Nick Train has expressed his disappointment at Unilever’s “crushingly pedestrian” performance in a month where Tesla’s shares took off, snagging the electric vehicle maker a $1trn valuation.
Writing in the latest Finsbury Growth & Income factsheet, Train said October had been an “emotional” month of highs and lows for his 24-stock portfolio.
Relx saw share price gains of 5.5% and hit an all-time high, while fellow top 10 holdings Burberry and Hargreaves Lansdown were up 6% and 7% respectively, pushing them into positive territory for 2021. Newer holding Experian also fared well, rising 7.7% over the month, and Heineken had a “better month”, with shares trading 4.5% higher.
However, Train had to “suck up” another 2% fall in Unilever’s share price. “In a month when Tesla goes up 44% Unilever looks crushingly pedestrian,” he confessed.
Unilever dividend still looks sustainable
Though previously hailed by Train as one of his “steady plodders” the consumer goods giant, which owns Dove and Marmite, has been one of his biggest laggards this year.
Shares have fallen 11% in the year to 31 October, as investors have fretted over the impact of inflation on the business and its reliance on emerging markets. While its Q3 report was “not as bad as feared”, it was hit by rising input cost pressures and lockdowns in Asia, Train said.
Despite questions about Unilever’s staying power, Train notes its quarterly dividend was up 4% on last year. It has also entered “500 IP-generating partnerships in areas like plant-based proteins and biotechnology for cleaning” in recent years.
“Who is to say this company won’t be able to sustain that rate of underlying cash return growth to shareholders, with these and other initiatives? It has done so for over half a century,” Train said.
See also: Nick Train braces for tough period as Finsbury Growth & Income hit by value rotation
LSE’s ‘frustrating’ share price drop
However, “most frustrating” for Train was the fact LSE’s share price tumbled 5% in the last week of October, following its Q3 report “which on the face of it looked fine”.
Train said analysts were similarly puzzled by the sudden drop, with one Bank of America Merrill Lynch analyst simply telling him: “I don’t know”.
“It is no mystery that not enough time has elapsed to make any final judgement about the wisdom of the Refinitiv merger, although we assume the sellers in October are pessimistic,” Train said.
However, he said these sellers conveniently ignored LSE’s “dexterous” acquisition of a 54% stake in TradeWeb, which saw its share price rise 10% to an all-time high in October. The firm which operates global electronic marketplaces for rates, credit, equities/ETFs and money markets is up over 40% in 2020.
“The company has a value of $21bn, meaning LSE’s stake is now worth over £8bn. Nice business – TradeWeb and LSE’s dextrous acquisition of it.”
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