Finsbury Growth and Income: on track for long-term profits

Nick Train’s Finsbury Growth & Income investment trust is a core holding – and it is now on sale.

Indian whisky McDowell’s is Diageo’s top-selling brand by volume © Getty

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. 

Advertisement - Article continues below

“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. 

Advertisement - Article continues below

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%.

Advertisement - Article continues below

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.



Investment trusts

If you think now is a good time to buy, look at these investment trusts

With the latest market slides, an awful lot of assets are beginning to look very cheap indeed. If you are thinking of buying, Merryn Somerset Webb has…
10 Mar 2020

How to build a properly diversified investment trust portfolio

Max King explains how to build a well diversified portfolio using one of our favourite tools – investment trusts.
25 Feb 2020

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020

Most Popular


These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020
EU Economy

Why a stronger euro is good news for investors

The fragile state of the eurozone has for a long time brought the threat of deflation. But the ECB’s latest moves have dampened those fears. John Step…
5 Jun 2020

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020