Monks shifts focus from tech giants to new disruptors

The trust, regarded as a less aggressive version of Scottish Mortgage, is backing new tech names. 

Monks (LSE: MNKS), one of the top 10 most-popular investment trusts among interactive investor customers in May, has reduced exposure to household-name technology giants in favour of “a new wave of digital companies”.

The Baillie Gifford-managed trust, which is regarded as a less aggressive version of Scottish Mortgage (LSE:SMT), has reduced its positions in Alibaba (NYSE:BABA), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Tesla (NASDAQ:TSLA). 

The money raised from the reductions have been re-invested in a “new wave of digital companies”. These include payments platforms Adyen (EURONEXT:ADYEN) and Stripe, and firms operating in the cloud computing sector, namely Twilio (NYSE:TWLO), Cloudflare (NYSE:NET), Datadog (NASDAQ:DDOG) and Snowflake (NYSE:SNOW).

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Spencer Adair and Malcolm MacColl, the lead and deputy fund managers of Monks, describe the companies as ‘digital natives’ due to not having “the baggage of legacy businesses which could act as a brake on growth”. Former lead manager Charles Plowden retired at the end of April.

The duo added: “The cloud is one of the most important technology leaps since the personal PC became mainstream in the mid-1980s. New online entrants looking to disrupt traditional businesses now have very low barriers to entry, as a key raw material in data and storage can be rented cheaply from day one. We think these companies have huge growth opportunities if they can go on to dominate in their respective niches.”

The shift in focus for Monks was detailed in its annual results, which were released this month.Over its financial year to 30 April 2021, Monks’ net asset value (NAV) total return was 55.5% compared to a total return of 33.9% for the FTSE World Index (in sterling terms). Monk’s share price total return for the same period was 53.1%.

All holdings in the portfolio fall into one of four categories: rapid growth, growth stalwarts, cyclical growth and latent growth.

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Scottish Mortgage, also in the Baillie Gifford stable, has similarly been reducing its exposure to large technology companies. Last November we reported that the trust had been trimming weightings to Amazon and Tesla, while Facebook was sold. It has sold 80% of its holding in Tesla.

Last month, Scottish Mortgagereported the strongest ever yearly return in its 112-year history in the 12-month period to end of March 2021.

It posted a net asset value (NAV) total return of 111.2% and a share price rise of 99%. In contrast, its benchmark – the FTSE All World Index – returned 39.6%.