The 3 characteristics of great growth companies

Short Briefings on Long Term Thinking - Baillie Gifford

What distinguishes companies that will thrive from those that will perish? In this episode, we explore three traits that mark out the companies set to surge ahead from those more likely to struggle:

1. They solve real-world problems

2. They are financially strong and disciplined

3. They are highly adaptable

Baillie Gifford partner Tim Garratt discusses these characteristics, gives examples of companies that exhibit them and explains why this feels like a once-in-a-generation opportunity to be a long-term growth investor.

Background

Tim Garratt is an investment specialist, overseeing the institutional clients who invest in our Long Term Global Growth strategy and leading our broader client specialist network.

He recently co-authored the paper Why growth, why now?, which reaffirms our beliefs about how growth investing can generate attractive returns.

In this episode of Short Briefings on Long Term Thinking, he discusses how interest rate rises, restricted amounts of capital and geopolitical tensions are causing a stock market shake-out. And he explains why this plays to the advantage of patient investors who focus on the fundamentals when picking growth stocks.

Garratt gives examples of how companies, including Netflix, Roblox, Shopify and Amazon, fulfil the criteria we seek. And he explains how Baillie Gifford itself is adapting to the times, exploring the use of machine learning and other tools to hone our investment process.

Resources:

Why growth, why now?

We’re all climate hypocrites now

See & Spray

Netflix engagement report

Timecodes:

00:00 Introduction

1:30 From abundance to limitation

03:45 Implications for investors

05:20 Real world problems: supply chains

07:30 Deere and hi-tech farming

09:00 Financial strength and discipline

09:50 Netflix and pricing power

12:00 Keeping watch on margins

14:15 China’s electric vehicle makers

16:15 Adaptability and new business models

16:50 Roblox adds AI

19:30 Microsoft, Amazon and environmental costs

21:45 Sea and the importance of culture

23:00 How Baillie Gifford is adapting

25:05 ‘Why now?’ for growth investing

26:55 Book choice