In the world of investment, it's fascinating to see how certain trusts navigate the ever-changing landscape of the stock market. The Baillie Gifford US Growth Trust, a FTSE 250-listed entity, has certainly made its mark with some bold moves.
The Rise and Fall of Software
The trust's journey with S&P 500 stocks, particularly Tesla and Nvidia, has been a lucrative one. However, the recent focus on software and its potential downfall due to AI fears has presented an intriguing challenge. The software sector's underperformance in the last six months has been a stark reminder of the risks and opportunities in this space.
Enter Axon: A Little-Known Giant
Axon Enterprise, a name that might not ring a bell for many, has caught the attention of Baillie Gifford and, interestingly, has been a part of my portfolio for over a decade. With a market cap of $33 billion, it's not a small player, but it's certainly not a household name.
What's intriguing about Axon is its unique position in the market. It's the brand behind Taser, the iconic stun-gun, which has played a significant role in modern law enforcement, saving countless lives. But Axon's reach goes beyond that. Its vehicle and body-worn cameras capture and store vast amounts of video evidence, creating a massive data repository.
The Power of Integration
Baillie Gifford recognizes Axon's potential as a company that combines devices, software, and data into an integrated system. This integration creates a powerful network effect, making it difficult for competitors to displace.
AI: Friend, Not Foe
Contrary to the fears surrounding AI, Axon is leveraging this technology to create innovative software products. Draft One, for instance, uses body camera footage to automate initial police reports, a feature that could revolutionize law enforcement efficiency.
Axon's products are not just about law enforcement; they're about community safety. With its Workforce Mini body cams, Axon is targeting retail staff and security guards, providing a tool to tackle shoplifting and increase accountability.
Data Advantage and Future Prospects
The company's revenue and bookings growth in 2025 is impressive, with a significant portion of its revenue coming from long-term contracts. Its AI products, which have attracted substantial bookings, are a key differentiator. Axon's CEO, Rick Smith, believes that owning the full stack, including hardware, is what will set them apart in an AI-commoditized software market.
Risks and Opportunities
The high valuation is a risk, and any unexpected slowdown in growth could impact the stock. However, the potential for AI adoption in law enforcement, despite legislative challenges, presents a unique opportunity.
Final Thoughts
The 52% dip in Axon's stock price has created an intriguing buying opportunity. Baillie Gifford's interest, coupled with my own experience with the company, makes this an investment worth considering. It's a reminder that sometimes, the most interesting opportunities lie in the less-traveled paths of the market.
Personally, I think Axon's story is a testament to the power of innovation and integration in a world driven by data and technology.
