Nick Train has vowed that he and business partner Michael Lindsell will keep buying shares in Lindsell Train Investment Trust as long as it trades at a discount.
In his February update for clients, Train highlighted the rare discount on the trust.
At the end of February shares in the trust were worth £992.50 a pop, a 3.37% discount to its NAV. This is a far cry from last May 2019 when the price stood at a 99.5% premium.
“The board and Mike and I have always made it clear that we would not add to our own holdings in the company when it stood at a premium,” Train wrote in the update to shareholders.
“But during the crisis, we have been offered and taken the opportunity to buy shares below NAV,” he said, adding that “Mike and I intend to buy more if the discount persists.”
LTIT sustains heavier losses than MSCI World
In addition to buying up shares in the Lindsell Train Investment Trust, Train and Lindsell have also been purchasing shares in the £1.5bn Finsbury Growth & Income trust, also run by Train, and have topped up holdings across their open-ended funds.
Train said he and Lindsell were buying shares in the investment company not because they think markets have bottomed out or “for show” in an attempt to calm shareholders’ nerves but “because we think it is probably the right thing to do from an investment perspective”.
The Lindsell Train Investment Trust sustained much heavier losses than the MSCI World in February, falling 18.3% on a share price basis, versus the index which was down 5.5%.
Its benchmark, which is the annual average running yield on the longest-dated UK government fixed rate bond plus 0.5% with a minimum yield of 4%, was up 0.3%.
Train warns holdings could face profit warnings and dividend cuts
Amid the coronavirus market turmoil Train said he was comforted by his strategy of only buying and holding high quality companies. “We believe that durability or just pure survival power is generally an underappreciated quality in a business. Of course, it is even more desirable today.”
Train said while he expects his portfolio holdings will face challenges and possibly even profit warnings and dividend cuts, he would be “amazed and disappointed if their challenges proved to be existential”.
“AG Barr, Diageo, eBay, Heineken, Laurent Perrier, London Stock Exchange, Mondelez, Nintendo, PayPal, Pearson and Unilever. These are the quoted constituents of your portfolio.
“There may be mistakes in this list. But in aggregate and compared to government bonds or cash their prospects as investments look good to us.”
