Nick Train has seized upon the coronavirus panic as an opportunity to add to his positions in Burberry and Diageo, as he bets the worst effects of the disease have already been felt and “will soon dissipate”.
Train outlined how his investments with exposure to Asia and luxury spending suffered “predictable beatings” following the emergence of the coronavirus last month, in the latest update for his Finsbury Growth & Income trust.
Burberry and French spirit maker Remy Cointreau suffered double-digit blows to their share prices, falling 11% and 13% respectively, while alcoholic drinks manufacturer Diageo lost 6%, he noted.
But Train said he took advantage of the “panic” to add to all three positions.
“We did so not because we have any insight into the severity and duration of the epidemic,” he wrote. “Instead, because we have been rewarded more often than not during previous unsettling episodes by treating them as buying opportunities.
“We hope we are right again on this occasion and that the distress and suffering the virus has already caused will soon dissipate,” he continued.
Diageo is currently the trust’s fourth largest position at 9.4%, while Burberry is the seventh at 7.7% of the fund. Remy Cointreau is part of the remaining 15.5% of assets that falls outside the top 10 holdings.
Train delivers losses despite defensive heroes
Train described how ‘defensive’ holdings, including Mondelez, Unilever and Heineken, “came to the rescue” and helped mitigate the damage from the coronavirus outbreak.
Even Irn-Bru maker AG Barr did its part, Train said, as its shares rose 4% over the month despite delivering weaker annual profits than the year before.
But this was not enough to prevent the £1.9bn trust from handing investors a loss. In January the trust’s NAV fell 2.2%, while the share price was down 1.2%.
However, its performance was stronger relative to the FTSE All Share index which ended the period 3.3% lower.
Growth rally ‘not supposed to be happening’
Train also singled out growth stocks London Stock Exchange and Relx for contributing positively to performance.
LSE and Relx both saw their share prices tick up last month despite a more volatile backdrop and are now trading at all-time highs, Train noted.
Relx in particular had a strong month, with shares up 6%. It is now the second largest holding in Finsbury Growth & Income at 10.8% of the portfolio, while LSE is the largest holding at 11.5%.
Although many investors were expecting to see a reversal in fortune for value stocks, Train noted the Nasdaq, the “pre-eminent global growth index,” was up 2% in January and hit another all-time high.
“In a sense this is not supposed to be happening,” Train said. “It is clear that companies with a credible growth strategy, particularly growth driven by digital technology, remain attractive to investors.”
“We hope that other portfolio holdings will continue to participate – for instance, Daily Mail, Euromoney and Sage – all of which are indeed doing very interesting things with digital technology,” Train added.
