lindsell train global equity makes acquisition

Michael Lindsell has introduced a new holding to the Lindsell Train Global Equity Fund, which the manager concedes is “a relatively unusual occurrence”.

lindsell train global equity makes acquisition


Japanese cosmetics company Shiseido was added to the £113.9m portfolio last month. Lindsell maintains a concentrated portfolio of between 20 and 35 stocks and keeps the fund’s turnover low.

Lindsell said luxury goods companies tend to be attractive as they benefit from low raw material costs compared with the prices customers can be charged, strong brand identifies and high levels of customer loyalty.

“Shiseido is even more interesting as the world’s only Asian luxury brand, with an important position in the rapidly growing Asian beauty market,” the manager added.

“The company has great heritage, founded back in 1872 and the top share of its domestic market.”

Although Shiseido currently has “sluggish” sales in its domestic market, the company’s overseas activities have seen growth of more than 7% a year since 2006 and international sales now account for almost half of its business. 

This includes a 10% share of the China prestige cosmetics market, making it one of the country’s top four cosmetic brands alongside L’Oreal, Estee Lauder and LVMH.

Lindsell started his position in Shiseido at ¥1,000 a share, which is 25% down over the year to date owing in part to the tension between Japan and China over the disputed Senkaku Islands in the East China Sea.

At this valuation, the manager noted, the fund accessed the firm at an enterprise value to revenues ratio of about 0.7 times, a free cash flow yield of  more than 10% and a historic dividend yield of 5%.

“We are as alert as any to the serial disappointments suffered by investors in the Japanese stock market,” Lindsell said.

“However, as value-conscious investors who love strong consumer  brands we  just  can’t  find  anything  of  Shiseido’s  calibre  at  remotely  like these valuations anywhere else in the world.”

The acquisition takes the fund’s allocation to Japan up to 27.% and its consumer discretionary weighting to 19.8%.


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