InvestmentsMay 16 2023

Nick Train: 'Things seem to be getting better'

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Nick Train: 'Things seem to be getting better'
Burberry saw its share price rise 40 per cent in the six months to March 31, boosting the portfolio of the Finsbury trust (Jason Alden/Bloomberg)

The Finsbury Growth and Income Trust swung back into the black in the second half of the year, driven by leaps in share price from luxury goods and confectionary companies.

The trust, managed by Nick Train, posted a 12.5 per cent share price total return in the six months to March 2023, compared to a 3 per cent decrease for the previous six months. 

The return was in line with the trust’s benchmark, the FTSE All-Share Index, which rose 12.3 per cent in the period. 

The two biggest positive contributors to the trust’s performance were Burberry and Relx, which both saw all-time share price highs in the six months.

Train said even though it is “trite”, his basic assumption is that things for the world (including the UK) will keep gradually getting better.

“If you work with our assumption then the business performance of the companies in your portfolio and their share prices in the first half of the company’s financial year are not a surprise, but they are encouraging,” he said.

“Things really do seem to be gradually getting better.”

Another good performer was global confectionery and biscuit owner Mondelez, which also hit a share-price high in the period, and the London Stock Exchange Group, which has seen its share price pick up in the past six months, though it still trades lower than its 2021 high.

Train said with each successive set of results, the LSEG’s acquisition of Refinitiv in 2021 looks more apparent. 

“LSEG’s position providing data, clearing and liquidity to global financial market participants also makes it a nice proxy for the wealth created by the advancement in technology,” he said. 

Poorer performers

The biggest detractors in the period were drinks company Diageo, Hargreaves Lansdown and Remy Cointreau.

Diageo’s share price ended the period down 4 per cent, however Train said: “Never mind; the company can take advantage of the temporarily flat price by retiring more stock via its newly announced share buyback. 

“Shrinking its share count at this valuation is exceptionally accretive for long-term investors like us, we expect.”

Train acknowledged it had been a difficult few years for quoted UK asset management companies, with Hargreaves Lansdown’s share price dropping 6 per cent in the past six months, despite posting a rise in both revenue and inflows.

Train was more positive about Schroders, which saw its share price return 22 per cent in the period, remaining “very lowly valued”, he said.

“The growth in assets in Schroder’s private wealth and private equity divisions through 2022, a difficult year for markets, is encouraging for investors in the parent.”

Referencing the recent wobbles in the banking crisis, Train said Schroders is a bank, albeit one “without the risky bits”.

The trust is not invested in any mainstream banks, however the liquidity issues faced by Silicon Valley Bank and others are not “irrelevant” for the trust’s portfolio, Train said.

“One detractor to our half-yearly performance was Experian, whose shares were unchanged over the period. 

“As a credit bureau there is certainly a correlation between banks’ use of Experian’s services and their ability to extend credit (which would be compromised if problems in the bank sector are deep-seated).”

Train indicated his positive outlook for UK companies.

“The UK stock market is home to some exceptional companies by global standards and owning a collection of them can help long-term savers achieve their investment goals.”