Star fund manager Nick Train has bought into three new companies in the UK over the past year, saying the region presents more opportunities because other investors “give up”.
In an update on the Finsbury Growth and Income Trust, Mr Train said Lindsell Train had been working at an “unusually high rate of actionable new ideas” in the UK — the latest new holding being Experian — as outflows from UK equity funds mounted.
He said: “I genuinely believe this in part reflects the long period of disappointing absolute and relative returns delivered by the UK stock market.
“It’s simply that more opportunities are being presented to us as other investors give up on the UK.
“I don’t exaggerate when I say ‘give up’. Have you seen the industry data showing monthly outflows from across all open-ended UK equity funds? They are substantial and sobering.”
According to Investment Association data, investors pulled more than £1.5bn from funds in UK sectors from May to July.
The UK has lagged other markets in terms of performance for some time, but particularly in the aftermath of the coronavirus-induced market crashes.
The Finsbury Growth and Income Trust’s new holding in Experian stems from Lindsell Train’s goal to own substantive UK companies with credible assets in technology, data and analytics.
It also seeks “luxury, premium or aspirational” brands, such as its recent holding in Fever Tree and large position in Burberry.
According to Mr Train, a year ago clients were raising concerns about the future performance of the trust because they perceived it to be owning too many growth companies.
This, the clients argued, made the strategy vulnerable to a period when value and cyclicals could take up the running.
As value funds and shares – which put more of an emphasis on the price paid for a stock rather than the near-term earnings growth prospects of a company – typically perform better when inflation and interest rates are rising and economic growth is strong, the strategy has been out of favour for more than a decade.
But buying companies currently “unloved” at low share prices mean the returns can be much greater when, or if, the tides turn.
Mr Train said: “Perhaps those concerns might’ve been right if Covid had not intervened.
“But the fact is by early Summer 2020 we had begun to be worried that far from holding too many ‘expensive growth companies’, in fact we didn’t have enough of them.”
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