Companies that have been managed for generations by the same family are more likely to stand the test of time, according to star manager Nick Train, while beverage brands have an extra benefit through the robustness of the product they sell.
Train, who heads up the five crown-rated CF Lindsell Train UK Equity fund and Finsbury Growth & Income trust, is well-known for his preference for consumer brands.
In his £4bn UK equity fund, for instance, he has 22.2 per cent weighting to beverage brands alone, as well as a further 17 per cent allocation to personal goods and 7.8 per cent to food producers.
Performance of indices over 5yrs
Source: FE Analytics 
“We’ve always noticed, and I think it’s an important thing to take note of, that really durable family fortunes are strong indicators,” the manager (pictured) said. “You have to look at how certain families have made a lot of money and have then been able to obtain that money over generations; lots of people get rich for a generation and then lose it.
“It has always struck us how beverage brands have maintained values over really, really long periods of time. Dr Pepper, which we have invested in, is older than Coca Cola as a brand. Irn Bru was created in 1901. The newest holding we have, Remy Cointreau, the history of that company begins in 1724.
“We are very interested in stocks where you can conceive why they might continue to survive for a very, very long time. I’m as confident as you can be about anything beyond an asteroid obliterating the planet that people will be drinking Remy Martin or Irn Bru or Heineken for a long time into the future.”
In the below article, we look at three examples of family-run beverage stocks that Train holds across his portfolios in greater detail:
Heineken
Dutch brewing company Heineken appears in the list of top 10 holdings across all three of the funds and trusts that Train is sole manager of.
“Somebody once said about Colgate toothpaste that anything you put in your mouth is a really intimate thing; you really need a high level of trust and confidence in whatever you actually ingest or put in your mouth. So, trusted and beloved drinks brands go on for a long, long, long time,” the manager explained.
“Innovation, new stuff – I’m not saying there aren’t new drinks brands – but it’s maybe harder to break down the loyalty.
“I always think of my father’s great love of Young’s bitter, who taught me to drink Young’s bitter and I taught my son to drink Young’s bitter. That sort of thing – anything that continues over generations – is very valuable.”
He said Heineken is a prime example of a beer that is widely consumed and had been across generations.
“Heineken is the world’s number one international beer brand by a margin of two – it is double the size of the next biggest international brand. So, if anything is the Coca Cola of beer, it is Heineken,” Train added.
The stock, which accounts for 7.3 per cent of CF Lindsell Train UK Equity’s overall portfolio, has made gains of 85.45 per cent over the last five years, according to data from Bloomberg.
It has a market cap of €49bn, yields 1.57 per cent and is trading on a P/E ratio of 31.49x.
Rémy Martin
Next on the list is French firm Rémy Martin, which of course produces and sells cognac. By Train’s standards, this is a very new position across his portfolios and was added to CF Lindsell Train UK Equity and Finsbury Growth & Income following the Black Monday sell-off in August 2015.
In an FE Trustnet article published at the time, he said: “This is the first addition in over four years – a circumstance that was beginning to embarrass me. Patience and commitment to an existing portfolio is one thing, but at some stage you begin to worry sclerosis has set in.
“I don’t drink the stuff myself, but if this encourages fund holders to sample a bottle of Remy’s iconic Louis XIII cognac, at circa £2,000 a pop – this the brand referenced by Rihanna in her 2015 hit single ‘Bitch Better Have My Money’ – then I’ll have done my bit for the share price.”
To date, Train said Louis XIII cognac is still “the hottest conspicuous consumption luxury drink there is” and that it will remain so for years to come, given that only Rémy Martin can make it.
He explained the company is also a prime example of one that has thrived for generations, having first launched back in 1724.
Rémy Martin, which is up 102 per cent over five years, has a market cap of €5bn, yields 1.63 per cent and has a P/E ratio of 39.7x.
AG Barr
Similarly, soft drink manufacturer AG Barr has survived for decades and remains a family-run business, having launched its first and largest product Irn Bru in 1901.
Often known as “Scotland’s other national drink”, the orange carbonated beverage is well recognised and, according to Train, impossible to replicate. “Put simply, Irn Bru is Irn Bru,” he said.
AG Barr, which is a constituent of the FTSE 250 index, also owns Rubicon, Tizer, Snapple and energy drink Rockstar among other brands.
Over five years, the stock is up 61.56 per cent compared to the FTSE 250’s return of 97.74 per cent.
Over the last 20 years, however – which is more akin to Train’s investment time horizon – it has outperformed the mid-cap index more than four times over with a stellar return of 2,622.21 per cent.
Performance of stock vs index over 20yrs
Source: FE Analytics
AG Barr, which has a market cap of £719m, yields 2.34 and has a P/E ratio of 19.9x.