As the coronavirus outbreak began to spread across the world earlier this year, many investors adopted a cautious approach. But Stephen Yiu, lead manager of LF Blue Whale Growth Fund (GB00BD6PG563), was busy topping up positions in big US tech stocks. At the start of the year, the fund had a cash position of 13 per cent because Mr Yiu was wary of high market valuations. But by the end of March this had fallen to 3 per cent. “We couldn’t have foreseen coronavirus, but were quite prepared for it,” says Mr Yiu.
The fund's largest holding is Microsoft (US:MSFT), which Mr Yiu topped up in March. “Microsoft was down 25 per cent from peak to trough, in line with the S&P 500 index,” he says. “That was when we redeployed a lot of cash into it, based on the attractiveness of the valuation.”
Mr Yiu believed that the expected earnings downgrade for Microsoft this year was significantly less than the market was pricing in at the time he invested in it. And despite its share price recovering nearly all of its fall since February highs, following strong results in April, he thinks its valuation is still attractive on a relative basis.