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Investing Ideas: Stonehage Fleming Global Best Ideas Equity manager on Netflix, AI and US exceptionalism
Mouthy Money meets top investment fund managers to get a look into the ‘what, how and why’ of how they invest, plus important long-term themes investors need to know.
This month, we meet Gerrit Smit, Head of Global Equity Management at Stonehage Fleming Investment Management UK and the Lead Portfolio Manager of the Stonehage Fleming Global Best Ideas Equity Fund.
How does the Stonehage Fleming Global Best Ideas Equity fund invest?
Our philosophy is to invest in best-in-class businesses for their quality, strategic competitive edge and value.
A main consideration of our investment approach is risk management. We believe investors aren’t compensated for simply taking risk. Instead, the reward lies in owning high-quality businesses with sustainable growth and competitive advantages at a reasonable valuation.
The fund deploys a bottom-up approach to identify exceptional businesses with a four-pillar framework that looks at the quality of management, high efficiencies, sustainable organic growth and free cash flow generation.
Since the inception of the fund in 2013, our aim has been to construct a portfolio of companies that we believe are the global leaders in their respective fields.
Where are you currently seeing opportunities?
We see the best opportunities in AI and 4th Industrial Revolution related stocks. We also find good opportunities in Health Care, Financial and Industrial related businesses that deploy technology well.
What makes you decide to buy into a stock?
Our stock selection process is an extension of our core investment philosophy. The fund is highly concentrated (no more than 30 stocks), so we have the luxury of being selective. We also have the option of exploring many alternative candidates if we deem a company to be overvalued.
We have developed a core quality list of around 150 companies which are actively followed. The investment committee meets weekly to discuss current holdings and potential changes to the portfolio. The core list is kept up to date to include an evolving business landscape.
If the business is deemed worthy of consideration for the portfolio, a far more rigorous analysis of the company will be made to ensure it fulfils our criteria to be considered a ‘Global Best Idea’.
Tell us about recent changes to the portfolio?
We recently added GE Aerospace, a world-leading provider of jet and turboprop engines, which powers over one million passengers in the air at any given time.
With engines in three out of four commercial aircraft, the company enjoys a robust and recurring revenue stream from servicing and aftermarket sales. The main attraction is the good industry organic growth and the strong cash generation from servicing their installed base, which makes up 70% of their overall business.
Another notable addition to the fund this year has been Netflix. After a long period of funding its growth largely through debt, the business is now self-funding and cash flow positive.
Netflix made the early pivot into streaming and its crackdown on password sharing and the introduction of an ad-supported tier has been highly successful, attracting 70 million subscribers globally and delivering a best-in-class churn rate of just 2%.
Netflix’s relatively affordable price point provides strong pricing power and it should see it continue to see subscriber pick-up globally, with subscribers in Latin America and Asia-Pacific growing at a double-digit rate.
What is your highest conviction market view right now?
The lower US dollar is in process of reviving US globally operating companies’ earnings. Along with that, sentiment on the European economy is structurally improving, from sharply increasing infrastructure and defense budgets. This can continue to support equity markets over the medium term.
U.S. equities have had an exceptional run in recent years. Considering the recent market turbulence and fears over the US exceptionalism story, do you believe it can maintain its dominance?
US stock performance varies widely in favour of those businesses with good organic growth and those that continue to improve efficiencies. This trend will continue.
Whilst US exceptionalism has this year come up for debate, it is predominantly driven by business and entrepreneurship rather than governmental factors. We believe the US remains an attractive investment destination.
What do investors get wrong about your asset class?
Many market participants underestimate the ability of high-quality businesses to continue reinventing themselves and improve efficiencies, and therefore their sustainability in growth. Their valuations are therefore often underestimated in terms of their compounding power.
What is the best advice you could give to an investor in your fund?
Consider the strong combination of high quality, strong operational growth, and low risk of failure underpinned by the strong free cash flow. This combination is the best opportunity for sustainable compounding.
Gerrit Smit is Head of Global Equity Management of Stonehage Fleming Investment Management UK and the Lead Portfolio Manager of the Stonehage Fleming Global Best Ideas Equity Fund.
FUND SNAPSHOT: Stonehage Fleming Global Best Ideas Equity Fund GBP C
- Fund size: £1,676.6 million
- Ongoing charges: 1.3%
- 5-year cumulative performance: 27.2%
- Performance since launch: 217.7%
TOP FIVE HOLDINGS
- Amazon: 6.8%
- Microsoft: 6.4%
- Netflix: 6.3%
- Alphabet: 5.4%
- Amphenol: 5.1%
TOP FIVE SECTORS
- Technology: 23.4%
- Industrials: 16.4%
- Financials: 15.3%
- Communication: 11.7%
- Discretionary: 11.6%
Source: Stonehage Fleming Investment Management, 30 June 2025
Disclaimer
This article is produced for general informational purposes only. It should not be construed as investment, legal, tax or other forms of financial advice.
If in any doubt about the themes expressed, consider consulting with a regulated financial professional for your own personal situation.
Past performance is no guarantee of future results. Investments can go down as well as up and you may get back less than you started with.
Investments are speculative and can be affected by volatility. Never invest more than you can afford to lose.
For more information visit www.fca.org.uk/investsmart
Cover photo by freestocks.org