Nick Train has given a surprising shout out to Scottish Mortgage manager James Anderson as he hits out at the UK’s dividend culture yet again.
Train singled out the rival trust manager (pictured) in the latest portfolio update for his Finsbury Growth & Income trust. In May the trust’s NAV rose 6.8% and the share price was up 6.7% compared to the FTSE All Share’s gains of 3.4%.
Describing Anderson’s annual report for Scottish Mortgage as “mandatory reading for all investors”, Train drew attention to his observation that Amazon and Apple combined are worth more than the entire UK stock market.
“Just two companies! As a career-long investor in the UK I scratch my head and wonder how this could have happened,” Train wrote.
Amazon, which is Scottish Mortgage’s second largest holding at 9.3% of total assets at the end of March, now has a market cap worth $1.3trn. Apple, which is not owned by Anderson, is also in the trillion-dollar club. On Wednesday it became the first company to hit $1.5trn.
Train’s praise for rival trust manager is surprising
Willis Owen head of personal investing Adrian Lowcock found Train’s shout out to Anderson somewhat surprising.
“It isn’t too common for fund managers to highlight the musings of other fund managers, but then Nick Train is unique in how he approaches fund management,” Lowcock said.
“You would hope a good fund manager considers others views to get a sense check of their views and ideas they may have missed. Having a differing perspective is often very helpful,” he added.
Both Train and Anderson are both noted for their buy and hold investment style and being growth investors.
But while Anderson favours American tech companies like Amazon and Netflix, Train has preferred consumer goods giants like Dove soap maker Unilever and booze brands Heineken and Remy Cointreau that have brand staying power. Such companies account for nearly half of the Finsbury Growth & Income trust with Unilever and Diageo accounting for 10% of assets each, followed by Mondelez with a 9.0% weighting.
Train hits out at UK dividend culture again
In the Finsbury Income & Growth update Train once again speculated that the UK’s dividend culture was to blame for London-listed businesses not being as highly valued as their American counterparts.
“I reflect on that rally in Burberry shares after its dividend cut,” he noted. “Perhaps part of the answer is investors have encouraged UK companies to be overly generous with their dividend policies and not reinvest enough of their earnings for growth?”
But Train added the coronavirus crisis has presented UK companies with “an opportunity to have a big think” and strike a better balance between dividend payouts and growth.
AG Barr, Burberry, Fullers and Youngs are among the portfolio holdings that have cut dividends, while Daily Mail & General Trust, Sage Group and Mondelez have modestly increased distributions.
Burberry, which cancelled its dividend last month, was the “most significant dividend hit yet for your portfolio,” Train said.
However he said it was “heartening to see the rationality of UK investors” in response, noting that Burberry’s shares were up 25% from the day before the cut toward the end of the first week of June.
