Table of Contents
Hold: Ley Iris for Burberry
Sorry seems to be the hardest word in investing. Even dire outcomes can be overlooked.
But this week, former star money manager Nick Train did something unusual.
He apologized for the poor performance of his UK investment fund, which focuses on well-known British stalwarts.
Train attributed the decline to the trust’s lack of holdings in mining, oil and technology.
Large stakes in luxury goods group Burberry and asset manager Schroders, which Train and his team believed would be “significant positions”, failed to deliver.
Over the past six months, the return on its Finsbury Growth & Income trust has been 3.8 per cent, compared to a sector average of 12.8 per cent. Its Lindsell Train UK Equity fund, whose portfolio is identical to that of the trust, also lagged behind. This is bad news for the thousands who supported Train when its reputation couldn’t have been better: it began to fall from grace in 2021.
However, while remorseful, Train is also optimistic and aware that his next steps will be closely examined.
He and his team “feel the UK market is full of value and opportunity.”
A rally is already underway as investors wonder why shares in strong British companies are so underappreciated, calculating that many could succumb to takeovers. For new investors, Finsbury Growth & Income could be a cheap route to back Britain, with the trust’s share price at an 8.6 per cent discount to the net value of its assets. Existing investors may be irritated, but Dan Boardman-Weston says the high-quality companies Train favors will shine again. As we noted, some of the trust’s substantial holdings are laggards, but may look attractive to predators looking for bargains. Other stocks are already recovering and further appreciation is expected.
Leaders
Just relax: A stake in this £81.5bn analytics, data, exhibitions and publishing group represents 12 per cent of the trust’s portfolio.
The shares have risen 41 per cent in the last 12 months to 3,415 pence, partly driven by enthusiasm for exploiting artificial intelligence (AI) in its legal services division. Analysts at Goldman Sachs and UBS are among those rating Relx a “buy”, with a price target of 4,000 pence.
London Stock Exchange: The £48.6bn business has been criticized for its apparent inability to stop London-listed companies leaving for the Wall Street hoopla. But shares have risen 7 percent over the past year, helped by views that the business has some of the hallmarks of a tech giant, due to its acquisition of financial data group Refinitiv and its partnership with Microsoft.
Experiano: Demand for the global credit rating group’s services has been boosted by the improving economy, as well as the expectation that interest rates will fall, which should make borrowers more willing to take out loans. The shares are up 29 per cent over the last year to 3,653p.
Stragglers
Burberry: Shares in the luxury fashion group have fallen 56 per cent to 1,056 pence over the past year, due to a slowdown in spending among the wealthy.
Premium hyper-luxury brands like Hermes, favored by the fabulously wealthy, are proving more resilient in what has been called “brand bifurcation.” Burberry, founded in 1856, aims to attract through its “British” character.
Their latest bags now carry names like Knight and Rocking Horse. But hopes are focused less on a change of course than on the appearance of a buyer. That’s why most analysts rate the stock a “hold.”
Schroders: Train maintains that Schroders has a “differentiated and winning strategy.” If it can deliver “even a sliver of secular growth”, the share price could reverse its 15 per cent fall to 389p over the past year. The recovery has already begun, with a jump in recent weeks. Against this backdrop, UBS has upgraded the stock’s rating from “hold” to “buy.” Other brokers consider the stock a “hold.”
Schroders, an actively managed operation, has been hit by the belief that “passive” index funds provide reasonable returns at a low cost. As an active manager, Train needs to prove that he is worthy of investors’ trust.
