

Confidence was eroded by difficult market conditions, leading growth stocks to reprice in response to the Federal Reserve’s aggressive rate hikes to fight inflation.

It added: “We don’t believe we can add value by making macro forecasts or questioning the Federal Reserve. Our approach remains resolutely bottom-up.’

The trust reiterated its commitment to finding “exceptional” growth companies in the US and “while stock prices and fundamentals could become loose in the near term.” In the long run they are strongly correlated.’

Since its launch in 2018, the trust’s stock price and NAV have returned 59.4 percent and 91.5 percent, respectively, though this still lags the S&P, which has returned 103.4 percent.

Despite a difficult year, co-managers Gary Robinson and Kirsty Gibson said they believe their holdings are “well placed to weather a more challenging environment given the strength of their competitive positions and corporate culture.”

“We take a long-term approach and ask shareholders to assess performance over a period of five years or more.”

What is BG US Growth Trust?

The managers highlighted portfolio company Moderna and its mRNA technology which it says has “broad therapeutic potential” following positive results from its personalized cancer vaccine trial.

‘The importance of this development for Moderna and for patients can hardly be overestimated.

“These new data indicate we are moving from a world of low-probability spaghetti-on-the-wall drug development to one of truly repeatable technology platforms where lessons are transferred from one drug to another and success leads to success.” .’

Moderna’s share price is up nearly 25 percent in the past year alone.

Robinson and Gibson also pointed to the success of the language learning app Duolingo, which the company says “democratizes access to tailored education” with the emergence of more mature generative AI.

The trust has also made full use of its assets to invest in private companies, with 24 private companies accounting for 35.6 percent of total assets.

This includes the largest stake in SpaceX, which makes up 6.1 per cent of the portfolio with a stake of £37.1m.

BG US Growth Trust added gaming platform Roblox and salad restaurant chain Sweetgreen to its portfolio. Its managers said it had been eyeing both companies for some time and bought Roblox “in the recent weakness in its stock price.”

It said Sweetgreen was a strong defensive play given its supply chain expertise and use of technology.

The managers also reported removing telemedicine firm Teladoc and Peloton from their portfolios.

The co-managers added: ‘We are on a path to abundance. The path may not be easy, but we are confident that the future is bright and that the innovative companies that have the potential to drive us there will be the outliers that will drive equity markets for the next decade.

“We understand that poor performance is a challenge for shareholders to persevere, but we can assure you that we remain confident and committed to our approach.”