The Lindsell Train Investment Trust has seen performance slump last month after a mixed bag of second quarter results for its largest holdings.
The £1.2bn trust‘s share price slipped 2.5% in July, while its net asset value sank 1.7%.
This was worse than its gilt benchmark, which rose 0.3% during the month. The trust’s performance is measured against the annual average running yield on the longest-dated UK government fixed rate bond plus 0.5% with a minimum yield of 4%, despite it being in the IT Global sector.
It also lagged the MSCI World index although by a smaller margin as it ended the month down 1.4%.
Portfolio manager Michael Lindsell (pictured), who runs the trust alongside Nick Train and James Bullock, said there was an even split of “five good and five bad results” among its portfolio holdings that reported in July.
“This month we saw the full effect of the coronavirus on our quoted companies as most have now reported second quarter earnings,” he said in the trust’s July factsheet.
Nintendo, Unilever and Mondelez reap the benefits of homebound living
Among the winners were Dove soap maker Unilever and Cadbury owner Mondelez, which saw “strong in-home consumption of their storied brands,” as well as London Stock Exchange which was boosted by rising trading volumes as investors flocked to the markets following the Covid sell-off in March.
Nintendo, the trust’s fourth largest holding at 6.2%, was another holding benefitting from “homebound living,” Lindsell said. The Japanese video game company revealed profits had surge fivefold between April and June, the worst of the lockdown period, after sales of its Switch console and Animal Crossing game reached a record high.
Though shares in the company are up 9% year-to-date it was one of the trust’s biggest detractors from performance in July, alongside publisher Relx and the newly launched Lindesll Train North American Equity fund.
Paypal also made waves in Q2 as it recorded more than twice the normal number of new active users joining the platform and a surge in offline merchants signing up. Its share price has rocketed over 80% in the second quarter alone and in July rose another 11%, hitting $197.
Relx and Pearson among trust’s Covid casualties
But there were just as many negative results for Lindsell Train Investment Trust’s holdings, with drink makers Diageo, Heineken and AG Barr all suffering from the closure of restaurants, bars, pubs and cafes for the better part of the period.
Relx, which derives 15% of its revenues from running exhibitions, also faltered as events were put on ice over the lockdown period. This division was loss-making over Q2 as sales plunged 70%.
Covid has also “exacerbated the fall of sales and profits” at academic publisher Pearson, Lindsell said, with its test and certification centres forced to close over the period. While Pearson has been a “consistent disappointer in recent years” Lindsell said he remains hopeful that the firm’s investment in online learning software will help it weather the Covid storm.
“All these companies are suffering thanks to the unpredictable effects of the crisis; but the crisis will in time abate and as it does so we expect them to first recover their sales and profitability and then grow their businesses, empowered by their well-known brands and unique market positions,” Lindsell said.
