Nick Train highlighted Diageo and Burberry as his biggest disappointments in 2023 as Finsbury Growth and Income fails to beat its FTSE All-Share benchmark for the third year running.
The £1.7bn investment trust was up 3.9% last year, but investors could have made more than double that tracking the UK index, which climbed 7.9% throughout 2023.
After three years of underperformance, Finsbury Growth and Income is up a modest 4.4% while the FTSE All-Share index soared over six times higher, generating a 28.1% return.
Alcoholic beverage company Diageo was the biggest detractor to performance in 2023, which Train described as “deeply disappointing”.
It started the year as his second largest holding but slipped to the fifth spot after its share price dropped 20% in 2023.
Diageo issued a profit warning in November which accounted for much of that fall, and while Train found the bad news floating around the company “frustrating,” it remains a top holding in the trust. He has maintained a 9.4% allocation to Diageo in the 23-stock portfolio.
“I cannot spend too much time regretting or analysing past underperformance,” Train said. “What now matters most to shareholders and to me are future returns and that is what I am focused on.
“I can assure investors that our approach remains unchanged and that the structure of the portfolio makes it very likely to continue to perform very differently from the benchmark. Of course, we hope for the better.”
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Similarly, Burberry retained a top position in the trust despite being one of its biggest detractors to performance in 2023.
Shares in the luxury clothing brand fell 27.9% last year, dropping even further at the start of 2024 after it issued a profit warning last week.
Nevertheless, Train remained optimistic about the company’s potential for future growth, keeping it as his eighth-largest holding at a 5.9% position.
He said: “Despite the company’s successful long-term record of growth in revenues and earnings, investors are clearly dubious, as evidenced by the share price fall in 2023, triggered by industrywide concerns about slowing growth, particularly in China.
“Burberry is not and never will be an LVMH or a Hermes, but it does have a genuine global luxury brand, particularly its iconic outerwear franchise.”
Despite this particularly poor performance from two of Finsbury Income and Growth’s largest holdings, its biggest position – RELX – was up 39% in 2023.
The analytics company soared throughout the year, but Train expects that the growth in its share price is “only just getting started”.
“RELX has built AI-driven tools to help customers derive more value from the data,” he explained. “As a result, RELX is justifiably a proxy for the Data/AI bull market, that can still be purchased on a lower valuation than its global peers.”
Strong performance from RELX last year meant its position in the trust exceeded the 12.5% limit, so some of that capital was used to start a new position in property website Rightmove.
There are concerns that US rival CoStar could bite into market share, but Train took advantage of this unease to establish a holding in the company. Even with this competition, Rightmove still accounts for 86% of visits to online property sites, giving it a “formidable competitive position”.
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