“We have little or no exposure [to value and cyclical stocks] and never have had,” he said.
“We have no particular view as to whether this ‘new’ economic outlook will prevail, but would not change the current disposition of the portfolio even if we did.
“Instead we look for a continuation of the current secular bull market in UK equities – a bull market we think will be best captured by investing in those companies best exposed to these fundamental and powerful trends.”
The “powerful, secular trends” in question, driving Train’s bullish perception of the UK economy, are emerging markets and the internet.
The first of these trends, emerging markets, he suspects was the principal underlying motivation in “the most significant event over the half year” – Kraft Heinz’s attempted takeover of Unilever.
“To us KHC’s opportunistic approach was likely driven far more by its desire to take advantage of the current relative unpopularity of Emerging Markets than short term quibbles about what ULVR’s profit margins should be.
“It’s ULVR’s unique market positions in India, Indonesia, Brazil etc that were the real prize here.
“Thinking about the prospects for emerging markets, the weakness of the oil price in Q1 2017, down nearly 10%, is very bullish for consumer expenditure around the world and particularly so for emerging market consumers, where lower energy costs quickly translate into greater disposable income.
“We expect an acceleration in sales growth here for not just Unilever, but other global brand owners if this continues.”
Train admitted that he bought more Unilever for Lindsell Train clients, given the breadth of its emerging market exposure, and because, contrary to many investors, he feels the stock is fairly valued.
He likewise stocked up on Diageo, Heineken and Mondelez for similar reasons.
