Lindsell TrainNov 12 2021

Nick Train's 'emotional' month of price moves

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Nick Train's 'emotional' month of price moves

Nick Train has said he finds it hard not to respond “emotionally” to short-term price moves, which his UK equities fund experienced in both directions in October.

In a monthly report for the Lindsell Train UK Equity Fund, Train said while he agrees intellectually with the view that it is “irrational” to be encouraged or discouraged by short-term share price movements, he experienced “both states” in October due to market fluctuations.

“When our stocks go up, I feel all is right with the world and I applaud the good sense of the buyers,” he said.

“Contrarily, when they fall, I am affronted by the injustice of it all.

“In October I experienced both emotional states.”

Train outlined how a number of the fund’s big holdings did well last month, with analytics firm RELX seeing its share price rise 5 per cent, hitting a new all time high of £2,264.

Another holding, Experian, rose 8 per cent in value over October, and now represents around 4.5 per cent of the portfolio’s value. Burberry and Hargreaves Lansdown were up 6 per cent and 7 per cent respectively.

In contrast, Train said he had to “suck up” another 2 per cent fall in Unilever’s share price, leaving the consumer goods firm down 8 per cent year-to-date. 

The firm was affected by costs pressures and lockdowns in Asia, he said, which also affected another of the firm's holdings, Heineken.

The Dutch brewing company suffered this year due to rising input costs, however Train said his "heart quickened" at a Q3 investment report which said 'premium brands offset Asia'.

"This is exactly what we hope," Train said.

"Inflation and staggered recovery from Covid are temporary headwinds, but the underlying growth of Heineken’s premium beer brands and the pricing power these convey are permanent structural advantages for this great company."

On Unilever, the fund manager said the firm looked “crushingly pedestrian” during the month when Tesla’s shares rose 44 per cent. 

"On the other hand," he added, "Unilever’s quarterly dividend was up 4 per cent on last year."

"Then consider: in recent years Unilever has “entered into 500 IP-generating partnerships in areas like plant-based proteins and biotechnology for cleaning.

"Who is to say this company won’t be able to sustain that rate of underlying cash return growth to shareholders, with these and other initiatives?

"It has done so for over half a century."

The manager added he was most frustrated by the 5 per cent fall in the share price of the London Stock Exchange, which acquired data provider Refinitiv in January this year.

The drop was puzzling, Train said, as the group had just released a Q3 report which looked “fine”, and when he asked an analyst at the Bank of Merrill Lynch why the drop occurred, he was told “I don’t know”.

“It is no mystery that not enough time has elapsed to make any final judgement about the wisdom of the Refinitiv merger, although we assume the sellers in October are pessimistic,” Train added.

He appeared optimistic about the firm’s prospects, highlighting another outcome of the merger which was LSE’s acquisition of a 54 per cent stake in TradeWeb, a New York-listed electronic marketplace business.

The firm has a value of $21bn (£15.7bn), which takes LSE’s value up to £8bn.

sally.hickey@ft.com