Today, we heard from long-term growth hunter, passive dividend income collector, and fund manager Nick Train.
Among other investment vehicles, he manages Finsbury Growth and Income Trust (LSE: FGT), which released its half-year report this morning.
I’m holding some of the trust’s shares. In so doing, I’m relying on Nick Train to help me build wealth and grow my passive income from the dividends paid by the stocks held in the trust.
A mixed bag of outcomes
It’s always worth reading commentary from Nick Train. And he tends to remind me how effective very long-term investing can be. But that only applies as long as quality and growing businesses are chosen with care in the first place.
And it tends to help with long-term returns if valuations are fair at the time of entering positions in the first place.
But even decent businesses with reasonable valuations can underperform from time to time. And it’s even possible to lose money on ‘great’ enterprises when they run into operational difficulties. Indeed, all shares and businesses carry risks as well as positive potential.
And as if to prove the point, Nick Train reported a mixed bag of stock performances within the trust.
For example, global luxury goods retailer Burberry saw its stock hit new highs in the period. As did Relx, the global provider of information-based analytics and decision tools for professional and business customers.
Train thinks Burberry’s iconic brand is well positioned to benefit from wealth being created, “notably in Asia and the Americas”.
Meanwhile, RELX reported a stronger-than-expected set of final results. And Train said that demonstrates how “increasingly” entrenched its data products and software services are in the work of the world’s scientists, lawyers, and risk professionals.
These are outstanding businesses. And Train pointed out that Burberry’s shares are up nearly 10-fold since 2003. Meanwhile, RELX is 4.5 times higher with both having “handsomely” outperformed the FTSE All-Share Index, which is the benchmark for the trust.
Detractors that may recover
But some of the stocks in the portfolio didn’t move much or lost ground in the period.
Digital wealth management and administration company Hargreaves Lansdown dropped by 6% during the prior six months. And that was “despite reporting record results and client numbers”.
Meanwhile, investment management company Schroders returned 22% in the first half. But I sense Train’s apparent frustration with the position when he said, “by any historic standard they remain very lowly valued”.
Another “detractor” from the half-year performance of the trust came from global information services business Experian. But Train added to the position. And that’s because he thinks the stock may be suffering a short-term reduction in investor confidence.
And that might be because of worries about the banking sector, which are hopefully unfounded. Indeed, the banks are big users of Experian’s services.
In terms of big investment funds, the trust aims for a small level of diversification between stocks. It normally has “up to” 30 investments. And that level of concentration “is likely to lead to an investment return which is materially different from the company’s benchmark index”.
Private investors may consider such an arrangement to carry above average risk. And the trust acknowledges that situation. But, I see opportunity as well as risks in my long-term position in the trust’s shares.
