Fund of the week: How to spot the multi-baggers

Ask any investor what they dream of and they’ll probably say it’s a ‘multi-bagger’ – a share that returns many multiples of the original purchase price, and makes them a heap of cash.

Finding one is a challenge, even for professionals. However, Nick Train, manager of the Finsbury Growth & Income Trust (LSE: FGT), has a pretty decent track record of finding such stocks.

He can count 17 ‘baggers’ of one sort or another across his portfolios, including drinks group AG Barr, which is up more than sevenfold. He’s even managed to find and hang on to a few ‘ten-baggers’ in his career, says Leonora Walters in the Investors Chronicle, including Dr Pepper Snapple.

But his “best investment” ever was football club Manchester United – a 30-bagger, thanks to soaring payments from broadcasters for rights to show games.

Finsbury Growth & Income Trust chartHis fund aims for capital appreciation and income growth by investing mainly in UK companies, while beating its benchmark – the FTSE All-Share. However, he can also invest up to 20% of the fund in global companies.

Train models his approach on that of US investor Peter Lynch who ran the Fidelity Magellan fund with great success between 1977 and 1990. He warns that you have to be patient to find ‘baggers’ – the best gains, he tells FT Adviser, “usually come in the third or fourth year, not in the third or fourth week or month”. But his strategy has paid off.

The fund, which has an ongoing charge of 0.94%, is up 77.5% over three years and 222% over five years – that’s more than double the gain for the FTSE All-Share over the same period, and also trounces his peer group. Given Train’s track record, the trust trades at a premium of around 1.5%, in line with its two-year average.

Finsbury Growth & Income Trust
Name of holding % of assets
Diageo 9.00%
Unilever 8.90%
Pearson 8.10%
Heineken 7.40%
Schroders 6.10%
AG Barr 5.60%
Reed Elsevier 5.40%
London Stock Exchange 5.30%
Daily Mail & General Trust 5.10%
Fidessa 5.10%