[ BAILLIE GIFFORD ]
Companies which are successful over the long term are
those that sacrifice short-term profitability to embrace
and drive far-reaching structural change
gazing to others. What they do
know is that over sustained periods
of time (five years and beyond),
share prices follow the path of
earnings. Therefore, the team
spends time trying to understand
the fundamental opportunities
available to companies. That will
typically involve looking at whether
a business operates in a market with
obvious scope for growth, whether
that business has a clear competitive
advantage, and whether management
runs the organisation in a sustainable
and thoughtful manner. This
approach provides markers in the
sand, against which progress may
be measured. In the real world, this
progress takes time. So the Trust’s
managers think in decades, rather
than trying to second-guess what will
happen over quarters.
Risk capital
Markets crave certainty. A huge
amount of work goes into analysis
of the minutiae – what is referred to
as being right of the decimal point.
But the one sure thing is that life isn’t
MONKS ANNUAL
PAST PERFORMANCE
TO 30 JUNE EACH
YEAR
2016 3.2%
2017 59.9%
2018 22.1%
2019 9.5%
2020 15.3%
Source: Morningstar, share price,
total return.
Past performance is not
a guide to future returns.
certain. The success of a business in
years to come can never be foretold
or guaranteed. With this as a starting
point, Monks deliberately embraces
uncertainty. The managers realise
that companies which are successful
over the long term are those that
sacrifice short-term profitability
to embrace and drive far-reaching
structural change. Big societal shifts
over the next decade and beyond are
far more powerful than next month’s
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