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Uncertain market offers buying opportunity, Nick Train tells investors

The uncertainty in global markets could present a buying opportunity for investors to snap up shares of high-quality businesses, according to Nick Train, one of Britain’s best-known fund managers.

The Lindsell Train co-founder, who has generated a fiercely loyal following among retail investors over two decades, in a report to shareholders on Monday described the mood in global markets as “apprehensive”. 

“In such circumstances, I always remind myself of this, paraphrased, advice from the late, great investor Sir John Templeton: ‘The best time to buy sound common stocks is when events look most uncertain.’ This is indeed great advice,” Train said, referring to the contrarian US value investor Templeton, who died in 2008.

“Often events don’t work out as badly as people fear; but even if they do, owning shares in solid companies is a good strategy to see you through to the better days to come,” Train added.

The comments come as Train sought to reassure investors in the Finsbury Growth & Income investment trust, which he manages, after a run of lacklustre returns.

Train said the nearly £2bn trust had suffered “disappointing returns” over the past 18 months, and apologised to investors for having “failed to deliver acceptable performance . . . over what is now no trivial period”. In its half-year report to the end of March, the company reported a share price total return of -3 per cent, against a 4.7 per cent rise for its benchmark index, the FTSE All-Share.

Known for his patient bets on a small number of companies, Train’s preference for large consumer businesses such as drinks group Diageo, Oreo-maker Mondelez and food to soap conglomerate Unilever left Train’s portfolio outpaced by fast-growing tech groups during the run-up in stocks last year.

Train in December said another of the vehicles he manages, the Lindsell Train Investment Trust, had suffered “arguably the worst period of relative investment performance” in two decades.

However, the vast sell-off in tech stocks since January has not helped to push Train’s relative performance back above the trust’s benchmark index, as markets were hit by anxiety about rising interest rates, inflation and the war in Ukraine.

“The duration and effects of war are uncertain. There may be a speculative bubble deflating in technology company shares. It is possible inflation and interest rates will go higher,” Train said. “We have no particular perspective on any of these issues that would give us an edge in timing the markets.”

The spell of underperformance has left Finsbury Growth & Income down over the past three years. The trust recorded a share price total return of -2.8 per cent over three years, according to data from the Association of Investment Companies. However, investors in the trust have seen handsome returns in the longer run, with returns of 186 per cent over 10 years, against 102 per cent for Morningstar’s UK index.

Simon Hayes, the trust’s chair, said the portfolio had been undervalued in the market. “The returns earned on our concentrated portfolio of high quality stocks have failed to reflect the underlying strength and performance of the companies we own.”

He said the lingering effects of Covid-19, the implications of central banks reducing their support to the economy and the war in Ukraine had all contributed to a “negative outlook for consumption, inflation and investors’ risk appetite”.

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