Nick Train has conceded 2020 was a “difficult year” for the Finsbury Growth and Income Trust portfolio but says he “could not be any more motivated” to preserve and grow the real value of the company.
The share price total return was -9% for the year compared with a 17.4% return the previous year, although the trust did outperform the FTSE All-Share’s total return of -16.6%. The NAV per share total return was -7.7%, down from 17.4% the previous year.
Net assets for the company stood at £1.84bn at the end of September, down from £1.88bn the year before, while the market cap dropped during the year to £1.83bn from £1.89bn.
The trust moved from a 0.7% premium to a 0.7% discount during the period.
A disappointing 20th year as portfolio manager
This month marks 20 years since Lindsell Train took over portfolio management of the trust. Train said it was “disappointing” that the NAV has fallen over the year to the end of September. But, he added: “Sticking with my 20-year time horizon for your company, I have taken advantage of the fall and bought more shares.”
He said: “The extraordinary events of 2020 have demonstrated none of us can legislate for the future; but it remains true that I and my colleagues could not be any more motivated to preserve and grow the real value of your company than we are today.”
Outgoing chairman keeps faith in long-term strategy
The company’s chairman Anthony Townsend who is retiring at the company’s AGM in February, noted that despite the continued uncertainty, in particular in the UK surrounding Brexit, and the continued effects of the pandemic the company has again outperformed its benchmark.
“Through these difficult times your board continues to support fully the portfolio manager’s strategy of investing in high quality companies that own both durable and cash generative brands,” he said. “We believe firmly that this strategy will continue to deliver strong investment returns to shareholders over the longer term.”
The top three contributors per share to the portfolio over the year were London Stock Exchange (21p per share), Remy Cointreau (11.5p) and Fever Tree (7p). The top detractors were Burberry Group (-62.3p); Diageo (-20.6p) and Hargreaves Lansdown (-15.9p).
Train kicks himself for overlooking Games Workshop
Elsewhere, Train said he “kicks himself” for not owning Games Workshop when looking at the incredible share price gains, especially as one of his younger colleagues had recommended it a few years ago.
“Sometimes it is the errors of omission – what you didn’t do but should’ve – that are most galling. Anyway, we still look for its sort of ‘sticky content’ that can fix attention, preferably of millions of people. So, although its share price is signalling scepticism today, I believe our investment in Manchester United gives access to a unique entertainment asset and one that looks undervalued, we think, compared to transactions for sports franchises around the world.”
No more than 15% of assets in any one holding
The trust’s board has also proposed formally amending the investment policy to include a restriction that no more than 15% of the trust’s net assets be invested in any one holding. The top holding, LSE, is 11.7% of the portfolio. The rule will be in place from 17 February 2021 should it gain shareholder approval.
It is also the first time for many years that the trust’s total dividend has not increased. The board said it was disappointed about this at a time when income is important to many shareholders.
“However, 2020 has been a year when many businesses have been adversely affected by the Covid-19 pandemic and a number of companies within your company’s investment portfolio have been forced to reduce their own dividend payments leading to a fall in the company’s own income per share,” said Townsend.
By Sebastian Cheek, 16 Dec 20