Lindsell Train UK Equity – Nick Train shares his outlook for 2020 and beyond
Dominic Rowles | Fri 17 January 2020
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- Nick Train invests in companies that have generated lots of cash and have stood the test of time
- His fund's delivered strong performance in recent years
- We think the fund has the potential to continue to do well over the long run
Our view
Nick Train is one of the UK's best known fund managers. He's delivered great returns for investors over the long run and he's done it by keeping things simple.
He's not looking for future success stories. Instead, he invests in companies that are already success stories, with the potential to remain successful for decades to come. His favourite companies have generated lots of cash and have stood the test of time. They're normally leaders in their fields with barriers to entry from the competition like brands, patents or other intellectual property that's hard to replicate.
Not many companies live up to the manager's high standards and LF Lindsell Train UK Equity currently invests in just 25 companies. It means each one has the potential to contribute significantly to returns although it is a higher-risk approach. The manager's freedom to invest in smaller companies also adds risk.
We think Train is an excellent manager and his fund has the potential to do well over the long run. However, he has a large investment in the shares of Hargreaves Lansdown Plc and to protect the independence of our investment selection process, the fund does not currently feature on the Wealth 50.
How's the fund performed?
The fund has a great long-term track record. It's grown 321.3%* over the past 10 years, compared with 118.3% for the broader UK stock market. Our analysis puts this down to the manager's ability to invest in companies with outstanding prospects, regardless of their size or what sector they're in. Please remember that past performance is not a guide to the future.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| Dec 14 -
Dec 15 |
Dec 15 -
Dec 16 |
Dec 16 -
Dec 17 |
Dec 17 -
Dec 18 |
Dec 18 -
Dec 19 |
|
| LF Lindsell Train UK Equity | 11.7% | 11.5% | 20.9% | -0.9% | 23.0% |
| FTSE All Share | 1.0% | 16.8% | 13.1% | -9.5% | 19.2% |
Past performance is not a guide to the future. Source: *Lipper IM to 31/12/2019
The fund did well over the past year too, beating the broader UK stock market by 3.8%. Financial services company London Stock Exchange was the fund's strongest performer. Its share price rose more than 90% over the year. Investments in media business Daily Mail & General Trust, wealth manager Schroders, confectionary maker Mondelez and fashion brand Burberry also performed well.
As with any diversified portfolio, there were also investments that didn’t do quite so well. Publishing and education company Pearson was the fund's worst performer but the manager thinks 2020 is an important year for the business. It should allow investors to judge whether the company's significant investment in digitising its content will pay off.
Manager's outlook for 2020 and beyond
Despite huge amounts of political and economic uncertainty throughout 2019, it turned out to be the second biggest year for merger and acquisition activity in financial history. Train's encouraged that businesses around the world set aside concerns about short term issues to focus on taking advantage of growth opportunities such as technology change and the opening up of emerging markets. He expects 2020 to be another big year for corporate activity which could be supportive for stock markets.
The manager's 'growth' investment style has been out-of-favour in recent months as investors preferred companies sensitive to the health of the UK economy. It's too early to tell how long this will last, but Train isn't concerned. Excellent companies can create wealth for patient investors, regardless of periodic changes in investor sentiment. As society gets cleverer and more productive over time, wealth increases. The manager thinks this is as good a reason as any to be optimistic about 2020 and beyond, but of course there are no guarantees.