The FE Alpha Manager (pictured) is one of the most highly rated bottom-up stock pickers in the business, and so is more confident than most of making money in a down-market; however, he believes market fundamentals are stronger than most suggest, which is evidenced by the buoyant past 12 months."Over the last decade there has been plenty to worry about as regards economics, politics and all the rest, and yet all those worries haven’t prevented Unilever, Pearson or the London Stock Exchange, to pick just three 'great' businesses from the portfolio, from turning out to be fine investments," said Train.
"But our most potent riposte to today’s prevailing caution about equities is this question: 'If things are so terrible in 2012, how come global equity markets are up 12 per cent year-to-date?'"
Performance of markets year-to-date
Source: FE Analytics
"Germany is up 22 per cent, Hong Kong 18 per cent, and the S&P 500 index 14 per cent. Meanwhile, even after a recent setback, the world’s biggest company by market capitalisation is up over 50 per cent – Apple."
"Could this actually be a bull market, one that backward-looking, depressed investors are missing?"
"We are not so daft as to proclaim it. But we expect that any genuine bull market will be driven by the same sorts of factors that have helped those leading equity markets do surprisingly well in 2012; namely emerging markets and technology."
As Fidelity’s Dominic Rossi highlighted in a recent FE Trustnet article, institutional levels of equity ownership are now at 30-year lows as a result of the flight from risk in recent years.
Train thinks investors are staring positive trends – particularly emerging markets and technological expansion – in the face, but choosing to ignore them.
"Diageo, the biggest holding in the portfolio, is up 24 per cent so far this year and we’re sure it’s because the company has been able to announce some smart acquisitions, in Brazil, India and Turkey, which meaningfully increase its exposure to emerging markets," he said.
"Daily Mail Group is up 18 per cent, as the spread of tablet devices and smart phones means that more and more people in more and more countries are entertaining themselves with MailOnline; the site turned profitable for the first time in July 2012."
"There’s plenty to be cheerful about, if you’re looking for it," Train finished.
Train heads up Finsbury Growth & Income Trust, Lindsell Train IT and the CF Lindsell Train UK Equity fund – all of which have five FE crowns.
Performance of trust vs sector and index over 10-yrs
| Name | 3yr (%) | 5yr (%) | 10yr (%) |
|---|---|---|---|
| Frostrow Capital LLP - Finsbury Growth & Income Trust | 82.86 | 63.37 | 311.34 |
| FTSE All Share | 28.31 | 11.78 | 131.98 |
| IT UK Growth & Income | 40.3 | 8.19 | 143.03 |
Source: FE Analytics
Train’s comments come in light of the publication of the Finsbury Growth & Income trust’s annual results for the year ended in September 2012. It was up 26.3 per cent over the 12-month period, compared with 17.3 per cent from its FTSE All Share benchmark.
The manager has an even more dominant record in the medium- and long-term; according to FE data, the trust has significantly outperformed the index and its IT UK Growth & Income sector over three, five and 10 years.
With returns of 311.34 per cent, it has more than doubled the returns of both over 10 years. The trust’s return over five years [63.37 per cent] is particularly impressive, given that the markets were in freefall for a big portion of this period.
Performance of trust, sector and index over 5-yrs
Source: FE Analytics
Finsbury Growth & Income is currently yielding 2.5 per cent, has an ongoing charges figure of 0.98 per cent, and is on a premium of 1.2 per cent.
Train runs one of the most highly concentrated portfolios in the entire investment trust universe, holding just 26 stocks. The top-10 accounts for more than 60 per cent of assets, and includes an 11 per cent position in Diageo, a 9.3 per cent position in Unilever and an 8.2 per cent position in Heineken.