Nick Train, a 40-year veteran of investment markets, has been the manager of Finsbury Growth & Income Trust (LSE: FGT) for 19 years but thinks that “the next 19 are going to be more successful, owing to the calibre of the companies in our portfolio”.
Under his management, FGT’s investment returns have compounded at 10.4% per annum, twice the pace of the FTSE All Share index, while dividends have grown by 10% a year. The trust has grown to £1.8bn of assets.
A concentrated portfolio
Train manages a concentrated portfolio of long-term growth companies in the consumer, financial and technology sectors. There are just 23 holdings, all but three of which are UK-listed. The ten largest account for 85% of the portfolio. The long-term average portfolio turnover is just 4.3% per annum.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
“We run our winners,” says Train, “as it’s not just difficult to get the sell decision right, it’s impossible.” That means holding the type of share which, owing to a strong brand name or business franchise, never has to be sold. The average age of the companies is 148 years; 13 are family controlled. Top of the list is London Stock Exchange, accounting for 11.5% of the portfolio. Train first bought the shares in 2001, since when they have risen nearly twentyfold. “We have barely sold a share in 18 years. It has been bid for at least five times, including by the Hong Kong Stock Exchange, which helped the share price rise by 90% in 2019,” Train says.
RELX, formerly Reed Elsevier, accounts for 11% of the portfolio and has successfully migrated its legal and business publishing from print to digital. The same cannot be said for educational publisher Pearson, a recurring thorn in Train’s side, which has “invested hundreds of millions of dollars in a digital learning platform comparable to Spotify and Netflix.” Its text books are not redundant but students have taken to buying them secondhand online rather than new, resulting in a crash in Pearson’s sales. The firm is now optimistic but Train is wary, keeping the holding below 2%.
Train expects growth at drinks group Diageo, 9.4% of the portfolio, to continue. “Its top-selling brand by volume is not Guinness nor Johnny Walker but McDowell’s, India’s leading premium whisky brand. Though India accounts for just 10% of Diageo’s sales compared to 35% for the US, it could become the bigger market, being already the largest whisky market on the planet.”
Two new picks
The portfolio has two new, though currently small, holdings. The share price of PZ Cussons has fallen 60% in the last five years as profits from Nigeria have fallen from 40% of the total to zero, but it has three strong brands: Imperial Leather soap, Carex with 30% of the UK hand-care market and St Tropez, a rapidly growing provider of fake tans. Fever-Tree “has fallen 65% since 2018 for good reasons”.
Though overseas sales continue to grow, UK sales have flattened out. Fever-Tree has developed a range of mixers for dark spirits such as whisky and rum but has been very slow to roll them out. “It needs to be about more than tonic water,” says Train, seeing potential for it to regain momentum.
Despite the sharp falls in equities this year Train refuses to be drawn into commenting on markets. “Our rule of thumb,” he says, “is that everything will work out fine in the end, probably.”
His only advice is “you shouldn’t sell in a panic”. The fall in the share price, now 20%, provides a rare opportunity to buy into what should be a core holding in any investment trust portfolio at reduced prices.
There is no discount to net asset value (NAV) and no juicy yield (just 2.2%) but long-term holders have learned to treat the shares just as Train does his holdings.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsLooking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go? We round up the best investing apps
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
