Another Difficult Six Months For Nick Train

It has been a tough period for investors in the £1.6bn Finsbury Growth & Income Trust (LON: FGT), which has now underperformed its FTSE All-Share benchmark for more than three years. In the six months to the end of March the fund delivered an NAV total return of 5.9%, with the shares only up 2.7% compared to a 6.9% gain by the index.

There are lots of reasons behind the poor recent performance, with one of the biggest being the lack of oil and mining shares that have done well ever since the global economy emerged from the various lockdowns.

Writing in the half-year accounts, manager Nick Train said that he is frustrated by the malaise gripping the UK Equity market, but remains optimistic about the portfolio. “I believe we own significant positions in a number of businesses that could grow their market capitalisations multiple times over the next decade or more.”

Highly Concentrated Portfolio

FGT relies on Train’s ability to identify high-quality companies, with durable and market-leading franchises or data assets that offer the potential for significant long-term returns. Many of these stocks are currently trading at a substantial discount to comparative peers listed elsewhere.

At the end of April the fund had a concentrated portfolio of just 21 holdings with the ten largest positions accounting for an incredible 85.1% of the assets. These included names such as RELX, London Stock Exchange, Experian, Sage, Diageo, Unilever and Burberry.

The stocks only represent five sectors of the market and further enhance the targeted nature of the exposure. They are: consumer staples 31.8%, consumer discretionary 23%, financials 22.4%, industrials 11.9% and technology 10.9%.

The manager is known for his low turnover approach, with the most meaningful shift in the portfolio since 2020 being the establishment of a top three holding in Experian. He says that it is one of the best positioned companies to take advantage of new data analytic tools based on artificial intelligence.

Stick Or Twist?

Train believes that the UK stock market is home to a number of world class businesses that benefit from important themes such as AI, the digitalisation of services and premium-brand consumption. It is around these companies that he has built the portfolio.

Despite the recent underperformance the long-term record is still excellent. Since Train took over as manager in December 2000, the trust has generated an NAV total return of 627.3%, which is more than double the 234.8% increase in the benchmark.

Finsbury Growth & Income shares are currently trading about eight percent below their NAV even though there is an active buyback programme in place. This is intended to limit the discount to no more than five percent.

It is a difficult decision for anyone with money in the fund whether to stick or twist given the contrast between the last few years and what went on before. If you’ve lost patience you might want to consider a global alternative like Scottish Mortgage (LON: SMT) that has a similar approach, but can pick the best stocks regardless of where they are listed.