Nick Train has described the success of Amazon as “sobering” for a UK equity investor whose investible universe is made up of comparative minnows.
Train’s comments, in his latest Finsbury Growth & Income monthly update, come days after the fund manager revealed his boutique launched a North American equities fund in April. The fund is the first new product from Lindsell Train in nine years.
He did not give any hint about his views on the investment case for Amazon except to say its £900bn market capitalisation was “sobering”.
“That is the equivalent of 15 Diageos – to pick the biggest FT All Share constituent we own in your portfolio.
“Then consider further: Diageo makes up c3.5% of the All Share. This means Amazon – just one US tech company – is worth around 50% of the entire UK stock market.
“That astounds me. I don’t know if it’s crazy. But what the success of Amazon as a business and an investment tells us is clear. It is that every company we invest in must be judged not only on its likelihood of surviving the crisis, but also on its fitness for prospering in a world where Amazon and its ilk can get so big.”
US tech will dictate relative performance of new Lindsell Train fund
Lindsell Train only revealed on Friday it had secretly launched its new fund.
Square Mile investment analyst Daniel Pereira said the new fund, which will be managed by James Bullock with assistance from Madeline Wright, would likely have a high overlap with the US holdings of the Lindsell Train Global Equity fund, which represented 32% of its assets at the end of April 2020.
Walt Disney is the largest US holding in that fund, followed by Mondelez International and Paypal, according to its annual report for the period ended 31 December 2019. Amazon does not feature in the portfolio.
Willis Owen head of personal investing Adrian Lowcock said the performance of US mega-cap stocks will affect the relative performance of the LF Lindsell Train North American Equity fund.
Lowcock said: “The US has a stronger tech sector which will have a greater impact on the overall performance of the US market, while at the same time because of valuations, some of these companies are close to the 10% upper limit for the fund to hold making it hard for active managers to go overweight in some of the best performing companies.
“However, Lindsell Train have proven that there are opportunities to make money in companies in other sectors and their philosophy doesn’t exclude technology stocks.”
Pereira warned investors interested in the fund, which may not be marketed externally for up to five years, that the US market is very challenging.
“The North American equity market is notoriously difficult for active managers to consistently outperform and although this is an exciting new venture for the firm and its investors, our initial view is that investors seeking outperformance at levels similar to those delivered by the firm’s Global, Japanese or UK equity funds, may need to slightly taper their expectations, given the North American market’s efficiency.”