I think this FTSE 250 stock may explode higher in 2025, just as it has done before

After a disappointing five-year performance, a build-up of value may cause this FTSE 250 investment trust to outperform next year.

| 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.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

I’ve had high hopes for the FTSE 250‘s Finsbury Growth and Income Trust (LSE: FGT) for some time.

However, with the share price near 896p, it’s where it was about five years ago — how disappointing. The chart shows the stock’s been moving essentially sideways for half a decade. But better times may be coming for shareholders.

Created with Highcharts 11.4.3Finsbury Growth & Income Trust Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Even the trust’s well-known investment manager, Nick Train, thinks the performance has been rubbish. Train said in the recent annual report he’s been disappointed and recognises it’s been a frustrating period for shareholders.

Should you invest £1,000 in Finsbury Growth & Income Trust Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Finsbury Growth & Income Trust Plc made the list?

See the 6 stocks

Fantastic past performance

But under his management, the stock rose by more than 350% in the decade between 2009 and 2019. I think it can perform like that again. Meanwhile, stock market conditions today seem similar to those in 2009, just before it took off.

In 2009, the markets were licking wounds inflicted by the credit-crunch and financial crisis a couple of years earlier. One outcome of that was depressed company valuations in the UK.

Today, the markets are wounded because of the pandemic, war in Ukraine, energy price shocks and inflationary pressures. Again, the UK stock market has been depressed along with company valuations. But value looks like it’s been building up in many businesses as operational progress continues. Not exactly the same situation as in 2009, but it rhymes.

Meanwhile, Train runs the trust with a long-term perspective. The strategy is to hold the shares of quality businesses that can compound a growing stream of earnings over time.

Going forward, Train is convinced” the best way to get the share price moving up again is by the same approach that generated good returns before. That means running a concentrated portfolio of shares backed by “exceptional” UK companies. 

The trust is unusual because it’s so concentrated — the opposite to being widely diversified. But it embraces the theory that exceptional results can come from doing things different from the crowd. 

There are 20 equity holdings in the portfolio. But the biggest six account for just over 73% of the invested money. So for a big fund, that’s super-concentrated.

Turnaround and growth potential

The top six holding are London Stock Exchange GroupExperianRELXUnilever, Diageo (LSE: DGE) and Sage. Of those, the share price of Diageo has been particularly depressed lately. But I reckon it has the potential to bounce back during 2025. 

The general economic challenges of the past few years affected Diageo’s premium alcoholic drinks business. The company posted declines in normalised earnings in 2021 and for the trading year to June 2024.

I reckon that weakness in the business unsettled the market. Previously, Diageo had carried a full-looking valuation for many years. That arose because of the steady, defensive and cash-generating qualities of the enterprise.

But the market has marked down the valuation and the share price over the past three years, as the chart shows.

Created with Highcharts 11.4.3Finsbury Growth & Income Trust Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

However, City analysts expect improving earnings ahead. So Diageo could regain its popularity among investors and prove to be a decent hold for the trust going forward.

Positive outcomes aren’t guaranteed, but I reckon Finsbury Growth and Income Trust is well worth investors’ research time and consideration now.

Should you buy Finsbury Growth & Income Trust Plc now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo Plc, Experian Plc, Finsbury Growth & Income Trust Plc, RELX, and Sage Group Plc. 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

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »