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Nick Train: Hold ‘boring’ stocks and you’ll be rewarded

Fund star Nick Train: ‘You can be well-rewarded over time for holding what others regard as boring companies’

  • Finsbury Growth & Income trust net asset value fell by 3.8% in February
  • Nick Train takes the long-term view when it comes to ‘boring’ stocks 

Investing approach: Fund star Nick Train prefers the long-term approach

Seemingly mundane or dull stocks can often prove fruitful for investors in the long-term, according to one of the City’s most influential money managers.

Fund star Nick Train, who manages the Lindsell Train and Finsbury Growth & Income trusts, believes many investors under-value such stocks, while chasing after the next Tesla or hyped-up tech firm.

City veteran Train said Finsbury Growth & Income Trust, which invests in the likes of tonic maker Fever-Tree, luxury fashion group Burberry, and software company Sage, saw its net asset value fall 3.8 per cent in February. 

Finsbury Growth & Income Trust shares were also down 3.9 per cent in the month. 

Train said his team’s investment approach centred on ‘steady dependability’ that is often undervalued by other investors. 

He added: ‘Our investment approach is based on owning durable and predictable companies, while avoiding the speculative and cyclical. 

‘The idea is that steady dependability is often undervalued by other investors because those other investors are, as a generalisation, too busy trying to identify the next Tesla or to time the next gyration of the economic cycle. 

‘As a result – so our argument and historic track record asserts – you can be well-rewarded over time for holding what others regard as boring companies.’

In his latest note, Train gave an overview of some of the most notable recent dividend and share buyback updates from companies in the Finsbury Growth & Income Trust.

On the subject of dividends and capital returns to shareholders, Train also said he preferred companies ‘to retain as much of their earnings as possible to fund future growth’.

He said: ‘We prefer [companies] to scrimp on dividends if they see better uses for internally generated cash.’ 

However, he noted that dividend declarations say something about a firm’s boards’ long-term confidence in future free cash flow, and said share buybacks ‘really should signal boards’ perception about the intrinsic value of their company’.

He added: ‘We are encouraged how many of our companies are buying back shares currently – because we agree with their boards.’   

Train said Burberry had hiked its most recent dividend by 3 per cent, and is conducting a share buyback which will retire around 2.5 per cent of its equity at current prices. Burberry shares are down around 0.8 per cent today and have fallen over 25 per cent in the past year.

The trust also invests in Diageo, which has upped its interim dividend by 5 per cent and accelerated its buyback scheme. Diageo shares have risen by around 15 per cent in the past year.

Train also noted that Experian had increased its most recent dividend by around 10 cent. Similar moves from Hargreaves Lansdown, Heineken, Mondelez, Rathbones and RELX were also flagged.

On Sage, Train noted that the group has increased its dividend by 3 per cent and has also recently completed share buybacks, amounting to around 7.5 per cent of its market capitalisation. Sage shares have risen by around 13 per cent in the past year.

Data: A chart showing the performance of Finsbury Growth and Income Trust over time

Data: A chart showing the performance of Finsbury Growth and Income Trust over time


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