Charles Plowden regrets not following in the footsteps of Baillie Gifford colleague James Anderson and purchasing Zoom as the video conferencing company’s shares more than quintuple during the coronavirus pandemic.
During an end of year roundtable hosted by the Association of Investment Companies, the Monks Investment Trust manager confessed that not buying Zoom “is one of my biggest regrets of the year”.
Plowden (pictured) said his investment team had discussed initiating a holding in the Silicon Valley software company last December but decided against it because they believed Microsoft “would inevitably outcompete them in time”.
But thanks to Covid, Microsoft’s own virtual conferencing tool Teams “didn’t have that time” and “Zoom now has a global user base and its shares are up five and a half fold in 12 months,” Plowden lamented.
Over the last year customer numbers have also risen by around five-and-a-half times, he added. “It’s a big miss for us.”
Zoom, which was trading around 66p last December, has benefited tremendously from the Covid crisis which has made working from home the norm, with shares up as much as 568p in October. But the flurry of positive vaccine news has taken some of the shine off its share price which has tumbled back down to 399p.
Its shares are still up 500% year-to-date, while Microsoft, which makes up 2% of Plowden’s £2.9bn trust, has only recorded share price gains of 38%.
James Anderson came to a ‘different conclusion’ on Zoom
However, Plowden said that “fortunately” several other Baillie Gifford funds, including Anderson’s Scottish Mortgage trust, “came to a different conclusion from Monks” and had purchased Zoom.
Scottish Mortgage held a 0.2% position in Zoom back in September 2019 when shares were trading at around 76p. But a year later its stake had ballooned to 1.6% of the £16.8bn trust’s NAV.
The nascent Baillie Gifford US Growth trust, which is run by Anderson’s Scottish Mortgage co-manager Tom Slater and Gary Robinson, had a 1.8% weighting to the stock at the end of May after also initiating a position in late 2019.
Slater and Robinson’s open-ended £6.6bn Baillie Gifford American fund also has a 4.6% position in Zoom.
See also: UK funds industry slowly dials up exposure to the Zoom explosion
Baillie Gifford is now one of the largest shareholders in Zoom, with a 3.2% stake in the video comms company. Passives giant Vanguard is the largest, owning 5.4% of the business, followed by Morgan Stanley (4.4%) and Blackrock (3.4%).
Monks and Scottish Mortgage diverging on unquoteds
Although Plowden said his trust and Anderson’s Scottish Mortgage vehicle had been “heading in different directions philosophically,” he noted there is still a degree of overlap between the two portfolios.
The two trusts share 21 names in common, including top 10 largest holdings Alibaba, Amazon and Meituan. The shared holdings represent around one fifth of Monks’ NAV which Plowden says is the same level it’s been at for the last five years.
Plowden finds this surprising considering Scottish Mortgage has been dialling up its exposure to unquoted companies. Anderson’s trust currently has around 25% in unlisted businesses while Plowden’s exposure is much smaller at 3.5%.
See also: Scottish Mortgage’s unquoted exposure scrutinised ahead of AGM vote
Currently Monks has the ability to invest up to 5% in unquoteds. “At the moment we’re a bit like the chap with the hole in his pocket because our unquoted companies keep either becoming quoted or getting taken over,” Plowden said.
One of his unquoted stocks Grail, which produces blood cancer tests, is currently being bid for by Illumina. Another holding Ant Group, which is also owned by Anderson, was close to listing this year until the Chinese government halted the record breaking $37bn IPO in November.
Earlier this year Baillie Gifford revealed Plowden would be retiring from the business at the end of April 2021.
