Nick Train’s fund business is becoming a smaller portion of the Lindsell Train Investment Trust which bears its name amid mediocre performance from two of his biggest investment strategies.
Train said shares in his eponymous boutique had become stagnant after his two open-ended strategies Lindsell Train UK Equity and Lindsell Train Global saw a modest run on assets after delivering “indifferent performance”.
In the month to the end of January his unquoted business Lindsell Train Limited slid from 49.9% of the trust’s net asset value to 49.7%. At its peak it represented 52.2% of the trust.
Previously it had been one of Lindsell Train Investment Trust’s biggest drivers of returns. In 2018 80% of the dividends received by the trust came from the stake in Lindsell Train Limited.
“The stagnation of Lindsell Train Limited’s share price, reflecting a small fall in its funds under management following indifferent performance from its major two strategies – UK and Global – over the last three months has meant that its rise as a proportion of the fund has come to at least a temporary halt,” Train said in a January update for the trust.
Lindsell Train funds losing money
Though Train’s funds have consistently been in the top quartile since launch recently performance has taken a turn as his holdings have been hit by a rotation away from growth stocks.
The £6.6bn Lindsell Train UK Equity fund lost investors 1.7% in January, while Lindsell Train Global Equity, which stands at £8.1bn, was down slightly at -0.2%. Year-to-date the funds are down 3.1% and 0.4% respectively.
Aside from performance, Train has previously blamed the blowup of Neil Woodford’s investment business for denting confidence in his own boutique.
In January, shares in Lindsell Train Investment Trust returned 0.6% compared to the NAV which fell 0.3%, beating the gilt benchmark (0.3%) and the MSCI World Index (-0.1%).
LSE and Paypal holdings climb
As Lindsell Train has become a smaller part of NAV, Train’s holdings in the London Stock Exchange and Paypal have been creeping upward.
LSE’s share price rose 5.8% over the period, taking it up to 9% of NAV. Train noted the stock exchange received a “huge fillip” after finalising its £22bn purchase of Refinitiv from Thomson Reuters, with its shares now commanding an enterprise value 8x forecasted revenues.
Paypal has also become a higher percentage of the trust, growing to 4.3% at the end of January “and likely to rise further,” said Train. The payment provider’s brand reputation is still growing strong, with the firm’s acquisitions of sister platforms Venmo and Zoom helping to grow active users by 14% in 2019.
Train said that while both stocks have looked “by conventional measures expensive indeed” with Paypal on 35x its prospective 2020 earnings, he is not thinking of selling out of his holdings.
“Selling the shares in the past would have been a mistake as the self-reinforcing nature of its business model has proved much more powerful than analysts and investors anticipated,” he said of Paypal.
“It’s probably the same today, which is why we’re content to sit tight. Remember that for PayPal the main competitor to online payments is cash and that mode of payment still commands an 85% market share of transactions worldwide. Thus, there is still lots for the whole online payments industry to go for – but especially Paypal as its leader in the western world.”
