- The Guinness Atkinson Global Innovators Fund has topped 99% of opposing funds in the past 15 years.
- Focusing on high-quality stocks is how portfolio manager Ian Mortimer has achieved success.
- Here are four growth stocks that are key components of the fund.
As its ticker would suggest, the Guinness Atkinson Global Innovators Fund (IWIRX) has worked for investors. The large-cap growth fund has beaten 96% of funds in its category in the past decade and 99% of peers in the past 15 years, according to Morningstar.
During that run there have been stretches of dominance along with lean years. The fund topped at least 85% of competitors in every year from 2012 through 2017 except for one, but it also suffered sharp declines in 2018 and 2022 — so far, at least — as growth stocks have gotten slammed across the board in the first half of the year with few exceptions.
But Ian Mortimer, a portfolio manager at Guinness Asset Management who has co-managed the 24-year-old IWIRX fund alongside colleague Matthew Page for over 11 years, thinks that better days are ahead for quality growth stocks, even if the days of euphoria-driven investing are over.
“We would definitely look back and say there were pockets of the market that clearly were valued very, very highly for those future growth prospects,” Mortimer told Insider in a recent interview.
Mortimer added: “You would hope as we go through the next couple of earnings seasons, the companies who are showing continued earnings growth — particularly if it’s more secular in nature — and guide for reasonable growth going forward should be well-rewarded.”
Choose growth stocks carefully
Only certain growth stocks can become one of the 30 equally weighted names in the Guinness Atkinson Global Innovators Fund. As the mutual fund’s gatekeepers, Mortimer and Page target companies that are growing at a rate that’s faster than the market but is still sustainable.
“Just because the company is innovative or growing quickly doesn’t necessarily make it a good investment,” Mortimer said.
There’s a misconception about the word “innovative,” Mortimer said, as not all companies that create value by improving products or services are early-stage upstarts that disrupt an industry.
Innovation can come from large or small firms in any field, but there are nine secular growth themes that tend to have a high concentration of transformative companies, Mortimer said: advanced healthcare, artificial intelligence/big data, clean energy/sustainability, cloud computing, mobile tech/the Internet of Things (IoT), next-gen consumer, payments/financial technology (fintech), robotics/automation, and internet, media, and entertainment.
But many of those industries aren’t just synonymous with innovation. For years, they were also known for hosting stocks that traded at sky-high valuations as investors entered fierce bidding wars for companies that they thought would change the world one day.
“If you go back in time, we’ve seen lots of these types of periods,” Mortimer said. “And again, there can’t be that many winners at that sort of level. There can, but historically, there has not been that many winners to that sort of level.”
Growth investors must first be wary of stocks that are in a bubble. Mortimer and Page avoid these stocks by focusing on quality and searching for firms with the following characteristics: reasonable valuations, solid returns on capital, healthy balance sheets, and material earnings instead of just promising revenue growth. That keeps them from overpaying for the wrong stocks.
“What we’re trying to do is limit the amount we are paying for the future growth relative to what we’re paying today,” Mortimer said. “So therefore, if that growth disappoints — which it often can do because we know growth is very hard to predict — then hopefully that protects you from paying up a lot for future expectations that may or may not occur.”
4 growth stocks to buy
Below are four stocks that fit the “innovator” criteria that Mortimer outlined above and are therefore key components of the Guinness Atkinson Global Innovators Fund.
“These are the sorts of businesses that have long pathways for future growth and, ideally, good opportunities for reinvestment into their business to generate more growth in the future,” Mortimer said.
Along with each name is its ticker, market capitalization, price-to-earnings (P/E) ratio, and Mortimer’s investment thesis.