Advertisement

Three great companies that will grow for decades

Professional investor Nick Train of the Finsbury Growth & Income Trust, explains his investment strategy, and picks three top quality companies to buy now.

Let’s agree the identity of a handful of great companies from around the world. I know there’s always room for debate about such qualitative matters and you and I might disagree about the qualities that constitute greatness. 

But if I table these (all held in Lindsell Train portfolios): Diageo, Kao Corporation (Japan’s Unilever), Heineken, Walt Disney and Unilever itself, I think anyone – after due consideration of these companies’ histories and prospects – would agree they are all great businesses. 

Advertisement - Article continues below

What is more – and this is important – if you’d produced the same list ten or even 20 years ago, they’d have been acknowledged as great businesses then too. They weren’t difficult to spot in 2000 or today.

It is also important to note that these “great” companies have been great investments over the last 20 years and longer. And when I say great, I mean that their share prices have often gone up many, many times over the decades. They have generally handsomely outpaced the local stockmarket indices they reside in. Take a look.

Advertisement
Advertisement - Article continues below

You would think then that investment was the simplest thing in the world. You just identify a few great businesses, buy their shares and then hold them forever. In fact, this is exactly the strategy we pursue for Finsbury Growth & Income Trust. This strategy is certainly neither original nor clever, but it has been effective for us over the best part of 20 years. Perhaps it will cease to be effective tomorrow – no one’s investment approach can be guaranteed to work in perpetuity – but we propose to stick to it.

Booze begets brand loyalty

We are wary of drawing firm conclusions about the long-term effects of the lockdown and virus. It is still too soon, raw and imponderable. But it seems not imprudent to make two observations. First, through the crisis consumers have remained loyal to beloved and trusted brands and perhaps no more so than with alcohol. 

Advertisement - Article continues below

Diageo (LSE: DGE) owns Guinness, Johnnie Walker and Tanqueray. I can’t tell you what Diageo’s sales and profits will be for the next six months or six years. But I can tell you it is highly likely that those brands will still be enjoyed in 60 years’ time.

The same is likely to be true for Heineken (Amsterdam: HEIA) too. For a certain type of investor, us for example, you really don’t need to know very much more. 

Next, the pace of technological change – already brisk – is accelerating. Some older great companies are being impaired by this process, while new great companies are emerging. In the UK, we continue to think RELX (LSE: REL), Reed Elsevier as was, is one of the best ways to participate in the changes we’re all experiencing. 

The company provides crucial digital data and software services to the global insurance, legal and scientific communities. It is in fact one of the UK’s few great tech companies.

Advertisement
Advertisement

Recommended

Share tips of the week
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
Share tips: eight stocks that should deliver robust returns
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019
Share tips of the week
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.
20 Dec 2019
Share tips of the week
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.
13 Dec 2019

Most Popular

House price crash: UK property prices are falling – so where next?
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
How “support” and “resistance” can help you spot trading opportunities
Sponsored

How “support” and “resistance” can help you spot trading opportunities

Technical analysis can help traders manage risk and decide where to enter and exit a trade. One simple form of technical analysis is the concept of “s…
6 Jul 2020
A first-half home run for investment trusts
Sponsored

A first-half home run for investment trusts

The investment trust sector has seen some extraordinary performance in the first half of this year. Max King looks at what's behind it, and asks: is i…
7 Jul 2020