Manager of the £927m Blue Whale Growth fund, Stephen Yiu, has bought back into Meta after previously selling out of the business in early 2022.
The ‘Magnificent Seven’ member has quickly become a top 10 holding after Blue Whale re-entered into the stock in H2 last year. Last week, Meta announced a surprise maiden dividend.
In the portfolio manager’s review of 2023, Yiu said the decision came off the back of Meta’s “clear potential” with generative artificial intelligence.
Elsewhere, the fund has swapped out its stake in semiconductor manufacturer ASML on valuation grounds, replacing it with Applied Materials. Yiu suggested the new position has “greater upside potential”.
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The final two major changes to the portfolio were an entry for Danaher, which Yiu said offers a similar opportunity as Sartorius in the biotech space.
Intuit was exited on valuation grounds, with the manager seeing greater opportunity for upside elsewhere.
“Sartorius shares also took a dip early in 2023 following news of an acquisition, and investors stayed away from the bioprocessing business for much of the rest of the year,” Yiu said. “However, again we felt the fundamentals of the business remained sound and purchased more of the stock at its depressed price.”
The strategy returned 30.6% in 2023, more than double the 12.7% IA Global sector average. The fund is also a top quartile performer over one and five years, according to FE Fundinfo data.
Yiu highlighted financials as a drag on performance over the year, and in particular Charles Schwab.
He said: “Worries over solvency of US banks – particularly smaller, regional lenders – led to a sector-wide nosedive in March.
“However, we view Charles Schwab as a net beneficiary of likely subsequent consolidation of the US banking sector and see it as a key investment to benefit from higher interest rates as it delivers a healthy return on its cash deposits.
“As we saw very limited risk of permanent loss of capital (our main consideration when looking at risk factors) and with the fundamentals of the business firmly intact – it is the largest investment platform in the US, with over $8trn AUM – we bought more of the stock as its valuation became more attractive.”
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Key issues in 2024
Looking towards 2024, Yiu outlined AI and the automation revolution, reshoring and deglobalisation, and a general shift from consumer facing businesses to industrials as key issues for the year ahead.
“With Russia continuing to flex its muscles, a delicate situation in the Middle East and China sabre rattling around Taiwan and the South China Sea, the world is precariously balanced. In addition to this, 2bn people will go to the polls in 2024 as major elections around the world take place. Unsurprisingly, geopolitics will likely be the focus in the press over the coming year.
“While inflation and interest rates will play second fiddle to geopolitics, we anticipate monetary policy to still command its fair share of column inches over the year. Although inflation is expected to be brought under control in many of the world’s major economies, interest rates are likely to rebase at a higher rate than has been seen for over a decade.
“With these macroeconomic headwinds, it is important to invest in those companies which can take advantage of underlying trends in the global economy, and therefore transcend the greater macroeconomic uncertainty.”
