2 surprising small-caps owned by Britain’s Warren Buffett

Could these surprising small-caps owned by Britain’s Warren Buffett make you rich?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

You only have to look at the funds run by asset manager Lindsell Train to see why Nick Train is known as ‘Britain’s Warren Buffett’. He owns relatively few stocks – 23 in the case of his UK Equity Fund – and they’re readily identifiable as Buffett-type businesses. FTSE 100 giants Diageo and Unilever are the top two holdings, each with a 10% weighting, while a smattering of overseas stocks, including Heineken and Buffett-backed Kraft Heinz, are in the same blue-chip mould.

Surprisingly, given the wide universe of megacaps available, Train’s concentrated portfolio includes two little AIM-listed companies. Even more surprising, one of them is a football club.

A flaky investment?

Train has been a long-term investor in Celtic (LSE: CCP), which released its annual results just after the market closed yesterday. The company reported a 74% rise in revenue to £91m and a jump in profit from £0.5m to £6.9m. With the shares currently trading at 131p, the business is valued at £123m and the P/E is 17.8 (or 24 on a fully diluted basis).

On the face of it, this looks expensive given Celtic’s bumper haul of domestic trophies last season and the fact that the results also reflect, as management admits, “the paramount importance to the company of participation in the group stages of the UEFA Champions League.” What about bad years? Isn’t a football club a flaky investment that’s sure to go wrong sooner or later?

Rare and valuable brands

Train has a fascinating take on the intrinsic value of Celtic, Juventus (held by his global fund), as well as New York-listed Manchester United, where he’s recently been “delighted” to pick up a block of shares from the owning Glazer family. He was previously a shareholder during its spell on the London Stock Exchange in the 1990s, making a return of 30 times his initial investment – the single best investment of his career, he’s said.

His take on these football clubs is that they’re among an elite with “deeply entrenched and storied franchises” that make them brands every bit as rare and valuable as, say, Diageo’s Johnnie Walker whisky. Train reckons that the exponential rise in the value of TV sporting rights is set to continue. He said recently: “It will not be long now before an internet giant bids against an incumbent football rights holder. The ramifications for traditional media companies will be massive, but through the turmoil we expect the value of strongly-franchised football clubs to rise.”

It’s an interesting view and I’m certainly reconsidering my aversion to the idea of investing in football clubs.

A rewarding pint

The other AIM-listed stock Train owns is pubs group Young & Co (LSE: YNGA). London-focused and the owner of many well-known hostelries, Train has every hope that the next quarter of a century will prove every bit as rewarding for shareholders as the last, telling the Telegraph a few years ago: “Its real estate is likely to offer protection against inflation while its focus on the capital means that shareholders get a ‘proxy’ participation in the growth and vitality of London.”

Again, this is not an obviously cheap stock on a P/E of 20.4 (at a share price of 1,357p), but the P/E comes down to a more reasonable 15.6 on Young’s non-voting shares (ticker YNGN) at 1,033p, which Train also holds.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Will it be too late to buy Nvidia stock in March?

NVIDIA stock is up more than 60% since the start of 2024. Our writer considers whether it might still be…

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

Why did Direct Line shares just soar 27%?

Direct Line shares have jumped more than a quarter in the course of today's trading session. Our writer explains why…

Read more »

Close-up of British bank notes
Investing Articles

These 2 shares are Dividend Aristocrats. Which should I buy this March?

Our writer likes the business model of this pair of FTSE 100 Dividend Aristocrats. So why would he only consider…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

I bought 49 Unilever shares in June. Here’s what they’re worth today

Harvey Jones bought a modest amount of Unilever shares last summer hoping the stock would soon recover. He's having to…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

I reckon these shares, potentially 20% undervalued, are Warren Buffett’s type of investment

Oliver Rodzianko thinks Games Workshop is an absolutely stellar investment. As it's potentially undervalued, he reckons Warren Buffett would agree.

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Great investing habits that can boost my Stocks and Shares ISA

Forget complicated calculations and financial jargon! Our writer uses a few simple habits to build wealth inside his Stocks and…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Why has the St. James’s Place share price crashed 30%, after FY results?

The St. James's Place share price has just fallen off a cliff. What could have gone wrong in 2023 that's…

Read more »

Family in protective face masks in airport
Investing Articles

Here’s how much I’d have if I’d bought 1,000 Rolls-Royce shares 10 years ago

Rolls-Royce shares may be flying high this year but that wasn't always the case. I'm calculating how much I'd have…

Read more »