The heavy-hitting manager remained steadfast to his two sizeable FTSE 100 holdings, despite their recent share price woes causing a drag on performance.
Both DMGT and Burberry suffered sizeable sell-offs in November 2017 after warning of difficult times ahead in their annual and interim results, respectively. The Daily Mail holding company saw its share price plummet 23% to a five-year low of 534.5p, while the iconic British luxury retailer lost 12% in the ensuing aftermath.
In November, the trust’s NAV slipped 1% on a total return basis and it share price fell 1%, while its benchmark, the FTSE All-Share index, was down 1.7%.
In general, the Finsbury Income Growth Trust saw strong performance across 2017 thanks to the share price gains of one of its largest holdings, Unilever. The FGT recorded NAV growth of 17.6% the year to 30 November 2017 beating the FTSE All-Share’s 7.9% growth.
Despite reservations about the future of traditional print media, DMGT remains one of the equity income manager’s largest holdings. At the end of the trust’s final reporting period on 30 September 2017, DMGT was its 11th largest holding, making up 3.6% of the portfolio.
Train has continued to defend the UK media titan in light of its disappointing set of annual results, arguing that it remains “notably undervalued on a sum-of-the-parts basis”.
He met with DMGT management back in December, including relatively new chief executive Paul Zwillenberg, but has yet to present an updated view of the firm to shareholders.
Train also reiterated his commitment to luxury retailer Burberry in his November update. Although its 12% share price sell-off during the month helped put additional strain on his £1.3bn trust, Train stressed he sees further opportunities for margin growth.
Burberry is one of his largest holdings, making up 6.6% of the FGT.
While markets and media commentators reacted harshly to new CEO Marco Gobbetti’s plans to re-position the luxury brand at the expense of near-term lower earnings growth, Train believes in his longer-term vision.
“Burberry is a high-teen profit margin business currently, but the best of its luxury peers make mid-twenties,” he said. “We see no reason why Burberry should not over time be as profitable as these peers and expect the shares to rerate materially on any future signs of the success of the strategy.”
He added: “Even if the costs of the brand-repositioning do mean lower earnings growth for a couple of years we nonetheless gladly welcome Gobbetti’s strategy.”
