Nick Train has added Experian, another expensive growth stock, to his Lindsell Train UK Equity fund despite mounting questions from shareholders over his pricey portfolio holdings.
The credit data company is the third new holding Train (pictured) has added to his £6.3bn UK equity fund in the past 12 months, which he admitted was “an unusually high rate of actionable new ideas for Lindsell Train” in the fund’s September factsheet.
In February Train took a “leap in the dark” and pounced on drinks mixer Fevertree, a brand he had been eyeing for years and finally picked up after its shares plunged 30% in January. Seven months before that he took a punt on Imperial soap maker PZ Cussons.
Before the trio of recent purchases Train hadn’t bought shares in a UK-listed company since purchasing pub group Greene King in 2010.
Train reflected he had been finding more opportunities in the UK market at a time when investors have given up on the region after a “long period of disappointing absolute and relative returns”.
Data from the Investment Association shows British retail investors have pulled over £13bn from UK equity funds since the Brexit referendum in 2016, a fact which Train called “substantial and sobering”.
Shareholders worry about quality growth bias
Train did not disclose the size of his Experian stake, but he has previously stated he would be building up his positions in Fevertree and PZ Cussons, which also feature in his Finsbury Growth & Income trust, slowly over time.
His latest addition to the portfolio comes at a time when the heavy hitting UK manager is having to defend his investments in pricier so-called “quality growth” companies.
Writing in the latest Lindsell Train UK Equity update, Train said 12 months ago a number of clients had expressed concerns about future performance due to a perception he owned too many “expensive” growth companies, adding the fund would be vulnerable if value stocks staged a comeback.
“Perhaps those concerns might’ve been right if Covid had not intervened,” Train said. “But the fact is by early summer 2020 we had begun to be worried that far from holding too many ‘expensive growth companies’, in fact we didn’t have enough of them.”
Experian is currently trading on a P/E ratio of 37.52, according to data from Hargreaves Lansdown. This is higher than its main US-based rivals Equifax and Transunion which were trading on 27.33x and 33.54x earnings as of 9 October.
Its shares have risen 17% year-to-date and are currently trading at £29.85 a piece, down slightly after hitting an all-time high of £31.24 in September. This puts the consumer credit reporting firm’s market cap at £27.3bn.
Nick Train eyeing up UK data and analytics companies
Like existing holdings Relx and the London Stock Exchange, Train said his new stake in Experian is part of a play to own more “UK companies with credible and globally-competitive assets in technology, data and analytics”.
“In fact, we should’ve owned it years ago and the fault that we didn’t is all mine,” he said reflecting on his most recent purchase.
“So, I want here to give credit to one of my investment team colleagues, Madeline Wright, who has persistently and correctly championed the investment case for the company and helped convince me that Experian was a worthy candidate for the fund.”
Lindsell Train UK Equity rose 1.4% last month compared to the FTSE All Share which lost 1.7%. Year-to-date it has returned -5.9% against the index’s -19.9%.
