Emphasizing Quality and Sustainability: Insights from Dr. Ian Mortimer of Guinness Global Innovators

In today’s fast-paced market, discerning investors are often inundated with trends and hype. However, according to Dr. Ian Mortimer, co-manager of the Guinness Global Innovators fund, prioritizing quality, efficiency, and sustainable growth is key.

Finding Innovation Beyond the Headlines

Dr. Mortimer suggests that the most promising companies for tomorrow may not be making headlines today. Instead of chasing buzzworthy stocks, he advocates for a focus on companies that are “quietly and sustainably compounding returns.” The Guinness Global Innovators fund, which boasts a portfolio of 30 high-conviction stocks, exemplifies this philosophy. Currently managing $1.5 billion, the fund reflects a meticulous selection of the best ideas in the market.

Fund Performance Insights

Over the past year, the Guinness Global Innovators fund has achieved a return of 13.1%, placing it in the second quartile of its sector. However, its long-term performance is impressive, ranking in the first quartile over three, five, and ten years, with a staggering 335.8% return over the last decade.

The Investment Process: Seeking Genuine Growth

Dr. Mortimer emphasizes that there is no “magic formula” guaranteeing faster earnings growth. Instead, the fund identifies secular growth themes—such as artificial intelligence and advanced healthcare—and then seeks out companies well-positioned within those sectors.

Balancing Quality and Valuation

While Dr. Mortimer acknowledges the importance of thematic investing, he warns against solely chasing trends without ensuring company quality. The fund emphasizes well-established companies with solid returns on capital, robust balance sheets, and strong earnings. Furthermore, valuation discipline is crucial to mitigate the risks associated with investing in high-growth sectors.

What Defines an Innovative Company?

For Dr. Mortimer, innovation goes beyond possessing novel products or disruptive technologies. He believes that evaluating companies through a quality lens helps improve investment outcomes. Many investors focus on the “game-changing” companies that receive significant attention, but this approach can lead to volatility in returns.

A Strategic Approach to Investment

The goal is to enhance the likelihood of favorable returns while minimizing the risk of underperformance. By avoiding the most obvious choices, the fund supports a diversified strategy while targeting lesser-known firms that possess strong fundamentals.

Identifying Opportunities: Beyond the Tech Sector

While a significant portion of the fund—around 40% to 50%—is typically allocated to information technology, Dr. Mortimer emphasizes that innovation isn’t confined to this sector alone. Opportunities also abound in financials, industrials, and consumer discretionary sectors, with low exposure to commodities, energy, and regulated utilities.

The Semiconductor Space

One key area of focus has been semiconductors, where recent demand drivers—such as data centers and advanced chips—have created a compelling investment landscape, moving the sector away from traditional cyclical trends.

Recent Performance Highlights

In the past year, the best-performing stock in the portfolio, Amphenol, exemplifies the fund’s strategy. This US-based company, known for its interconnects and fiber optic cables, has seen its share price rise by 260% since being added to the portfolio in June 2021. As a result, it now constitutes 3.6% of the fund as of September 30.

Conversely, the fund experienced challenges with Danish pharmaceutical company Novo Nordisk, seeing a 41% decline in share price since their investment began in August 2023. A disappointing drug trial result for a weight loss drug prompted the decision to divest in July after closely monitoring the situation.

Life Beyond Fund Management

Outside of his professional responsibilities, Dr. Mortimer enjoys quality time with his young family and indulges in sports, such as tennis and sea swimming, although he admits his wife is the more adept swimmer.

Conclusion

In an ever-evolving investment landscape, Dr. Ian Mortimer’s approach encourages a thoughtful evaluation of companies based on performance and potential, rather than surface-level hype. By focusing on quality investments across diverse industries with a commitment to sustainability, the Guinness Global Innovators fund aims to achieve reliable growth while capitalizing on emerging trends. As the market continues to shift, maintaining this disciplined investment strategy will be key to fostering lasting success.

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