Top-performing fund manager Nick Train is often referred to as ‘Britain’s Warren Buffett’. This is because Train, like Buffett, generally invests with a ‘high conviction’ approach, choosing to hold only a limited number of stocks in this portfolios. Unlike many other portfolio managers who diversify across a large number of stocks in the fear of underperforming their benchmark indices, Train is not afraid to keep his portfolios concentrated and to take large positions in companies that he’s confident in.
Today, I’m profiling an under-the-radar FTSE 100 growth stock that Train currently has significant exposure to in his Lindsell Train UK Equity fund. Should you consider this stock for your own portfolio?
Schroders
Headquartered in London, Schroders (LSE: SDR) (LSE: SDRC) is a £9bn market cap investment manager that offers both asset management and wealth management solutions. The stock is currently the eighth largest-holding in the Lindsell Train UK Equity fund with a 6% weighting, which suggests the fund manager is highly confident about its prospects.
Glancing at the company’s financials and track record, I can see why he rates the stock highly. For example, over the last five years, net profit has surged 110% from £283m to £594m and the group has lifted its dividend payout by a whopping 163%. Return on equity has also been excellent in that time, averaging a high 17%. Train has stated in the past that he likes financial companies that generate fees from assets under management, because of the fact that the stock market has a tendency to rise over time.
Solid results
Half-year results, released today, show that the company continues to enjoy momentum. Assets under management increased marginally during the period to £449.4bn, up from £447bn at the end of December, with profit before tax and exceptional items rising 10% to £397m on the same period last year. Basic earnings per share for the half year increased to 106p, up from 97.8p last year and the dividend was lifted 3% to 35p per share.
Group Chief Executive Peter Harrison commented: “Our diversified business model has again proven its worth. We remain confident that we can generate growth through the cycle and that we are well placed to continue to create value for our clients and shareholders over the long term.”
Worth buying?
Looking at the group’s track record and recent results, I believe Schroders shares continue to offer appeal.
There are risks to the investment case, of course, with one such risk being the threat of passive (ETF) investing. However, over the last five years to the end of December, 84% of Schroders’ assets under management outperformed their respective benchmarks and if the company can continue to perform like this, it should be able to continue to prosper.
The shares currently trade on a forward P/E of 13.7 and offer a dividend yield of 3.7%, which I think are attractive metrics. It’s worth noting that Schroders also offers non-voting shares which are traded under ticker SDRC. For private investors, who most likely have less desire to vote, I think these shares offer particular appeal, as they currently offer a higher yield of 4.7%.
