Perspectives on Progress #11
Hamish Maxwell – Investment Specialist
- Exceptional growth opportunities come in different forms, as new holdings Nubank and Hermès demonstrate
- From drug discovery to autonomous driving, news from Recursion and Aurora affirms the value of technology-driven transformations
- Operational success and emphasis on sustainability and tech advancements drives expansion for PDD
As with any investment, your capital is at risk.
Nubank
A Revolution in Latin American Banking
We recently took a holding in Nu Holdings, commonly known as Nubank. It is a digital banking powerhouse that has shaken up the traditional banking scene in Latin America. Hundreds of millions of people in Latin America are under- or un-banked. Nubank, led by its founder and chief executive David Vélez, is using technology to help change that.
Founded in 2013, Nubank has already attracted millions of users in Brazil, Mexico and Colombia, many through word-of-mouth, making it stand out in digital banking. Thirty per cent of adults in Brazil now use Nubank. Being a digital bank allows Nubank to offer services at a lower cost and higher efficiency than traditional banks burdened by costly branch networks. Unlike many of its peers, Nubank has turned its customer acquisition and service advantages into a strong deposit base that fully funds its credit operations, essentially making it the primary bank for its users.
Nubank's growth from here looks promising. It has shown a knack for prudent capital allocation, avoiding riskier funding methods. It has attracted and retained younger customers who are expected to increase their income significantly over the next decade. The company's focus on expanding its product offerings, such as personal financial management and investment platforms, and its potential to increase revenue per customer through cohort maturation, suggest continued expansion. Nubank's innovative approach and solid execution track record offer a compelling growth story for long-term investors.
Recursion
Exscientia Acquisition
Recursion, one of our holdings, is set to acquire Exscientia. Both companies are pioneers in biotech, using technology and artificial intelligence (AI) to revolutionise drug discovery and development. Recursion has made significant strides in automating drug creation, aiming to streamline the process from discovery to investigation studies. This could significantly reduce the time and cost associated with drug development.
Exscientia is recognised for its novel AI platform and pipeline of advanced cancer treatment drugs. Its use of proprietary patient sample data, active learning and automation set it apart in addressing the limitations of older drugs.
The merger has strong potential. It combines Recursion's capabilities in automating small molecule development with Exscientia's strengths in AI-driven oncology drug discovery. The complementary nature of their platforms and minimal pipeline overlap suggest a synergy that could accelerate the development of treatments. The merger could enhance the companies' growth trajectories, making it a compelling opportunity.
Recursion’s CEO and co-founder Chris Gibson tells Tom Slater why he believes robots and artificial intelligence can help find potential drugs faster, cheaper and more effectively than ever before.
Listen to the podcast here.
Hermes
A Dazzling Addition to the Portfolio
Scottish Mortgage aims to invest in the most exceptional growth companies worldwide. Exceptional growth is not just the preserve of newer companies. Hermès is a luxury leading light, with exceptional craftsmanship and timeless elegance. We are excited to add it to the portfolio. This iconic brand, known for its exquisite leather goods, silk scarves and high-end jewellery, still has exceptional growth potential by captivating the hearts of the newly affluent and aspirational.
At its heart, Hermès thrives on a unique blend of classic allure and unparalleled craftsmanship, making it less susceptible to the whims of fashion trends. Customers must be invited to buy its higher-end products, which helps to maintain its exclusivity. Hermès’ iconic brand continues to weave its magic worldwide, captivating a sophisticated clientele with exquisite offerings. Its growth is underpinned by a strategic marriage of its storied brand with the dynamic expansion of emerging Asian economies. Hermès is propelling its classic allure into new markets and a new era.
Aurora
First-of-a-kind Independent Audit
Aurora's technology could save lives, fuel and time. It is a leader in the field of autonomous driving, developing self-driving technology to move people and goods. Its platform autonomously operates heavy-duty trucks, commercial vehicles and passenger vehicles.
Aurora's systems underwent a pioneering third-party audit, setting a new benchmark in the US autonomous vehicle sector. This comprehensive evaluation praised Aurora’s proactive, responsible and thorough approach to safety, including rigorous reviews of safety policies, programmes and leadership. The audit affirms Aurora's alignment with critical industry standards and underscores the company's commitment to safety as it prepares to scale driverless truck deployment.
We welcomed Aurora’s founder Chris Urmson to discuss the impact that self-driving trucks will have on the trucking industry, and how autonomous vehicles will revolutionise transportation at large.
Listen to the podcast here.
PDD
Upending the Ecommerce Landscape in China
PDD is a rapidly growing ecommerce platform known for its unique consumer-to-manufacturer (C2M) model and gamified social purchase system. It links consumers directly with manufacturers to remove supply chain costs. It does this by creating a fun shopping experience to leverage social connections into group buying strength.
PDD has made significant strides in expanding its platform, focusing on price and leveraging technology to improve the efficiency of China's agricultural sector. The company is actively investing to enhance its technological capabilities, including artificial intelligence and big data analytics, to better understand consumer preferences and optimise its supply chain. PDD has been working on sustainability initiatives, aiming to reduce waste and improve the environmental impact of its operations.
Notwithstanding market volatility, PDD has delivered exceptionally strong operational performance. Earnings are growing rapidly and the number of new merchants on the platform continues to grow apace. Meanwhile, international subsidiary Temu is now supporting billions of dollars of merchandise volume, and is an attractive optionality on top of domestic success.
About the author - Hamish Maxwell
Investment Specialist
Hamish joined Baillie Gifford in 2017 and is an investment specialist. He joined the Scottish Mortgage Team in 2024 and works closely with the managers, meeting with portfolio companies and conducting in-depth portfolio discussions with shareholders. Alongside this, he creates engaging content which makes the Scottish Mortgage portfolio accessible to all its shareholders. Prior to Scottish Mortgage, Hamish worked on Baillie Gifford's international equities strategies alongside Lawrence Burns. Before Baillie Gifford, Hamish served in the Royal Navy as a Commissioned Officer, including time as a leader in aircraft carriers, mine-hunters, and nuclear submarines. During training, he was awarded top-of-class by HRH Prince Edward. Hamish is a CFA Charterholder, and he achieved an MBA from City, University of London where he received the EU Award.
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