Fears surrounding interest rate rises, creeping inflation and subsequent falls in consumer spending power are irrelevant to Nick Train’s investment process, according to the manager (pictured below), who told FE Trustnet he will always remain bullish.
Train, who runs the open-ended CF Lindsell Train UK Equity fund and the closed-ended Finsbury Growth & Income trust, said bears have to be absolutely sure that markets will continuously plummet for the foreseeable future in order to justify their views.
This comes as the first article of FE Trustnet's 'Train week' series.
“Why are we always bullish? When you look at the odds on the basis of financial history, the odds are so profoundly in your favour if you’re a bull rather than a bear,” he explained. “The trajectory of stock markets going up over time is so persuasive that it seems to us you have to have massive confidence and conviction in your bearish view to justify being anything else but being very bullish.”
Performance of indices since start of data
Source: FE Analytics
That said, Train acknowledges that the current mood among investors is sombre. The manager recently had a meeting with the team at Hargreaves Lansdown – which he holds in his portfolios – who told him that cash levels in its clients’ portfolios are historically high. 
In fact, research director at Hargreaves Lansdown Mark Dampier is well known for describing 2016 as the most hated bull market of his 32-year career.
Views on why market movements seem to jar with investor sentiment vary, although many believe ultra-loose monetary policy has forced investors into risk assets in a bid to put their cash to work.
While equity markets have continued to rise, concerns surrounding geopolitical uncertainty, impending rate hikes, increased inflation, slowing growth and levels of debt have been mounting.
“I don’t recognise anything in these concerns as being new or peculiar,” Train said. “As far as I can recall, people have always been worrying about what might happen next to interest rates or to the politics or to the profit cycle.
“While I’m not denying there have been fluctuations in markets according to those factors, nothing has undone the trajectory. If you’re there for the trajectory, why not be invested for the trajectory?”
Another reason he is always bullish is that, for every market-related concern, there is often a counteracting positive factor.
“The other strand [to remaining bullish] I maybe don’t want to go into because it involves me making the sorts of prediction that I dislike – but I think there are plenty of things you could table to say, ‘yes, but look at this bullish thing’,” Train continued.
“You might say interest rates are going up, let me give you the oil price which is down 25 per cent this year. Totally unexpected, that is a major, major tax cut for companies and consumers around the world. Nobody was expecting the oil price to fall by 25 per cent. Energy is an important cost for every person on this planet and the cost has just fallen by 25 per cent. What could be more bullish than that?
Performance of index in 2017
Source: FE Analytics
“It’s a truism to say there is always good news and bad news at all times – of course there’s a lot of things you can look out for. For us, it’s more a state of mind. You might as well be bullish.”
This view should be taken in the context of Train’s well-known investment approach, which involves holding a highly-concentrated portfolio of quality growth stocks over the very long term.
For instance, he said at least 60 per cent of Finsbury Growth & Income’s portfolio is made up of stocks that have been in the trust for at least 15 years.
Examples of its largest holdings include Unilever at 10.4 per cent, RELX at 9.6 per cent and Diageo at 9.3 per cent.
“I’ve probably got more potentially active ideas today than I have had for a number of years – there are probably two or three ideas we’re working on at the moment where, if we had an opportunity to access some shares, we could well initiate new holdings,” Train said.
“But I think it’s a random thing – I don’t think that’s necessarily saying anything about the market as a whole, it’s just in the very, very slow grinding fashion of us trying to come up with new ideas. We’re a bit closer at the moment to a couple of new ideas anyway.”
Since the turn of the century, FE Alpha Manager Train has outperformed his peer group composite by 323.73 percentage points with an average return of 503.41 per cent.
Performance of manager vs peer group composite since 2000
Source: FE Analytics
CF Lindsell Train UK Equity has remained in the list of top 10 performers in the IA UK All Companies sector over three, five and 10 years, while Finsbury Growth & Income is in the top three list within its IT UK Equity Income sector over the same time frame.
The fund has a clean ongoing charges figure (OCF) of 0.72 per cent and yields 1.96 per cent, while the trust – which is trading on a 1.2 per cent premium – is 3 per cent geared, yields 1.2 per cent and has an ongoing charge of 0.74 per cent.