Zen strategy pays dividends

published 18 August 2017

This week, a professional investor tells us where he'd put his money.This week:Nick Train of Lindsell Train.

Maybe the most unusual thing about Lindsell Train's investment approach is how little we actually do. We almost never initiate new holdings, we almost never sell existing holdings and we do almost no trimming of holdings. In the UK context, we have added only two new positions since 2011 and exited one since 2013. Our long-run portfolio turnover is around 3% per annum.

We make no exaggerated claims for this low-impact approach. Outperforming efficient equity markets is difficult and there are many valid ways to go about it. What you can say about ours, though, is that it tends to keep costs down, while we are clearly taking a very long-term and high-conviction view on our investments.

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The honest truth is we have only had three ideas over the last 15 years admittedly big ones and have structured the UK portfolios around them. First, we note that globally resonant consumer brands are rare very rare in the context of the UK stockmarket. But such brands, which really can be sold across the world, are also extraordinarily valuable. Kraft Heinz's merger proposal to Unilever (one of our holdings) earlier this year is another reminder of that value.

We are particularly interested in Burberry (LSE: BRBY), which is the UK's only global luxury brand. The company not only has a wonderful heritage, I also think we Brits underestimate the international appeal of the culture and image of our country, cachet that Burberry encapsulates well.

Next, we are sure the value of whatever attracts eyeballs to the screens of electronic devices is going up. Amazon, Netflix, YouTube all of them are bidding up to get proprietary access to entertainment or information that will draw viewers to them rather than their rivals. We're keen to invest in UK companies with unique intellectual property; the kind individuals or companies feel they can't do without. One example is Daily Mail and General Trust (LSE: DMGT). We know, as does the company, that the days of the print newspaper are numbered. But have investors properly registered the success of MailOnline in reaching a bigger and more global audience than the newspaper has, or ever could?

Finally, we're always bullish on UK equities and that means we like to invest in companies that do well when markets go up. We see Hargreaves Lansdown (LSE: HL), now 36 years old, as still a very "young" company in terms of the value it will bring to ever more customers over time. In short, we think its assets under management will be much higher in ten years, as will its share price.

Nick Train co-founded Lindsell Train Limited in 2000. He is the portfolio manager for UK equity portfolios and jointly manages Global portfolios.

Nick has over 40 years’ experience in Investment Management. Before founding Lindsell Train, he was Head of Global Equities at M&G Investment Management, having joined there in 1998 as a Director. Previously he spent 17 years (1981 – 1998) at GT Management which he left soon after its acquisition by Invesco. At his resignation, he was a Director of GT Management (London), Investment Director of GT Unit Managers and Chief Investment Officer for Pan-Europe.

Nick has a BA Honours Degree in Modern History from Queen’s College, Oxford.