Finsbury Growth & Income trust manager Nick Train held strong in his positions in Diageo and Fever-Tree for the end of 2024, keeping faith in what Train called “truly global brands in growing categories”.
While Diageo caught a rally in December, the success was short lived as the company dropped 11.3% in the past month from a share price of $114.40. In the year to 14 January, the share price has fallen over 20%. The year caused FundSmith’s Terry Smith to sell out of the stock, which he had held since the fund’s inception. Meanwhile, Fever-Tree has dropped 38.6% in the last year, and 18% in the final quarter of 2024.
“Over the next decade we expect global economies to expand, global consumer confidence to recover and consumer predilection for luxury and premium products to become even more pronounced,” Train said.
“Burberry and Fever-Tree’s eponymous brands and the best of Diageo’s brands offer UK investors rare access to that global potential, we believe. So we must hope and think it not impossible, that 2024 was the low-point for their fortunes and for investor sentiment.”
Finsbury has slightly underperformed the sector average in the past year, with a share price total return of 9.1% compared to an average 9.8%. On a five-year view, the gap expands to 12.1% for Finsbury against 22.6%. The trust currently trades at a 6.7% discount, according to the Association of Investment Companies.
For the upcoming year, Train said he believed the election of Donald Trump would make “peace more likely worldwide”, which could lead to improved energy and commodity pricing as well as consumer confidence.
“To emphasise the potential in the portfolio, if those themes and economic trends do generate the returns we aspire to, please consider the top 10 holdings in the company and the proportion of the whole they represent To us this really is a collection of outstanding businesses, with robust market positions and compelling growth opportunities,” Train said.
“The concentration of the portfolio has worked against your company in recent years, but in the past it has produced market beating returns and we are sure it can do so again.”
The top 10 holdings of the trust make up over 90% of Finsbury’s portfolio, and include the London Stock Exchange, RELX, Sage Group, Unilever, Experian, Diageo, Rightmove, Hargreaves Lansdown, Schroders and Burberry Group. Finsbury also announced two new holdings in the portfolio, Shipbroking company Clarkson and global testing business Intertek.
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“What is interesting about shipbroking and Clarkson is that it seems that both are participating in the structural trends driving all financial markets: the electronification of trading; the embedding of technology through the trade process; and the growth in demand for data and the tools to analyse it,” Train said.
“As one of only four genuinely global testing and assurance businesses, Intertek is another true toll-booth company. We think it is well placed to benefit from the ever-increasing burden of global regulation and end user demand for demonstrable quality and compliance with a widening range of metrics, not only safety but increasingly traceability and supply chain visibility.”