Investors should view recent market lows as a strong buying opportunity, according to FE Alpha Manager Nick Train (pictured), who has used the recent dips to buy more shares in his Finsbury Growth & Income investment trust.
Train, who has headed up Finsbury Growth & Income since 2000, is renowned for consistently beating the market over recent times. However, his £623m portfolio has not escaped the selling since the start of the year.
According to FE Analytics, while Finsbury Growth & Income trust is down 5.3 per cent, the FTSE All Share has fallen has not fared much worse being down 5.82 per cent since the start of the year.
Performance of trust and index in 2016
Source: FE Analytics
The manager says he has recently been adding to his own exposure in the trust, as he thinks it will see a bounce back from its recent falls.
“I have been adding to my own holding in the company, attempting - not very successfully - to find the bottom of the share price,” Train said.
While this counts as one of the worst starts to a year for stock markets ever recorded, Train says there are two trends that are currently misinterpreted by the market and should be enough to add support to a recovery in global stocks in the near future.
These are a boom in mergers & acquisitions [M&A] activity and the current low price of oil.
“What really interests us about this ongoing wave of M&A is the gulf between the price that companies are prepared to pay for other businesses and the price that persist in stock markets,” he said.
“We are in a takeover boom currently and my own view is that M&A activity so far in 2016 is running in line with last year, which was the all-time record. I expect to see a lot more particularly in the industries that we are invested in.”
Secondly, he says the oil price being at an all-time inflation adjusted low will be hugely beneficial for the global economy.
“As far as I'm concerned of the idea of $20 dollar oil; bring it on. We find it hard to conceive of anything that would be more bullish for the global economy and for the capital markets than the continued decline of energy and raw material costs.”
“This will lead to an acceleration in profits and growth. Finally, what a bad bet it is to be pessimistic about markets. Ken Fisher says in reference to the US stock market but I think the point still stands - over the past 100 years the stock market has gone up 55 per cent of all trading days.”
“In addition it had gone up 65 per cent of all months and it has gone up 75 per cent of all discreet calendar years. Those are attractive odds in our opinion. We don't want to bet against them and I suggest you don't bet against them either.”
“That is the reason why this is a buying opportunity,” he said.
Keith Wade, chief economist at Schroders says the continuing fall in the oil price – shown below – has been one of the main factors that has been blamed for the rout in markets seen this year so far. However, Wade says it isn’t justified.
“We believe concerns are overdone and maintain that lower oil prices generally lead to strong growth - although with around an 18 month lag,” Wade said.
Performance of indices in 2016
Source: FE Analytics
Train has a low turnover, high conviction approach to buying stocks. He usually opts for ‘quality’ firms with strong brands and market dominance in their fields. He rarely buys or sells his holdings but instead sells recent winners and adds to underperformers.
This tactic has worked well for Train, who has one of the more enviable records of any UK equity manager of recent years. His Finsbury Growth & Income trust has outperformed the FTSE All Share for the past eight years running and is top quartile so far in 2016 of its IT UK Equity Income sector.
Over one, three, five and 10 years it is also top quartile with the trust being the best in the sector over the latter two time periods as well as top since he took over more than 15 years ago.
Performance trust, sector and index since 2000
Source: FE Analytics
However, he recently told FE Trustnet that he was finding a lack of opportunity in the UK market place, preferring instead to buy into global firms.
Finsbury Growth & Income is on discount 0.2 per cent, has ongoing charges figure of 0.78 per cent and is 4 per cent geared.