Nick Train says UK shares can recover from the ‘growth sell-off’ as inflation-hit investors look for ‘compelling’ value
- Finsbury Growth & Income trust net asset value fell 5.4% in January
- Almost every ‘growth’ investment in the trust fell in line with sell-off on Nasdaq
Almost every ‘growth’ investment in Nick Train’s Finsbury Growth & Income trust lost value in January, but the top fund manager says stocks were collateral damage amid a wider sell-off in US tech.
Train told investors this week that the UK growth stocks which make up his trust have not been caught up in the ‘speculative mania’ seemingly affecting US tech and growth stocks, so he hopes they will recover more quickly.
Finsbury Growth & Income trust, which invests in the likes of tonic maker Fever-Tree, luxury fashion group Burberry and software company Sage, saw net asset value fall 5.4 per cent in January.
The trust’s share price was also down 5.3 per cent.
Nick Train says Finsbury Growth & Income trust stocks were ‘caught up in the growth sell-off’.
Train said ‘major, growing companies’ in the portfolio delivered strong trading updates, but still saw their share prices fall because they were ‘caught up in the growth sell-off’.
‘It almost seemed the better the trading news the companies delivered, the worse the share price hit,’ he added.
He cited upmarket tonic maker Fever-Tree, which saw revenues rise 23 per cent in its last full year, but still saw its shares fall 21 per cent in January amid fears that profits will be dented by rising costs.
Credit ratings agency Experian, another of the trust’s holdings, upped its revenues outlook after strong performance in its third quarter, but shares fell 15 per cent last month.
Despite the share price fall, Train increased the trust’s exposure to these companies after receiving a big cash injection after the buyout of Daily Mail & General Trust – the owner of the Daily Mail and This is Money.
‘In particular we were able to add to our holdings in Experian and Fever-Tree at notably lower prices as the month went on and they are now important positions,’ Train said.
Accounting software firm Sage posted ‘strong’ third quarter results, which showed a ‘continued improvement in the quality of the company’, but shares still dropped.
Finsbury Growth & Income Trust
AIC Sector: UK Equity Income
Date of Appointment of Lindsell Train: December 2000
Net Assets: £2.04bn
Invests in: Shares of predominantly UK-listed companies, with the objective of achieving capital and income growth.
Concentrated portfolio of up to 30 stocks with a low turnover.
Train said: ‘Quarter-to quarter the recurring growth rate was 2 per cent. Apparently, investors were hoping for 2.5 per cent and this was the excuse for the stock to drop 14 per cent in January.’
Burberry’s shares rose 3 per cent in January, a ‘welcome’ rise in a month when luxury growth stocks sold off around the world, which Train said ‘leaves much more upside’ for the stock.
The trust also invests in drinks giant Diageo, snacks group Mondelez, investment firm Rathbones and French spirits group Remi Cointreau.
‘To the companies mentioned above I would add Hargreaves Lansdown, Heineken and RELX as further examples of major, growing companies in the portfolio whose shares also fell in January, caught up in the growth sell-off,’ he added.
‘And all these companies are those which we expect will generate business and share price value for FGT into the future.’
Train added there is a deep value gap between UK and US growth stocks, which is partly explained by the lacklustre performance of the overall UK stock market in recent years that has prompted many investors to flee.
‘As a result, we hope our holdings will fall less, recover more quickly and go up correspondingly further, as global investors are inspired to find compelling growth stories in neglected markets.
‘We hope the 4 per cent uplift in London Stock Exchange shares in January, after its dismal 2021, shows the potential for undervalued UK growth stocks through the rest of 2022.’