Why adversity creates opportunity

Capital is at risk and income not guaranteed.

In the world of investing, patience is more than a virtue – it’s a strategy. The Scottish American Investment Company (SAINTS), strives to apply this approach, turning the market problems that even the best companies encounter into opportunity. As Ross Mathison, deputy manager of SAINTS, explains, discovering the best dividend payers requires a keen eye, a steady hand, and the wisdom to recognise value amid volatility.

Consider the case of L’Oréal, the French cosmetics behemoth. When 2024 saw its shares tumble 20%, largely due to fears about a slowdown in luxury spending in China, many investors ran for cover. But SAINTS saw beyond the short-term turbulence. “We didn’t feel that the slowdown represented fundamental change. For us, it was a rare opportunity to purchase a great business at a fair price,” says Mathison.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Look beyond polished presentations

This approach isn’t mere contrarianism; it’s rooted in deep, investigative research. SAINTS doesn’t just skim the surface with profit-and-loss accounts or polished investor presentations. It digs deeper, often interviewing former employees and industry experts. This thoroughness revealed L’Oréal’s entrepreneurial culture and its strides in “beauty tech”, factors that make it resilient to setbacks.

And L’Oréal isn’t an isolated case. SAINTS applies this patient, research-intensive approach across its whole portfolio. Take Anta Sports, China’s largest homegrown sportswear brand. SAINTS is unperturbed by recent falls in premium product sales in China. “We pay more attention to Anta’s fundamental strengths. These will matter more to longterm returns,” Mathison says.

Similarly, Schneider Electric, a French firm specialising in power management and supply, has weathered a bout of leadership changes and regulatory challenges. But more important to SAINTS is Schneider’s commanding position in the global shift towards electrification and the promise of a leading role in the AI-driven data-centre boom.

Fundamental strengths drive long-term returns

This diversity of the SAINTS portfolio spanning cosmetics, sportswear, and electrical equipment – is no accident. It’s a carefully curated selection of “great growth businesses that we take time to get to know and trust to stay on course despite bumps in the road,” Mathison explains. This approach has enabled SAINTS to increase its dividends to shareholders every year for over half a century.

The SAINTS strategy is clear: identify 50 to 60 of the best dividend-paying companies from a global pool of 5,000, focusing on those capable of delivering earnings and dividend growth of around 10% a year for a decade or more. It’s not about timing the market or chasing short-term gains. Instead, it’s about recognising the fundamental strengths that drive long-term returns.

A patient alternative to frenetic markets

In a world fixated on quarterly results and daily stock movements, SAINTS offers something different. It reminds us that the best opportunities often arise when others are fearful, and that the best companies can not only weather storms but emerge stronger from them.

For investors seeking steady, long-term growth and reliable dividends, this patient, research-driven approach offers a compelling alternative to the frenetic pace of modern markets. As Mathison sums up, “When those bumps inevitably happen, we ask if our fundamental thesis changed. No? Then the market’s short-termism is our opportunity.”

In the end, SAINTS’ philosophy boils down to a simple yet powerful idea: opportunities to invest in great growth companies are worth waiting for. By looking beyond short-term setbacks and focusing on fundamental strengths, patient investors can uncover value where others see only risk.

Brought to you by

Important information

Investments with exposure to overseas securities can be affected by changing stock market conditions and currency exchange rates. Past performance is not a guide to future returns. This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA. A Key Information Document is available at bailliegifford.com.