Reap long-term rewards from consumption and technology stocks

A professional investor tells us where he’d put his money. This week: Nick Train, portfolio manager of the Finsbury Growth & Income Trust, highlights four favourites.

Cadbury chocolate bars
(Image credit: Getty Images)

Finsbury Growth & Income Trust invests primarily in British companies, focusing on four core themes: luxury and premium products; beloved, mass-market consumer brands; data and software companies; and providers of wealth-management services in the UK. 

The pace of technological change is evidently accelerating and in stockmarkets great wealth is being created. But wealth is also being destroyed as new applications displace old ways of doing business. Sometimes these new applications make redundant even recently emerged technologies, and this is why investing in technology has a well-justified reputation for being risky.

As portfolio managers we respond to these opportunities and risks in three ways. Firstly, we believe it important to maintain holdings in companies whose products are likely to remain desirable to consumers whatever happens in the digital world. For instance, firms whose products taste good. There is no evidence, for example, that consumption of treats and snacks is slowing anywhere in the world. I ask readers to consider that the price of a bar of Cadbury Dairy Milk has increased 167-fold since 1920, while general prices in the UK have climbed 39-fold.

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This shows that this well-loved brand, now owned by US company Mondelez International (Nasdaq: MDLZ), has remained a staple for many decades, at the same time delivering growth and protection against inflation for its owners. Look at Mondelez’s recent results and you will be encouraged that Cadbury and its other wonderful brands, such as Oreo or Belvita, will continue to create steadily growing wealth for investors, probably for many decades to come. This reliability is enormously valuable in an uncertain world.

Whisky is a growth play

It is also important to understand that the wealth created by technological innovation will ultimately be spent – by entrepreneurs, investors, or the beneficiaries of the innovation. In previous decades and almost certainly in decades to come, this new wealth is likely 

to be spent on luxury and premium consumer brands and experiences. 

We have holdings in both Diageo (LSE: DGE) and Fever-Tree (Aim: FEVR). Both have been, and will continue to be, beneficiaries of wealthier consumers choosing to drink less alcohol, but to drink more prestigious, higher-quality products. In other words, investing in the owner of Johnnie Walker Blue Label gives you exposure to technology-driven global growth, but without taking the risk of judging which specific technology company is going to be a long-term winner.

Finally, to generate the investment returns we and our clients aspire to, we must also invest in technology ourselves. We seek firms that already have products or services integral to their customers’ daily business lives, but where applying technology can further enhance  that relationship. The London Stock Exchange Group (LSE: LSEG) is a globally-significant supplier of must-have data, liquidity, connectivity and clearing services for the world’s financial community. An executive at LSEG once described the group to us as being “more of a technology company than a marketplace”. 

This has become ever more the case in recent years. Microsoft entering a joint venture with LSEG in late 2022 (and acquiring a stake in it too) highlights the opportunities both firms see in bringing technology solutions, including artificial intelligence (AI) tools, to their already captive clients. Ironically for a stockmarket that is sadly short of world-class technology, the London Stock Exchange could emerge as one of the UK’s global tech winners. 

Nick Train

Nick Train is a highly recognised fund manager, currently the co-founder of Lindsell Train Limited and their chairman. He is the portfolio manager for UK equity portfolios and Nick has over 40 years experience in investment management. Nick’s other roles include 17 years at GT Management where he worked his way up to a Chief Investment Officer for Pan-Europe. Nick graduated from the University of Oxford with a degree in modern history. Nick contributes to MoneyWeek’s share tips.