Ways to thrive in a crisis

The five best performing investment companies over the past year in NAV terms are Golden Prospect Precious Metals, Biotech Growth, Pershing Square, JPMorgan China Growth and Income and Scottish Mortgage. It’s an eclectic bunch and illustrative of just how hard it is to navigate the market in the current turmoil.

Golden Prospect is soaring because the gold price is going up. The gold price is going up because people are fearful – of recession, depression, inflation and perhaps a systemic financial collapse of the kind we almost saw 12 years ago.

Biotech Growth is going up because people are hopeful that its portfolio contains the company that will develop the vaccine, find the cure and/or alleviate the symptoms of COVID-19. The biotech sector is also thankful that Bernie Sanders will not be the Democrat candidate in the US Presidential election.

Pershing Square placed a winning bet on the market falling, which paid off spectacularly – turning $27m into $2.6bn. The stocks that it holds in the rest of its portfolio may also be relatively cheap.

JPMorgan China Growth and Income has done well because, despite being the source of the virus, China has brought it under control and its economy is returning to normal (ish).

Scottish Mortgage is hitting new all-time highs, has broken the £10bn market cap barrier and is heading rapidly for £11bn because it holds the stocks that everyone else wants to own – the global giants that seem capable of growing regardless of what is happening in the wider economy.

And all five are going up because governments have pumped enormous sums of money into the financial system to stave off collapsing bond and equity markets.

The question is, what happens next? Which, if any, of these will be the best performer over the next 12 months? The bears are roaring again, predicting a new market crash when share prices catch up with the reality of what is happening to earnings.

Strangely, of these five funds, Scottish Mortgage is the only one that trades at a premium to asset value. Pershing Square is on a whopping 34% discount. Generally, however, discounts are tighter than they were a year ago (about 5.4% versus 7.3%). That might be one indicator that markets are a little over-exuberant.

Next week, we get to quiz Catharine Flood, client services director at Baillie Gifford and expert on all things related to Scottish Mortgage. She will be the guest on our weekly news roundup webinar. We can discuss valuations and the Baillie Gifford view on the way forward for markets. If you are interested, see our Events section. You can put questions in the comments box below as well.

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