According to the latest factsheet, Pearson contributed 7% to the return during November. Overall, the trust’s net asset value was up 1.1% and the share price was up 1.3% on a total return basis during the month, versus the benchmark FTSE All-Share index which was down 1.6%.
Train has stuck by the beleaguered publisher during a tough couple of years. In 2016 Pearson reported pre-tax loss of £2.6bn and in January 2017 saw almost £2bn wiped from its stock market value after issuing its fifth profit warning in two years.
Speaking to Portfolio Adviser in October, Train said he backed Pearson on the belief there are few credible competitors in the digital education space.
The company’s stock price has rallied 30% so far this year, but Train is not getting carried away with the rebound.
Writing in the latest factsheet, he said: “We cannot and must not think that this move, or even the 30% gain in Pearson’s shares so far in 2018, demonstrate that we have been right to retain our investment in the company, or that the bull case is by any means proven. It is not.
“But it is for sure that today it sounds less absurd than it would have done a year ago to claim Pearson is having early success in propagating digital versions of its IP and that this could result in a sustained period of profitable growth.”
Defensive stocks shine
Defensive stocks were the main driver of the trust’s performance last month, making up four of the five best-performing holdings.
Train said Modelez, the portfolio’s fourth largest holding at 8.5%, contributed 7% to the return, while the top three holdings, Diageo, RELX and Unilever respectively, also registered “nice gains”.
He said these stocks have rallied as concerned global equity investors have sought dependable names as 2018 comes to a volatile end, and on the back of the 20% drawdown experienced by oil during the month.
“For as long as I remember, portfolio investors’ instinctive reaction to uncertainty has been to buy shares in good old dependable Unilever, or whisky and chocolate; or Heineken, which also outperformed last month,” he said.
Train said he learned long ago not to extrapolate anything from swings in the oil market, but added: “It is undeniable that lower energy costs are good for global consumers and what is good for consumers is probably also good for consumer goods companies.”
Elsewhere, Train said the steady news flow from these companies demonstrates their intention and ability to improve the quality of their earnings and keep their brand equity per share high.
Examples of this include Diageo’s announcement last month of the sale of 19 secondary US brands and the heritage of its gin brand Tanqueray which is “bigger and more valuable today than it has ever been”.