Nick Train laments ‘particularly galling’ Diageo drag on FGT

Especially as he has been ‘evangelising’ the drinks giants ‘to anyone who will listen’

Nick Train


Finsbury Growth & Income Trust portfolio manager Nick Train (pictured) was left bewildered by the poor monthly performance of one of the fund’s main holdings, Diageo.

On a total return basis, the £1.9bn trust’s net asset value (NAV) rose 4.2% in January, while its share price was up 3.6%. Despite the positive performance, the trust undershot its benchmark, the FTSE All-Share, which delivered 4.5%.

The slight underperformance was largely due to Diageo ending the month down 4%, leaving it trading 13% below its all-time high posted at the end of 2021, in spite of the 9% organic sales growth and 15% earnings gain reported in the drinks giant’s interim report in January.

Diageo is the second-largest holding in the FGT portfolio, making up 10.8% of the trust.

Train said: “This is annoying for me and all shareholders – given it is one of the biggest positions in your portfolio. It is particularly galling for me because throughout I have been evangelising on Diageo’s behalf to anyone who will listen to me.

“To the effect that Diageo is an ideal investment to hold in current economic conditions because it offers a rare and valuable combination of inflation protection and secular growth. In truth – so you know where I am coming from – I think Diageo is an ideal investment to hold in any economic circumstances and forever.”

He added: “Now, it is true that Diageo’s North American sales slowed by more than investors expected, to 3% and the US is Diageo’s biggest geography – thank goodness. But I don’t see anyone arguing that selling premium spirits brands to the US consumer is not structurally a great category to be in. It is.

“No. We must buy more Diageo when we can and we should applaud the Diageo board as it sanctions continued share buybacks. Every share bought for cancellation – and £4.5bn worth were retired to the period end – increases the scarcity of the remaining shares held by non-sellers, like us. And increases the possible share price upside as and when this great business comes back into favour.”

However, share price moves for Remy Cointreau and Schroders – both up over 10% – alongside a 22% leap for Burberry were named as reasons for optimism for UK equities.

“What is a tantalising proposal, but one which will only be revealed over time, is the possibility that Burberry is not the only one. That there are other, substantive and globally-significant UK companies with dull recent share price histories and undemanding valuations. If there are, then Burberry’s 50% share price jump in three months could be a harbinger of better returns from UK equities ahead. We do hope so.”

The trust ended January trading at a 4.8% discount to NAV, slightly wider than the 4.2% recorded in December.

See also: Nick Train: Returns will keep confounding consensus

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