Private Investor Forum 2026: Investing in great growth companies

Core Argument

The report argues that more than 99% of wealth creation in the U.S. stock market is driven by only about 4% of a small number of companies. Therefore, the key to investment success lies in identifying and holding these "outliers" for the long term, while accepting the inevitable sharp fluctuations along the way. This view stands in stark contrast to the market's prevailing consensus of pursuing diversification, short-term trading, or market timing: Scottish Mortgage advocates concentrated bets, patient holding, and even regards volatility as a necessary price for achieving excess returns.

Evidence Chain

The author supports the argument with the following facts and data:

1. Mathematical basis of return asymmetry: Equity markets have limited downside (at most losing the entire principal) but unlimited upside (theoretically infinite growth). This asymmetry can only take effect when investors possess both "conviction" and "patience."

2. NVIDIA holding case: Scottish Mortgage bought NVIDIA in 2016, when the company looked like a gaming chip maker and AI was just a "strange side business." Since then, the value has grown more than 130 times, but it has experienced multiple declines of over 10%, and even several declines of over 50%. Selling during a downturn would have interrupted the compounding effect.

3. Other portfolio cases: Tesla and ASML are public market winners; Spotify and Wise were held from private to public listing; SpaceX is one of the largest return drivers of the past decade. They all follow the same principle: early discovery, long-term holding.

4. Expanding private market opportunities: The average private period before a company's IPO has extended from about 7 years to 11-12 years, meaning a large portion of high-growth phases occur before the public market. Since 2012, Scottish Mortgage has invested in private companies, deploying approximately $6.5 billion in total, and currently about 35% of the portfolio consists of 41 private companies.

Metric	About a decade ago	Now
Average private period before IPO	About 7 years	About 11-12 years
Number of private companies in portfolio	—	41
Private allocation as % of portfolio	—	About 35%
Cumulative private investment amount	—	About $6.5 billion

5. Full iceberg view of AI: Beyond the underlying chips (TSMC, NVIDIA, ASML) and model developers (Anthropic), the report also looks at AI beneficiaries such as Spotify, Joby, Revolut, Tempus AI, and Stripe. These companies are not traditional AI firms, but AI tools may change their growth trajectories.

6. Global unconstrained case: The Chinese app RedNote (Xiaohongshu) has over 100 million daily active users, and its daily search volume has already exceeded half of Baidu's, demonstrating that the future form of the internet may emerge in China.

Companies/Themes Covered

Company/Theme	Role	Key Data	Author's Stance
NVIDIA	Most prominent holding case	Invested in 2016, value grew 130x, multiple declines of over 50% along the way	Bullish, emphasizing patience in holding
Tesla, ASML	Public market winners	Long-term holding, experienced volatility	Bullish
Spotify, Wise	Held from private to public	Held through IPO to present	Bullish
SpaceX	Private market leader	One of the largest return drivers of the past decade	Bullish
Anthropic, ByteDance, Databricks, Stripe, Revolut, Redwood Materials, Zipline	Representative private holdings	Involving AI, payments, materials, logistics, etc.	Bullish
TSMC, ASML, NVIDIA	AI computing suppliers	Constitute the tip of the AI iceberg	Bullish
Spotify, Joby, Revolut, Tempus AI, Stripe	Potential AI beneficiaries	Not traditional AI companies, but AI can change their growth	Bullish
CATL, Minimax, RedNote	New Chinese holdings	RedNote: 100M+ DAU, search volume exceeds half of Baidu	Bullish
Themes: AI, Healthcare, Transportation, Finance, E-commerce	Transformational growth themes	Clustered within the portfolio	Theme-driven

Investment Implications

• Actionable direction: Investors may consider adopting a concentrated long-term strategy similar to Scottish Mortgage, or directly allocate to the trust, in order to capture asymmetric returns. The key is to identify companies with "4%" potential and tolerate significant volatility (e.g., portfolio halving) without selling at the lows.
• Private market opportunities: As the private period before IPOs lengthens, investors should pay attention to opportunities for early positioning in the private market, or choose instruments that allow participation in private companies through trust structures (e.g., without facing redemptions) while maintaining liquidity.
• Full AI value chain: Do not limit to AI chips and models; focus on AI's empowerment of various industries (e.g., music, flying cars, finance, healthcare), which may become the next batch of outliers.
• Perspective bias: As an institution focused on growth stocks, Scottish Mortgage is naturally inclined to favor innovation narratives and may underestimate the tail risks of concentrated holdings (e.g., permanent loss of principal due to misjudgment) and the cost of illiquidity during long-term holding periods. Its historical performance (e.g., the success of NVIDIA) suffers from survivorship bias, and investors need to independently evaluate the effectiveness of its screening logic.

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Core Thesis

Monks Investment Trust's core thesis is that in a market with highly asymmetric returns (where a small number of companies generate the vast majority of returns), by employing a structured portfolio of "three growth types" and an "uncommon understanding", it can capture high-quality companies undervalued by the market and achieve long-term steady growth in a changing environment. The difference from market consensus is that the market often overfocuses on short-term volatility or macro narratives, while Monks believes that by diversifying across different growth modes (stalwarts, rapid, cyclical) and adhering to independent judgment on valuation and fundamentals, it can consistently outperform the benchmark.

Evidence Chain

1. Quantitative Evidence of Return Asymmetry:

• Over the past decade, tracking the returns of an investable index, £1 would have turned into approximately £3.
• However, only one in eight companies outperformed the index; the companies that outperformed had an average return of 6x, while the average company returned only about 2x.
• Conclusion: A small number of companies (outliers) are the core source of excess returns, so stock selection must be broad and focus on such companies.

2. Specific Examples of the Three Growth Types:

• Growth stalwarts: e.g., Mastercard, with clear competitive moats and sustained earnings growth.
• Rapid growth: e.g., MercadoLibre, creating new markets and disrupting old ones.
• Cyclical growth: e.g., Ryanair, where excellent management can grow against the tide during cyclical troughs.

3. Dollar General Case: After 2019, due to a CEO change, overexpansion leading to inventory buildup, increased theft, lagging store renovations, profits collapsed. Monks bought after Todd Vasos returned, judging that the market was overly pessimistic (believing the difficulties would persist), while in reality, simply restoring the original model would lead to improvement. After the investment, the company resumed steady expansion and profits grew strongly. This is a classic application of "uncommon understanding."

4. Three Pillars of the Balanced Strategy:

• Broad and balanced exposure: The portfolio includes SpaceX (rockets), Royalty Pharma (pharmaceuticals), Petrobras (oil), NVIDIA (chips), Adyen (payments), etc. The stock prices of these companies perform differently at different times, providing a natural hedge.
• Fundamental resilience: The portfolio has higher growth rates, higher profit margins, and lower debt compared to the benchmark.
• Valuation advantage: Monks' portfolio's valuation premium relative to the benchmark is at a 10-year low, and in an environment where inflation and interest rates may rise, valuation risk is low.

5. Structural Trends:

• Chips everywhere: AI-driven computing demand is expected to triple. Favor bottleneck areas: Disco (Japanese chip cutting equipment), Samsung (AI memory price increases).
• The emerging consumer: Over the next five years, 90% of new middle-class consumers will come from developing countries. Favor digital champions: Sea Ltd, Nubank (scale effects undervalued); traditional brands: Nippon Paint, Kweichow Moutai (brand endurance).
• Industrial renaissance: The return of physical construction, including infrastructure upgrades (CRH), automation (Keyence), electrification (Nexans high-voltage cables), and defense (AeroVironment).

Companies/Themes Involved

Company/Theme	Role	Key Data/Facts	Author's Attitude
Dollar General	Uncommon understanding case	After CEO change in 2022, performance collapsed; Monks bought after CEO returned; currently profits are growing strongly	Bullish (invest when expectations are low)
Mastercard	Growth stalwarts example	Industry leader, clear competitive advantage	Neutral explanation
MercadoLibre	Rapid growth example	Creates new markets, disrupts traditional retail	Neutral explanation
Ryanair	Cyclical growth example	Excellent management can win during cyclical difficulties	Neutral explanation
Disco (Japan)	Structural trend "Chips everywhere"	Cutting equipment importance rises in chip stacking, may gain pricing power	Bullish (bottleneck)
Samsung	Structural trend "Chips everywhere"	Increasing AI model complexity makes memory more critical; price increases benefit all businesses	Bullish
Sea Ltd, Nubank	Structural trend "Emerging consumer"	Market underestimates their profitability after scaling	Bullish
Nippon Paint, Kweichow Moutai	Structural trend "Emerging consumer"	Brand endurance and management's ability to sustain	Bullish
CRH, Keyence, Nexans, AeroVironment	Structural trend "Industrial renaissance"	Infrastructure upgrades, automation, electrification, defense (focus on spending direction)	Bullish (some)
SpaceX, Royalty Pharma, Petrobras, NVIDIA, Adyen	Portfolio diversification example	Different industries, different stock price drivers	Neutral explanation

Investment Implications

• Actionable direction: In the current environment of geopolitical tensions and increased economic uncertainty, investors can draw on Monks' balanced framework of "three growth types" to construct a portfolio that can both capture high-growth opportunities (e.g., AI, emerging consumer) and have defensive characteristics (e.g., cyclical quality companies), while seeking market expectation gaps through independent research (e.g., Dollar General's turnaround case).
• Focus on structural trends: AI chip bottlenecks, emerging market consumption upgrades, and industrial reinvestment are long-term growth engines. Allocate primarily to bottleneck areas (e.g., Disco) and companies with strong brand moats (e.g., Kweichow Moutai).
• Note perspective bias: As a growth trust, Monks naturally favors high-growth narratives and may underestimate the performance of traditional value or cyclical stocks in certain environments. Its "uncommon understanding" strategy relies on subjective judgment, which may carry overconfidence risk. The current valuation premium is at a 10-year low, but if market style shifts, the portfolio may face relative performance pressure.

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Core Thesis

This section consists of standardized risk disclosures and legal disclaimers, which do not constitute an independent investment thesis in themselves. However, by reverse-engineering the detailed risk factors listed, the article's implicit core argument is: The investment strategies of Scottish Mortgage and Monks (high allocation to unlisted companies, heavy exposure to emerging markets, pursuit of capital growth rather than income) expose them to special risks significantly higher than those of ordinary equity investment trusts. These risks are not investment assumptions but prerequisites investors must accept to hold these trusts.

Chain of Evidence

• Performance Data (as risk context): The table shows the extreme volatility of both trusts in recent years. Scottish Mortgage saw share price declines of -9.5% and -33.5% in 2022-2023, and NAV declines of -13.1% and -17.8%, significantly underperforming the index (which rose +12.8% and fell -0.9% over the same periods). However, it staged a sharp rebound in 2024-2026. This directly confirms its high-volatility characteristics.
• Specific Risk Terms: The author clarifies the sources of risk through the following details:

Risk Category	Regarding Scottish Mortgage	Regarding Monks
Currency Risk	Invests in overseas securities; exchange rate fluctuations may cause value declines	Same as left
Emerging Market Risk	Mentions China and emerging markets, covering risks related to market closures, trading, liquidity, settlement, corporate governance, regulations, etc.	Mentions "difficulties in trading, settlement, and custody"
Unlisted Investment Risk (Core)	States that such assets are "difficult to sell and price movements may be more significant"; valuations may not reflect actual sale prices	Same as left
Income Characteristics	Not addressed separately	Explicitly states "pursues capital growth; should not expect significant or stable annual income"

Companies/Themes Involved

• Scottish Mortgage Investment Trust PLC: Investment theme focuses on growth stocks, particularly unlisted companies and emerging markets (including China). Through detailed performance drawdown data and dedicated risk clauses, the author warns investors that this trust carries extremely high market volatility and liquidity risk.
• Monks Investment Trust Plc: Investment theme is similar, but the risk disclosure emphasizes its "non-income" characteristics. The author provides a neutral indication that its risk structure is highly similar to Scottish Mortgage, but adds a separate clause on "no stable income."

Investment Implications

• Actionable Implications for Investors: Before purchasing either trust, the following three conditions must be accepted:

1. Accept Extreme Volatility: Historical performance shows that a principal loss of over 30% in a bad year is a realistic possibility, not an extreme hypothetical.

2. Accept Long-Term Uncertainty: The heavily held unlisted assets suffer from valuation opacity and poor liquidity; the actual price investors receive upon selling may be significantly lower than the NAV reported on the books.

3. Accept Currency and Geopolitical Risks: The high proportion of overseas (especially emerging market) assets amplifies exposure to systemic risks.

• Perspective Bias: Baillie Gifford, as the manager, must fully disclose risks for legal compliance. However, the content of this chapter is essentially a legal disclaimer narrative — its stance is to protect the management company from litigation, not to help investors evaluate the merits of the strategy. Investors should not view this risk list as Baillie Gifford's voluntary acknowledgment of potential weaknesses in its strategy, but rather as a starting point for self-examination before investment.