According to Winterflood Securities, the fund’s dividend has increased by 161 per cent in the past 10 years, in spite of suffering a 7 per cent cut following the decision by Lloyds Banking Group to suspend its dividend in 2010.
In terms of growth, the past 10 years have seen a £1,000 investment rise to £4,357.75 to November 1 2013. This is almost double that of the fund’s FTSE All-Share index benchmark and the AIC UK Growth and Income sector.
This track record certainly meets the fund’s primary aim of providing both capital and income growth and providing a total return in excess of that of its benchmark.
Mr Train invests in companies that he believes can at least double on its book cost. He explains the concept of ‘baggers’, a term coined by legendary US investor Peter Lynch, as one reserved for those with patience.
“The best gains usually come in the third or fourth year, not in the third or fourth week or month,” he says. During his career, Mr Lynch was obsessed with uncovering the “10-baggers” – those stocks that would rise 1,000 per cent from its purchase price. For Mr Train, these opportunities remain rare, but in the portfolio today there is one – Dr Pepper Snapple, which has increased 10.5 times since the manager initially invested.
“Peter Lynch was presidiously successful. Underpinning his success was the fact that he ran his winners, so where lots of investors look for a share that might go up 30 per cent, then go off and look for the next opportunity, what Mr Lynch did was find companies where the share price could double or treble or become a four-five-bagger or even a 10-bagger.
“He was looking for shares that had the potential not to just go up a few 10s of per cents, but those that had the potential for really fearless returns over the longer term – maybe five or seven years,” he says.
Significant companies in the portfolio of just 29 stocks are AG Barr, Euromoney, Burberry and Fullers – all of which have experienced growth of 5-7 times the purchase price.
It is this approach that has seen Mr Train take this fund, which is an Investment Adviser 100 Club member, to new heights. Even in times of trouble, such as the recent financial crisis, this product was able to continue to deliver growth to its investors, along with an element of income – although the latter did suffer on the back of Lloyds dividend cut in 2010.
In five years to November 1, the fund has returned 218.49 per cent, more than double the 96.74 per cent gain in the FTSE All-Share index for the same period. Meanwhile the AIC UK Growth and Income sector return was 124.03 per cent for the period.
Year-to-date, the fund has slightly lagged the wider peer group, returning 26.34 per cent compared with the sector’s 26.75 per cent.
The fund is currently trading on a 1.1 per cent premium to its net asset value and according to Winterflood Securities, it has been at a premium for the past three years – a reflection of Mr Train’s consistent performance.
EXPERT VIEW
Simon Elliot, research analyst, Winterflood Securities:
“Finsbury Growth and Income trust has one of the strongest performance records in its peer group and has benefited from Nick Train’s ability to invest in quality companies with strong franchises. Its dividend yield is lower than most of its peers, although this is partly a result of its performance record. The fact that the portfolio of companies offer strong and rising yields has proven an attractive combination in a low interest rate environment. The trust remains one of the best managed UK Income and Growth funds and we would expect Mr Train to continue to outperform over the longer term.”
