Nick Train found himself back in more comfortable territory in April, after some of Finsbury Growth & Income’s biggest holdings delivered strong performances.
The £1.9bn trust achieved NAV growth of 1.2% in April, with its share price up 0.1%. This compares with a 0.3% uptick in its benchmark, the FTSE All-Share index.
The start of the year saw some of FGT’s largest holdings stomach double-digit share price falls as the tech-heavy Nasdaq posted its weakest January performance since 2009. At the time, Train quipped that his portfolio “is even more growth oriented than I thought“.
FGT’s NAV was down 5.4% in January, with shares dropping 5.3%. This was against the index which fell 0.3%.
Simmering geopolitical tensions came to a boil with Russia invaded Ukraine on 24 February. FGT’s slump deepended with its NAV down 3.8% and its share price recording a 3.9% drop. The FTSE All-Share was down 0.5%.
Daylight started to glimmer in March, with both the NAV and share price in positive territory, 1.5% and 0.9%, respectively. The index was up 1.3%.
Performance appears pedestrian but they pack pricing power
Consumers staples giants were the four biggest positive contributors in April: with Diageo up 4%, Heineken 8%, Mondelez 7.7% and Unilever up 7.6%.
Train said the latter three had been out of favour with investors for a while and acknowledged that their performance “appeared pedestrian” – especially compared with the tech winners and, more recently, the “booming commodity companies”.
He accepted that “the profitability of the consumer staples sector is seen, not unjustly, as being vulnerable to spiking raw materials costs” and his biggest holdings give the impression, after “creating so much wealth for investors over so many decades”, that they are “mature and losing relevance”.
“Yet, it must be said, this better showing from our quartet in April feels rational to us,” Train said in FGT’s latest factsheet.
He pointed to their ability to raises prices “in a way that, broadly, protected profitability, without compromising volume growth”.
Adding: “The inflation protection offered by premium spirits is an important aspect of our optimism in both Remy [Cointreau] and Diageo – and why the latter is pretty much the biggest holding in the portfolio.”
The above reasons alone “are not enough, to our minds, to justify our continued holdings in these companies”, Train added. “In addition, we must believe the sceptics are wrong and that the brands are, in fact, not mature and can continue to deliver real (above inflation), secular growth through the rest of this decade and further.”
