Buy quality shares at reasonable prices and hold for the long term. That’s the strategy we endorse at the Motley Fool. We’re in good company. It’s also the game plan followed by one of the UK’s most successful fund managers, Nick Train.
Today, I’m looking at three UK stocks Train continues to back, despite so far struggling to recover since March’s coronavirus-related market crash.
A Train favourite
Its share price may have performed poorly over the last year or so, but Irn Bru maker AG Barr (LSE: BAG) boasts many great business hallmarks. It has strong brands, a robust balance sheet, and generates higher operating margins compared to peers. It also operates in a defensive sector with loyal customers. No wonder Nick Train remains a fan.
Despite not being immune to the coronavirus, Barr has also been performing fairly well in 2020. Revenue of £113m in H1 may have been down 8% on the previous year due to the lockdown, but it was far better than analysts were expecting.
The stuttering reopening of bars and cafes in recent weeks means it will take time for sales to really fizz. Then again, the recent heatwave will surely have provided a welcome boost. Indeed, AG Barr could reinstate its dividend in September if management feels another UK lockdown is unlikely.
Like Train, I remain confident the stock will recover in time.
Staying with the drinks theme, FTSE 100 beverage beast Diageo (LSE: DGE) is another of Nick Train’s favourite stocks. It’s the biggest holding in the Lindsell Train UK Equity Fund and the third-largest in both the Lindsell Train Global Equity Fund and Finsbury Growth and Income Trust.
That said, recent news from the company has been disappointing. Despite many of us drinking from our homes over lockdown, the company still revealed a bigger-than-expected fall in underlying net sales earlier this month.
The near-term outlook is also pretty gloomy. Confirmation that the UK is now in the first recession for 11 years may force some to curtail their spending on premium label booze for a while.
Train, however, is staying optimistic. Writing to investors, he said there’s “no doubt that human beings both crave and will return to ‘real’ activities and experiences” once the coronavirus has passed.
Since this will inevitably include going back to pubs and clubs en masse, I think now might be an excellent opportunity to snap up Diageo while its share price is depressed.
Nick Train luxury buy
A third business Nick Train is standing by — and another key holding across funds he manages — is FTSE 100 luxury brand Burberry (LSE: BRBY).
Once again, trading through the pandemic hasn’t been great due to store closures and travel restrictions. Although last month’s update included some green shoots of recovery, the share price is understandably still far below where it stood at the start of 2020.
As tricky as the current environment is however, I’m confident Burberry can recover. The unstoppable growth in wealth across Asia coupled with the exclusivity of its brand should see to that. In the meantime, the firm is cutting costs where it can and continuing to develop its online offering.
While certainly not a reason to buy the shares on its own, I also suspect Burberry is now a prime takeover candidate.
Paul Summers owns shares of Burberry, AG Barr and Lindsell Train Global Equity Fund. The Motley Fool UK has recommended AG Barr, Burberry, and 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.