Lindsell Train UK Equity - searching for sustainable greatness
Dominic Rowles | Mon 11 March 2019
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- Nick Train invests in successful companies that have stood the test of time
- He's got a great long-term track record
- We like his straightforward approach and his fund features on the Wealth 50
Our view
Investing doesn’t need to be complicated. At its heart, it's about finding great companies and holding shares in them for the long term.
It sounds easy. But it takes practice and experience to find companies with the potential to do well over a period of decades.
Nick Train, manager of the Lindsell Train UK Equity Fund, has been doing it for more than thirty years. He doesn’t try to invest in the next big thing. Instead, he invests in proven success stories – companies that generate plenty of cash and have stood the test of time. They're normally leaders in their fields with barriers to entry from the competition. This could be a brand, patent or other intellectual property that's hard to replicate.
There aren't many companies that meet his high standards and the fund currently invests in just 23 companies. This means each one can have a significant impact on returns, which we expect to benefit investors with a long-term view. It's a higher-risk approach though.
Nick Train is one of the most talented stock pickers in the UK and his fund's delivered excellent returns for long-term investors. That's why it features on the Wealth 50 list of our favourite funds.
How's the fund performed?
The fund's long-term track record is exceptional. An investment of £10,000 made 10 years ago would now be worth £52,387*. The broader UK stock market would've returned £28,854 over that time. We put this down to the manager's ability to invest in companies with outstanding long-term prospects, regardless of what size they are or industry they're in. These exceptional returns shouldn't be seen as a guide to the future though. You should remember that all investments can rise and fall in value so you could get back less than you invest.
Lindsell Train UK Equity - £10,000 invested over 10 years
Past performance isn't a guide to the future. Source:*Lipper IM to 28/2/2019
The fund's done well over the past year too, beating the return of the UK stock market by 5.8%**. Returns were boosted by a number of the fund's largest investments including drinks maker Diageo, financial services company London Stock Exchange, and fashion brand Burberry.
It wasn’t all good news though. An investment in asset manager Schroders lost money as investors worried poor stock markets would put people off investing with the group and affect profits.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Feb 14 -
Feb 15 |
Feb 15 -
Feb 16 |
Feb 16 -
Feb 17 |
Feb 17 -
Feb 18 |
Feb 18 -
Feb 19 |
|
| LF Lindsell Train UK Equity | 14.9% | 2.3% | 18.6% | 11.2% | 7.5% |
| FTSE All-Share | 5.6% | -7.3% | 22.8% | 4.4% | 1.7% |
Past performance is not a guide to the future. Source: **Lipper IM to 28/2/2019
How's the fund invested?
Nick Train tends to focus on larger companies but he also has flexibility to invest in higher-risk small and medium-sized companies if he spots an opportunity.
The fund's investments tend to centre on a small number of themes:
Brands
The manager thinks demand for many consumer brands will remain robust in the long run, supported by a rising population and growing demand in emerging markets, where incomes are rising rapidly. There's quite a few companies with strong brands in the fund – Heineken and Manchester United are examples.
A strong brand isn’t always enough though. A successful company must also think about how technology can be used to get better at what it does. Take Unilever. It owns hundreds of consumer product brands. In 2016, it bought Dollar Shave Club, a service which allows you to order razor blades and other grooming products online and delivers them to your door. It's grown quickly in recent years and is becoming a major competitor to the established players.
Financials
Nick Train thinks stock markets will rise over the long term so he's invested in companies that stand to benefit including asset managers Schroder and Rathbone Brothers. The fund also invests in Hargreaves Lansdown plc.
Media content
Technology is challenging the traditional media industry. Online services such as Netflix and Facebook now pay lots of money for video content that'll attract a large audience. Nick Train thinks it's a matter of time before internet giants bid for football rights. Football clubs could benefit if competition for broadcasting rights increases, so shares in Manchester United and Celtic are held in the fund.
The manager also invests in companies that own or create media content used on digital devices, such as smartphones and tablets. Daily Mail & General Trust is an example. Its lucrative MailOnline business has gone from strength to strength and its website attracts more than 200m visitors per month from across the globe.