Baillie Gifford is an Edinburgh investment partnership founded in 1908, famous for ultra-long-horizon, high-conviction growth investing — its early stakes in Amazon, Tesla and NIO are classics. Its "actual investors" philosophy holds world-changing companies on 5-10 year views; AUM is around $120bn. The Insights column carries its managers' investment views and thematic research.
This article is about the UK Growth Trust adding seven new stocks after appointing a new co-manager. The fund is optimistic that many UK growth companies have strong fundamentals but are undervalued by the market. Three key holdings: Marks & Spencer is turning around with better food and fashion sales; Croda, a specialty chemicals firm, is recovering from a destocking cycle; and Cranswick is investing in a new chicken plant to boost production and market share.
One-sentence summary: Baillie Gifford UK Growth Trust has added seven new holdings, betting on the return opportunities arising from the disconnect between fundamentals and valuations of UK growth companies, with a stance of [Bullish].
Baillie Gifford UK Growth Trust appointed James Smith as co-manager in June and conducted a comprehensive portfolio review, adding holdings spanning naval engineering, food, retail, chemicals, banking, and building materials to broaden growth drivers. The author categorises these new holdings into three groups: cyclical growth, resilient growth, and unique growth opportunities.
The article notes that Marks & Spencer, Croda, and Breedon fall into the cyclical growth category, where recent challenges have created attractive entry points. The author states, "Marks & Spencer is turning a corner after years of inconsistent execution." The report argues that its food business maintains an edge through product innovation and a stronger value proposition, while the fashion division has enhanced its appeal via faster product cycles, curated collections, and culturally relevant marketing—including hosting its first fashion show at the Silverstone Circuit during the British Grand Prix. Additionally, new flagship store openings have drawn queues of hundreds, and a cyberattack, though disruptive, accelerated investment in IT resilience. The author judges that "the combination of sales growth, market share gains and operational progress is not yet fully reflected in the valuation."
Regarding Croda, the article describes it as a specialty chemicals company with strong positions in life sciences and consumer markets. Customers built up inventories during the pandemic, and the subsequent destocking cycle weighed on its sales, earnings, and valuation. The author believes "this destocking cycle is now largely behind the business," and after divesting its industrial chemicals division, Croda is more focused on structurally attractive end markets, where demand normalisation should drive earnings growth.
Breedon supplies basic building materials such as aggregates, asphalt, and ready-mix concrete to the construction industry, operating in the UK, Ireland, and the US. The article highlights its strategy of acquiring smaller operators, improving efficiency, and building dense regional networks to establish a strong position. Despite a challenging economic environment, Breedon has continued to grow, and the author argues that "improving construction activity and further bolt-on acquisitions can support continued growth."
Cranswick and AstraZeneca are classified under resilient growth, offering more durable long-term growth sources. Cranswick holds a leading position in the UK pork processing sector, with long-standing relationships with major supermarkets such as Marks & Spencer. The article specifically highlights its ambition to enter the poultry business: Cranswick recently invested £78 million in a new processing facility in Suffolk, increasing weekly output from approximately 500,000 chickens to 1.4 million—the first new chicken processing plant built in the UK in over 30 years. The author believes "this willingness to invest ahead of demand gives Cranswick scope to continue taking market share."
AstraZeneca's management has successfully navigated a major patent cliff and rebuilt its R&D capabilities. The article notes that its broad pipeline in oncology, cardiovascular, renal, and respiratory drugs "should support continued sales growth and margin expansion."
Standard Chartered and Babcock present unique growth opportunities driven by distinctly different end markets. Standard Chartered holds a strong banking franchise in Asia, Africa, and the Middle East, operating in Hong Kong and Singapore since 1859, giving it access to growing wealth and cross-border trade. The author argues that "this longstanding presence and international network can support growth in areas such as wealth management and transaction banking," and while its balance sheet is robust, "current valuation underestimates the durability and earnings potential of the franchise."
Babcock builds and maintains naval vessels (including the Royal Navy's new Type 31 frigates) and supports the UK submarine fleet, with its nuclear expertise extending to civil decommissioning, maintenance, and new-build programmes. The article acknowledges that "the business lost its way in the past," but the leadership team has made significant progress in addressing financial, cultural, and organisational issues, placing Babcock on a more solid footing with improved execution and a clearer growth outlook.
The article argues that these new holdings all meet the same investment thresholds: strong competitive positions, attractive long-term growth prospects, and valuations offering significant return potential. The author concludes that there is a disconnect between the fundamental strength of many UK growth companies and the valuations assigned by the market, and that this combination of "strong growth and quality characteristics with attractive starting valuations" provides a favourable backdrop for future returns. Readers should note that this is a position-holder's perspective, with the author using these arguments to justify the rationale behind the portfolio adjustments.
| Ticker | Direction | Author's One-Sentence View | Key Data |
|---|---|---|---|
| Marks & Spencer | New Position | Sales growth, market share gains, and operational progress are not yet fully reflected in the valuation | Food business advantage, fashion business improvement, new flagship store opening |
| Croda | New Position | The destocking cycle has largely ended, and demand normalization will drive earnings growth | More focused on end markets after selling the industrial chemicals business |
| Breedon | New Position | Improved construction activity and bolt-on acquisitions can support sustained growth | Building regional networks through acquisitions of smaller operators |
| Cranswick | New Position | Willingness to invest ahead of demand enables continued market share gains | £78 million investment in a new processing plant, weekly output raised to 1.4 million units |
| AstraZeneca | New Position | Broad pipeline should support sustained sales growth and margin expansion | Pipeline in oncology, cardiovascular, renal, and respiratory drugs |
| Standard Chartered | New Position | Current valuation understates the franchise's durability and earnings potential | Operating in Hong Kong and Singapore since 1859, covering Asia, Africa, and the Middle East |
| Babcock | New Position | After the leadership team addressed financial, cultural, and organizational issues, execution improved and growth prospects became clearer | Building Type 31 frigates, supporting the UK submarine fleet and civil nuclear technology |