Nick Train has initiated a new position in his £1.2bn Finsbury Growth & Income Trust for the first time in two years, backing Manchester United to be a beneficiary of a broadcaster "arms race".
The manager said shares in the football club had been "stuck in a bit of rut" but suggested the business had meaningfully improved its financial position by growing earnings and cutting debt and interest costs.
Although the Premier League club has a market capitalisation of $2.7bn (£2bn), its free float is much smaller and the manager described the stock as "tightly held". Mr Train said he had bought his shareholding directly from the Glazer family, the majority owners of the club, and admitted he could sympathise with their decision to sell stock.
"We don’t see any short-term reason for the shares to pop and we accept they do not look undervalued, certainly on conventional measures of investment value...[but] we expect, over time, this to be a very rewarding commitment," the manager said in a note to investors.
"The reason is that technology is upending the media industry, but creating extraordinary new value for some participants."
He said digital distributors such as Amazon and Netflix were creating a content "arms race" - a race he predicted would be lost by traditional broadcasters.
"In this context and the context of the $100s of billions of market capitalisation in global internet and telecommunication companies, we regard the current market cap as low. Certainly low relative to the global following and fascination with the franchise and to the priceless (virtually) strategic value to broadcasters of live sports."
"It will not be long now before an internet giant bids against an incumbent football rights holder", Mr Train added, noting Facebook's recent failed attempt to buy the rights to Indian Premier League cricket coverage.
Finsbury Growth & Income has returned 54.8 per cent over the past three years compared with a 24.8 per cent rise for the FTSE All-Share, according to the company's own figures.
Andrew Summers, head of fund research at Investec Wealth and Investment, said strategies such as Mr Train’s, which invest in large companies, many of which may be described as “bond proxies” could be set for a period of underperformance as inflation and interest rates rise.
Jason Hollands of Tilney Group, said the strategy deployed by Mr Train often involves investing in companies others would regard as “boring”, due to their large cap nature, but that over the long term the fund manager feel such boring companies deliver superior returns.
The Finsbury Growth and Income Trust trades at a premium to net assets of 0.4 per cent.
