A World of Opportunities: Forum Write-Up

As with any investment, your capital is at risk. 

At the Scottish Mortgage Forums for professional investors in early 2025, manager Tom Slater and deputy Lawrence Burns invited attendees on a tour around the world. On the journey, they explored the significant progress in public and private markets in every corner of the globe.

US: Resilience and Adaptability

The first point of arrival was the United States. Slater acknowledged the uncertainty surrounding the impact of the new Trump administration, which has accelerated a shift back to a more conservative social and political stance, on the stock market.

He anticipates a lighter-touch regulatory environment that could benefit certain industries and a re-embrace of free markets. However, he notes that there is a wide range of possible outcomes, and the impact on the anti-trust environment for Big Tech remains uncertain.

As such, Slater stressed the importance of resilience and adaptability for companies. He referenced Meta, Amazon, Doordash and Roblox, all of which have focused on controlling their cost base and driving efficiency post-Covid. This has led to a rebound in productivity and driven profits to new highs.

He also noted the potential for growth in space exploration, cryptocurrency and transport under the new administration's lighter regulatory touch. This could benefit companies such as SpaceX (the Trust’s largest holding), Blockchain.com and Tesla.

The Trust significantly reduced its Tesla holding in the fourth quarter of 2024 after the sharp valuation rise in the absence of fundamental news. However, the managers remain excited about Tesla’s prospects and will be alert to opportunities to reinvest.

Another US holding where the Trust has been making changes is NVIDIA, the dominant supplier of artificial intelligence (AI) software and hardware.

“It is because AI is so important that we think it must be commoditised. It will be so ubiquitous that you can’t have one company at the heart of the ecosystem making $100bn of profit,” explained Slater.

As AI models evolve, Slater anticipates its company-specific advantages will become less pronounced. This led to the Trust selling $1bn in shares last year.

Elsewhere, Tempus AI is applying the power of data and AI to healthcare. It IPO’d in the summer of 2024. Scottish Mortgage has held it since 2018, and when it went public, it was the Trust’s sixth-largest private holding company.

China: Why Bother?

The journey continued to China. In explaining the rationale for persisting despite the geopolitical tensions, Slater suggested, “It has much in common with the US, with driven entrepreneurs, a focus on innovation, deep capital markets and large domestic opportunities.”

He highlighted the importance of recognising China's rapid progress in high-tech industries such as electric vehicles, drones, robotics, semiconductors, renewable energy and advanced manufacturing.  

Meituan, a leading Chinese food delivery company, has delivered strong performance for the Trust. BYD is a Chinese electric vehicle manufacturer with the potential to become a global leader. It is growing its revenue at 40 per cent annually while maintaining a remarkable return on equity.

China is also home to Horizon Robotics, the second of Scottish Mortgage’s holdings to go public in 2024. Slater expressed the view that the worst of the regulatory challenges may be behind us, noting that the potential return of Ant International's IPO is seen as a positive signal for the market.

Latin America: Digital Transformation in the Financial Landscape

Lawrence Burns proceeded to Latin America, where he explained, “Digitisation in the developing world is not just at an earlier stage, but it has the potential to be more meaningful...The existing offline services and infrastructure are less developed, which means the upgrade you get from shifting to online becomes radical.”

Burns showcased Mercadolibre, the leading digital platform in Latin America. Despite the region's weak economic backdrop, it has grown significantly by offering a greater range of goods, lower prices and faster delivery.

The company is expanding into financial services (payments and digital banking) and digital advertising, leveraging its ecommerce data to inform lending decisions and target advertisements.

Burns said that this ability to deliver multiple acts, where a company leverages success in one area into another, will be important in enabling outlier returns.

Another notable company in the region is Nubank, the world's largest digital bank outside of China. He noted that as it is unencumbered by legacy IT systems or branch infrastructure, it charges less than traditional banks while still being highly profitable.

From selling additional financial products to Brazilian customers to expanding into Mexico and Colombia, it has the potential to become a global digital bank.

Southeast Asia: Digital Pioneers in Fast-Growing and Dynamic Sectors

The next destination was Southeast Asia, home to some of the world's fastest-growing ecommerce markets.

Scottish Mortgage invested in SEA last year, following a steep share price fall, the managers’ growing conviction in the longevity of the company’s competitive edge and management’s ability to execute.

SEA is the region's leading digital platform, excelling in gaming, ecommerce and financial services. Its market shares have steadily increased, and Burns pointed out that it is another excellent example of “a digital company delivering multiple acts.”

He noted that the company has shown remarkable growth, taking logistics in-house to improve delivery speed and cost efficiency.

In South Korea, Coupang stands out as a dominant ecommerce player. Its highly efficient logistics network allows it to deliver 99 per cent of orders within one day. The company is also expanding into new areas, such as food delivery and streaming, showcasing its ability to diversify and grow.

Europe: Iconic Luxury Brands

Closer to home, the next stop was Europe, where Scottish Mortgage has invested in iconic luxury brands. While these do not make for explosive growth, the combination of excellent financial characteristics, resilience and longevity can enable outlier-like outcomes over time.

Ferrari and Hermes are prime examples of companies that have cultivated unparalleled brand equity and pricing power. Ferrari has been one of the Trust’s top ten contributors over the past five years.

Ferrari’s strategy of producing fewer cars than market demand maintains its allure and cachet with price-agnostic customers. Likewise, Hermes' Birkin and Kelly bags have waiting lists measured in years.

Taiwan and the Netherlands: At the Heart of Technological Progress

The final destinations were Taiwan and the Netherlands, which though geographically apart are linked by a global theme.

Burns said, “The semiconductor may be our entire species' largest and most important endeavour. Improving the amount of compute in the world has near endless possibilities … and we will never reach the point of being saturated with intelligence.”

The Taiwanese company TSMC is the world's largest integrated circuit manufacturer, producing nearly 90 per cent of the world's most advanced chips. TSMC's scale and dominance make it a linchpin of the global semiconductor industry.

He noted the company’s dependence on ASML in the Netherlands, which has a monopoly on advanced lithography machines essential for chip manufacturing.

ASML's machines are among the most complex in the world, making both companies critical enablers of technological advances that hold up the world economy.

Around the Globe in One Portfolio

Burns concluded that one of Scottish Mortgage’s key advantages is its unrestricted access to a rich and diverse opportunity set, both in public and private markets and regarding geography. The Trust will continue to invest in exceptional companies and change wherever they might be on our shareholders’ behalf.

Risk Factors

Unlisted investments such as private companies, in which the Trust has a significant investment, can increase risk. These assets may be more difficult to sell, so changes in their prices may be greater.

The Trust invests in emerging markets, which includes China, where difficulties with market volatility, political and economic instability including the risk of market shutdown, trading, liquidity, settlement, corporate governance, regulation, legislation and taxation could arise, resulting in a negative impact on the value of your investment.

The trust invests in overseas securities. Changes in the rates of exchange may also cause
the value of your investment (and any income it may pay) to go down or up.