July was a good month for struggling star manager Nick Train, with his Finsbury Growth and Income trust up 7.8% on a NAV basis, compared to an index return of roughly 3.7%.
This brings the trust flat for the year, although it’s still trailing the index by 11.2 percentage points year to date, according to Morningstar data.
For much of the year, Train’s holdings in software and data companies have been a headwind, as investors became convinced that these would be the first victims of AI.
However, this month it was the data companies and platform companies that performed best for Train, including Sage, RELX and Experian.
“The company [Sage] revealed accelerating revenue growth, driven, in part, by its own AI tools, trained on Sage’s proprietary business data.” According to data by Hargreaves Lansdown, the share price has jumped roughly 19% over the past month.
“Sage’s CEO, Steve Hare, says ‘Sage is native AI’,” Train noted. “That may be an exaggeration, but if he’s right about the direction of travel, the business has a long growth runway in our view.”
There was a similar case for London Stock Exchange Group, which also beat results in July, Train noted. LSEG CEO David Schwimmer argued AI companies increasingly need high-quality data providers to deliver value, which Train agreed with.
“Schwimmer believes the recent results demonstrate that LSEG is such a high-quality data provider that the frontier AI models need LSEG much more than LSEG needs any one of those models individually.”
Updates like these, Train argued, indicated that investors have become far too cautious about the London data companies.
See also: Baillie Gifford’s James: The market is being too simplistic with software businesses.
One particularly interesting example this month, he said, was Rightmove. In a month when most of the data, software and platform businesses Train owned beat expectations, Rightmove failed to deliver.
And yet the share price is up 15% over the past month, at the time of writing.
Part of this, he explained, was due to Rightmove’s longer-term slowdown (it is down roughly 34% over the past year), which was driven by macroeconomic factors such as the historically low level of new home development.
“While it would be helpful for Rightmove if the housing market were more buoyant, the fluctuations of UK real estate are not central to our case for holding the equity.”
Investors’ “existential concern” that Rightmove would lose customers to large language models that can take customer share is “unwarranted – at least not yet”.
He noted customer engagement remains strong, with less than 0.5% of its traffic from LLMs and 90% of the time on a real estate portal in June spent on Rightmove. Customers are about as loyal as ever, he said.
“But even more encouraging is how Rightmove is capitalising on this level of engagement,” Train said. “When consumers, agents and housing inventory meet on a digital platform, something happens. Data is created.”
This is data that sites like Rightmove can harness internally, such as through its ‘Ask Rightmove’ chatbot that other LLM’s or portals cannot. For example, he pointed to its Rightmove Plus service, a business intelligence platform it provides to estate agents, for which the company has now launched an in-house AI Assistant to help agents get more from the platform.
“We think investors were right to look through any cyclical pressure on the UK housing market and focus instead on the demonstrable strengthening of Rightmove’s platform – because the latter could drive revenue and profit growth for years to come.
“Finding underappreciated or underexploited caches of data in the UK stock market may prove to be a fruitful source of value-creating investment ideas.”
As a result, he also initiated some small holdings in industrial engineering and capital market infrastructure data companies in July.
That said, while investors may be pleased to see Train’s portfolio rebound in July, it was certainly not all positive for the trust, as names such as Celtic, Games Workshop and Manchester United dragged on performance.
See also: Nick Train reflects on ‘the most disappointing performance in history’ for his trust.
