Nick Train is widely regarded as one of the UK’s top fund managers. Since his UK Equity fund was launched in 2006, it has delivered a return of around 370%. That’s about three-and-a-half times the return of the FTSE All-Share index.
Today, I’m going to look at two stocks that Train currently holds in his UK fund. I’d be happy to buy both stocks right now.
A top Nick Train growth stock
Let’s start with a stock Nick Train added to his fund last year – Experian (LSE: EXPN). It’s one of the major players in the consumer credit data space. Last week, it posted a healthy trading update in which it reported organic revenue growth of 7% for the quarter ended 31 December.
I see Experian as a good fit for my portfolio for a few reasons. Firstly, it operates in a growth industry. The market for data analytics is expected to grow at a healthy rate in the years ahead. Secondly, it has competitive advantage – Experian’s industry enjoys high barriers to entry. This means there’s less risk of rivals stealing market share.
Third, the company has a number of high-quality attributes. Return on capital employed, for example, has averaged 19% of over the last five years. This tells us that the company is very profitable. Additionally, it also has a fantastic dividend growth track record. Over the last five years, the dividend has been raised from 39 cents to 47 cents per share.
Experian shares currently trade on a forward-looking P/E of around 31 which means the valuation of the stock is relatively high. This does add risk to the investment case. If the company’s future financial results are disappointing, its share price could fall significantly. However, given EXPN’s high-quality attributes, and long-term growth potential, I’m not personally worried about the premium valuation. Overall, I see Experian as a good stock for me to buy and hold for the long term.
Long-term growth potential
The second Nick Train stock I’d buy today is Hargreaves Lansdown (LSE: HL). It’s a leading player in the UK retail investing space.
I’m bullish on this Train stock for a few reasons. Firstly, interest in stock picking has increased over the last year or so. Investors have realised that, by picking stocks, they can potentially make much higher returns than by simply investing in passive index funds, even though they can also potentially lose more. I think this renewed interest in stocks should benefit Hargreaves Lansdown.
Secondly, Britons have saved record amounts of money over the last year while on lockdown. I expect a considerable amount of this money to find its way into the stock market, which, once again, should benefit Hargreaves.
Third, stock markets tend to rise over the long run. Given that Hargreaves generates a large proportion of its income from assets under administration (AUA), there’s a good chance its income will increase over time from rising AUA.
It also has quality attributes. It’s very profitable (five-year average ROCE of 74%) and has a strong balance sheet. It has also put together a good dividend growth track record.
However, like Experian, this stock does have a relatively high valuation. The forward-looking P/E ratio is 29, which again adds risk to the investment case. Overall though, I think the long-term risk/reward proposition offered by this Nick Train stock suits my investment goals.
Edward Sheldon owns shares in Hargreaves Lansdown and Experian. The Motley Fool UK has recommended Experian and Hargreaves Lansdown. 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.