After graduating from Oxford with a degree in modern history, Nick Train joined investment firm GT Management in 1981. He then briefly worked for fund manager M&G for two years before setting up his own company, Lindsell Train. He currently manages four funds: Finsbury Growth and Income Trust (since December 2000); Lindsell Train investment trust (since 2001); CF Lindsell Train UK Equity (since 2005); and Lindsell Train Global Equity (which he co-manages).
What was his strategy?
Nick Train is a believer in “buy and hold” – that you should find high-quality growth companies, buy them, then hang on to them until something radically changes. His funds have an average annual turnover of only 6%; entire portfolios often staying unchanged from year to year.
Did this work?
Since January 2001, £100 invested in the Finsbury Growth and Investment Trust would have grown to be worth £424 (including reinvested dividends), an annual return of 11%. The Lindsell Train Investment Trust has done even better, with £100 turning into £954, equivalent to 15.22% a year. Around two-fifths of the latter fund is invested in Lindsell Train itself (which is not listed). Both those funds have outperformed the FTSE All-Share, which has returned only 121% (5% a year), including dividends, during this period.
What were his best investments?
Diageo and the London Stock Exchange have been core holdings in both portfolios. Train bought Diageo because he felt that its wide variety of alcoholic drink brands, which appealed to all ages, meant that it had a long-term future. This optimism has been rewarded – the shares have gone up by more than 4.5 times over the past 16 years (including dividends). His other major pick, the LSE, has done even better, rising by more than 15 times in 16 years (an annual return of 18.5%).
What lessons does Train have for investors?
Train shows that it is possible to select a concentrated portfolio of growth stocks, keep it relatively unchanged over a long period of time and still beat the market by a significant amount. As Train himself puts it, “if you can find a company whose products are likely still to be consumed in 25 years’ time, and if the company can succeed in at least maintaining or preferably increasing the price of its products above inflation, then you have the basis for a wonderful long-term holding”.