When Nick Train took to the floor for the Frostrow Capital annual investment seminar, he thanked Finsbury Growth & income shareholders for being so patient.
It has been a running theme in his updates to investors after a protracted period of underperformance.
But investors in Train’s flagship investment trust may have been quietly cheering it on lately, as it has steadily climbed to put in a one-year share price return of 13.5 per cent and climb back towards its all-time high level.
Finsbury Growth & Income manager Nick Train has thanked investors for their patience
Finsbury Growth & Income is a household name in the investment trust world, with star stockpicker Train delivering strong returns since he was appointed in 2000.
Last year, however, saw FGT suffer a second consecutive year of underperformance after a 5.8 per cent fall in its net asset value (NAV).
It meant the trust underperformed the benchmark FTSE All Share, which was down 4 per cent over the same period.
‘Mercifully [underperformance] hasn’t happened too often in the 22 years… nonetheless I can assure you it was a disagreeable experience,’ Train told investors this week.
FGT has suffered from a choppy share price performance too, falling 8.5 per cent to 800p in the 12 months to 30 September.
But over the past year, the trust is up 13.5 per cent and at 902p it is trading not far off its 2019 share price high of about 940p.
Train made his frustration known in his update to investors saying performance had been ‘disappointing’ especially given that the business performance of most of the companies in the portfolio has met or exceeded my expectations.’
There is a glimmer of hope for patient investors, as shares creep higher and the discount narrows to -4.45 per cent.
So what’s changed? Portfolio turnover at FGT remains extremely low. It has a concentrated portfolio of 22 holdings and the trust has not added any new names since early 2020, when it added Experian and Fever Tree.
Could it be that Train’s strategy is finally back to paying off?
‘When you run a strategy as concentrated as this one, it really matters what you’re concentrated on and it’s our contention that Finsbury’s portfolio is concentrated on a collection of exceptional businesses, predominantly UK businesses,’ the stockpicker said.
The trust invests in four main types of businesses: digital winners, luxury brands, mass market consumer goods and financial services.
They have largely fallen out of favour in a higher interest rate environment and investors’ aversion to investing in UK stocks has not helped.
Despite being a largely UK focussed fund manager, Train made headlines when he called UK equities the ‘backwater’ of global equities following an extended period of ‘dismal capital performance’.
Speaking to investors last week, however, he remained upbeat about the portfolio’s prospects.
He said: ‘Contrary to popular perceptions, [and] despite the natural self-deprecation that Brits often have, actually there are some truly outstanding companies quoted on the London stock market and we’re invested in a lot of them.’
In March, Burberry and RELX both hit all-time share price highs and performance has continued on an upwards trajectory.
RELX, the trust’s top holding, has been a particular highlight for Train who says it is ‘one of the finest growth businesses available to investors anywhere in the world’ outperforming the All Share and the Nasdaq since 2000.
Other holdings include Diageo and Heineken which have fared well despite the current climate given their strong pricing power.
Train might also receive a boost from his holding in Manchester United, which is set to sold for billions if reports are to believed.
While Train has not been drawn into discussion about the sale , he told investors that a bid of up to £5billion shows ‘the value of unique sports franchises.’
It has been a rough ride for FGT and while investors might have been disappointed in recent years, longer-term returns are impressive.
The share price total return over 5 years has outperformed the AIC’s UK Equity Income sector at 25.9 per cent to 22.6 per cent. Over 10 years, FGT has returned 138.4 per cent, well above the sector’s share price return of 80.8 per cent.
Even more impressively, the trust has outperformed the S&P 500 since Lindsell Train took over the trust in 2001.
‘[Our] approach has generated returns not only competitive with its own benchmark but generated returns that have been globally competitive, even though the market we’re picking securities out from has been lacklustre and out of favour.’
