Professional investor Nick Train, manager of Finsbury Growth& Income Trust, tells us where he'd put his money now.
I have managed Finsbury Growth & Income Trust (LSE: FGT) for 15 years. I have to acknowledge that my work for the Company may now be about half done. I leave it to shareholders to determine whether the return so far has been satisfactory.
But I do want to convey the unusually long-term nature of our approach. Over the last 15 years, annual average portfolio turnover has been under 6%. At this rate it will take nearly 17 years for the portfolio fully to turn over once many turn over once a year. Or consider this: last August, I added a new holding (Remy Cointreau, if you are interested), for the first time in more than four years an eternity by the standards of most managers.
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What's more, I think it reasonable if mildly embarrassing to claim that I have only had three investment ideas for FGT in that 15 years. And because those three strategic ideas make up the whole portfolio and remain critical for future performance, I shall review them here.
"If a company's products taste good, buy the shares." For a long-term investor, this simple idea has proved remarkably successful. Owning shares in great-tasting brands in beverages (Irn-Bru); confectionery (Cadbury); or my favourite, Marmite has been a great way to get rich slowly. Owning shares in Diageo (LSE: DGE) has been a dull experience for several years understandable given an array of setbacks. But surely over the next 20 years people will still enjoy Johnnie Walker, Smirnoff, Guinnessand its many iconic brands? That predictability is unusual and valuable.
"People will always need information and entertainment." We like firms that own proprietary business information (without which professionals can't do their jobs), or beloved entertainment formats. For example, scientists and lawyers globally have little option but to subscribe to RELX Group's (LSE: REL) services or risk being ill-informed. We're also fascinated by the reach of the Daily Mail Group's (LSE: DMGT) MailOnline. With 220m global unique users a month, it is one of the UK's few world-leading internet properties.
"Be optimistic." If ever asked to fill in a sentiment survey, I always answer: "raging bull". This is not as naive as it may seem. Stockmarkets spend far more time going up than down. The biggest risk for most of us is holding too much cash, not too little. And if you are optimistic on the long-term outlook for markets, it makes sense to invest in companies that benefit from markets going up.
We own Hargreaves Lansdown (LSE: HL), the London Stock Exchange (LSE: LSE), and Schroders (LSE: SDR). It is disappointing that today the FTSE All-Share index is little changed on its 1 January 2000 level. Yet in the meantime, Schroders has near-doubled. Imagine what it can do if markets really get going.
Nick Train is a highly recognised fund manager, currently the co-founder of Lindsell Train Limited and their chairman. He is the portfolio manager for UK equity portfolios and Nick has over 40 years experience in investment management. Nick’s other roles include 17 years at GT Management where he worked his way up to a Chief Investment Officer for Pan-Europe. Nick graduated from the University of Oxford with a degree in modern history. Nick contributes to MoneyWeek’s share tips.
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