Nick Train: protectionism is the biggest threat

Nick Train, manager of the Finsbury Growth & Income Trust and co-founder of Lindsell Train, isn’t worried about inflation or rising interest rates hitting his portfolio. Investors shouldn’t “make the category error of conflating growth companies with bond proxies” (companies that pay decent dividends but don’t grow much), he says.

For example, “Unilever… has compounded its dividends by 8% a year since 1952”. And don’t be scared off by above-average price/earnings (p/e) ratios. Studies show that “exceptionally rare companies that can compound steadily for decades… can readily justify p/es of 30, 40 or more times”.

What worries Train more is the rise of protectionism. It would be bad news, he says, “if the North American Free Trade Agreement and other free trade agreements between major trading blocs are broken down… the history of finance and economics has increasingly seen more people trading more products with each other”. If the spread of free trade “were to go into serious reverse, it would unravel many big drivers, not just for my portfolio but many others, as well as economies and markets” globally.

Still, Train remains upbeat. Indeed, he sees the recent stock market volatility, “as a wonderful buying opportunity” – he “bought more shares in the trust” himself. Of course, “one day or one year that will not be the best advice”, but “looking at setbacks as opportunities is the rational thing to do”. Overall, “every time the market sells off 5% or 6% people worry that it is Armageddon – it might be one day, but more often than not it is just a better opportunity to buy more”.


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