Scottish Mortgage’s 10-year winners and losers

Over the past decade, 20% of US companies delivered about half the market’s gains, according to research carried out by Scottish Mortgage (SMT ) manager Tom Slater.

His latest study, which looked at the returns of the S&P 500 over the past decade, sought to explore how market gains are structured. In particular, Slater was keen to understand why some stocks deliver huge gains over time, while many disappoint.

He found that the top 5% of US companies returned at least four and a half fold over the 10-year period.

‘It remains true that, when seeking the best returns, only a few companies actually matter,’ Slater noted.

‘That skew doesn’t bother us. In fact, it’s the source of our investment edge. It underlies why we continue to back a small number of businesses with the potential for transformative outcomes.’

Run your winners

The fund manager reflected that over the past 10 years this ‘skewness’ has translated into SMT’s positioning, as he and the team have sought to run their winners.

For example, Nvidia has been SMT’s top performing investment over the 10 years to the end of March 2025. It grew 80 times and became one of the global equity trust’s largest holdings. This was until last year when Slater and co-manager Lawrence Burns cut SMT’s Nvidia stake by £1bn on the back of concerns that the AI chip maker’s pricing could prove unsustainable.

Tesla was the second best performing stock, up 25 times, followed by Netflix at 13 times.

Of course, the team didn’t get everything right. A number of stocks went to zero during the period. They include trucking company Convoy, battery-maker Northvolt and Blockstream, the Canadian blockchain technology company.

Slater was keen to add that the impact of the losers did not exceed the size of the investment so was limited.

‘What is crucial is the payoffs: what you make when you win versus what you lose when you get it wrong,’ Slater explained.

‘That is the skew that has driven returns. The likes of Nvidia, Spotify, home delivery leader Meituan and space logistics and satellite internet company SpaceX have created substantial upside.’

Lessons learnt

His latest research, coupled with a previous study that looked at how returns were structured between 1984 and 2013, have resulted in Slater outlining a number of key investment lessons. These include embracing the ‘non-obvious’.

‘Being distinctive is essential, but it’s also difficult. Everything around us encourages convergence. It takes deliberate, sustained effort to stand apart, to resist being enveloped by the surrounding environment,’ he explained.

Another lesson is to only back ‘a few exceptional companies that can potentially deliver substantial returns’.

‘It is robust fundamentals, such as rapid sales growth and increasing profitability that determine top performers,’ he noted.

Finally, Slater’s analysis showed that the US and China are home to the highest concentration of top-performing companies over the past decade. From a sector perspective, information technology and consumer discretionary companies dominated, while healthcare dropped out of the running. He puts this down to rising interest rates and drug pricing concerns. 

‘Industrials saw a renaissance, perhaps reflecting strong demand for goods through the Covid period and substantial infrastructure investment,’ he added.

Slater co-manages the £12.2bn global equity trust alongside Lawrence Burns. Over the past 10 years, Scottish Mortgage’s shares are far ahead of the sector average, up 314.5% versus 234.9%.

However, over the past three years it has been a more challenging environment for the trust. Its shares are up 28.9%, which compares to a 32.9% gain by the average trust in the AIC’s global sector.

The trust currently trades at a 10% discount, which the board is hoping to narrow via an active buyback policy.