Three long-term growth stocks to profit from a world that’s getting wealthier

Professional investor Nick Train of the Finsbury Growth & Income Trust picks three long-term growth stocks

When I think about Finsbury Growth & Income Trust’s 2021, I think with chagrin and euphoria respectively about the shares of two of its biggest holdings. I also think about the mediocre showing of the shares of a third, middling-sized holding, where that lacklustre performance presented an opportunity to buy a lot more.

It strikes me that in expanding on this teasing introduction I can convey something of how we invest shareholders’ capital and the types of companies that we hope will do well for them.

The London Stock Exchange’s ambitious data deal

Our problem stock in 2021 was London Stock Exchange Group (LSE: LSEG), which we have held for the best part of 20 years. It has been a great investment. For instance, over the five years to the end of 2020, its shares more than trebled. However, disappointingly, in 2021 they fell by over 20%. This can be ascribed to some investors worrying that LSE has recently been too ambitious – last year it closed the biggest acquisition in its history, Refinitiv. 

This deal makes LSE, on some measures, the world’s top provider of market data and analytics. It is a leap into the big league. We can understand why some have decided to wait and see whether LSE has bitten off more than it can chew. But we remain long-term supporters. The transaction is consistent with LSE’s clearly articulated and hugely successful strategy, and market data is the gold dust of the 21st century. So we not only held, but we also bought more.

Diageo: profiting from wealthier drinkers

The winner was another long-term holding – Diageo (LSE: DGE). As a career-long UK equity investor I am always so grateful that Diageo is a UK quoted company – it has been a reliable cornerstone for us forever. Diageo is evidently the best spirits company in the world and spirits are a highly profitable and growing sector. 

It is a long-established trend that as the world gets wealthier people drink less alcohol. Is that bad news for Diageo? Not really, because, crucially, richer people drink more better-quality products. And this phenomenon is helpful for Diageo and helps explain why its shares rose by more than 40% in 2021. 

By and large, over my career it has been right to be optimistic about the global economy and today is no different, with digital technology accelerating wealth creation. Owning Diageo’s shares is still a great way to participate in things getting steadily better.

Fever-Tree: creating cachet

We think the same is true, as a corollary, for the third holding – Fever-Tree (LSE: FEVR). Fever-Tree has brilliantly created a new beverage category that did not exist 15 years ago – premium mixers for the growing premium spirits industry. As such it is not really competing against mass-market brands. Customers love the taste and luxury cachet the Fever-Tree brand conveys. Its success is manifest in the UK. 

Now the question is whether Fever-Tree can replicate that domestic success in the US and continental Europe. If it can, then there is little doubt its shares have enormous potential. Of course, by the time you know for sure, it will be too late. So, we must take a view. The early signs for Fever-Tree abroad, particularly in the US, look thrilling. Accordingly, we bought more in 2021 – both the shares and the product.

Recommended

The best one-year fixed savings accounts - February 2023
Savings

The best one-year fixed savings accounts - February 2023

Earn almost 5% on one-year fixed savings accounts.
3 Feb 2023
Best regular savings accounts – February 2023
Savings

Best regular savings accounts – February 2023

Looking to stash small amounts away each month? You can now earn as much as 7% on regular saving accounts. We list the ones worth looking at.
3 Feb 2023
Which supermarket is the cheapest?
Personal finance

Which supermarket is the cheapest?

With food inflation hitting almost 17%, we look at which is the cheapest supermarket, plus the Competitions and Market Authority’s plan to introduce u…
3 Feb 2023
After slumping 42% last year, what's next for Scottish Mortgage?
Investment trusts

After slumping 42% last year, what's next for Scottish Mortgage?

After a spectacular couple of decades, the Scottish Mortgage Investment Trust fell by 42% last year. We take a look at the trust's performance and dis…
3 Feb 2023

Most Popular

When will interest rates go up?
UK Economy

When will interest rates go up?

Interest rates are now at 4%, and they could rise further in the months ahead.
3 Feb 2023
NS&I brings back one-year fixed bonds with highest rates since 2010
Personal finance

NS&I brings back one-year fixed bonds with highest rates since 2010

NS&I’s one-year fixed bonds are back on sale after being pulled off the market in 2019 - but is the rate any good?
1 Feb 2023
Covid-19 vaccines helped these stocks take off, but what’s next for these companies?
Investments

Covid-19 vaccines helped these stocks take off, but what’s next for these companies?

Dominic Frisby explores how the top vaccine stocks are doing as booster take-up remains at a low
2 Feb 2023