It’s often better to do nothing at all than to invest when you’re unsure about markets, says Finsbury Growth & Income’s Nick Train, who said that the portfolio has remain little changed this year as Covid-19 pandemic has increased uncertainty. 
“Where we find ourselves in the current circumstances is believing that it is perfectly rational to do nothing, or at least to do very little if we’re not sure,” said the FE fundinfo Alpha Manager.
As such, Train (pictured) said he has focused less on the macroeconomic backdrop this year and instead focused on the micro outlook for the £1.7bn trust’s individual holdings.
Finsbury Growth & Income which invests primarily in large-cap companies – with more than 90 per cent of the portfolio invested in FTSE 100 names – is invested across four thematic buckets: digital winners; trusted consumer brands; luxury premium consumer brands; and, stock market proxies.
And looking at the trust’s construction over the past year, Train said the portfolio hasn’t changed much during the course of 2020.
“And frankly why should it?,” he asked. “Each of those four segments we would submit are winning industries, winning ideas and we can’t see any reason why they can’t continue to be winning ideas.”
On the macroeconomic outlook, the manager said that he does not have a view, simply because he has very little insight.
He explained: “I find, in all candour, [that] I have nothing to say about the macro-outlook, largely because I haven’t the faintest idea, of course.
“Contrarily, I find I have a whole lot to say about the micro-outlook.”
For example, looking at financial services company Hargreaves Lansdown, Train said that the system outage the investment platform suffered on the day of the Pfizer vaccine news – which caused markets to rally significantly – spoke to a wider trend he’d seen at the company.
The manager said the amount of transactions carried out on a mobile device has increased from 1.7m in 2019 to 4.2m in 2020.
“In other words, an explosive growth of interaction between the platform and its customers via a digital device,” he said. “That growth is driving overall revenue growth for Hargreaves Lansdown, it’s growing in double digits in 2020.
“And there aren’t a lot of UK companies growing at double digits this year.”
Another micro-outlook Train touched on was brewer Heineken, which he said is having a “tough year”
International lockdowns have forced pubs and bars to close as both sales volumes of Heineken’s beverages and operating profits have fallen year-on-year, according to its latest Q3 results.
“Nonetheless, within that sorry tale there was a fact that really made us sit up,” Train said, which was that sales for the Heineken brand had grown by 1 per cent year-on-year.
He explained: “That growth [was] very much driven by the incredible success of Heineken Zero, which the company said is the single most successful new product launch in Heineken’s history.
“I have to tell you it’s been drunk by the crate load at Train Towers.
“But the fact that Heineken the brand could grow at all in this recent period to us is really encouraging and no surprise that on the Pfizer vaccine news Heineken’s stock price was up 20 per cent almost instantaneously.
“You know you don’t want to miss the eventual resumption of compounding growth in this wonderful company.”
These micro-outlooks are examples of what investors need to remember during such intense short-term events.
“It’s so crucial not to confuse a short-term tactical set of problems that the world is facing at the moment, not to confuse that or let that mask true secular underlying progress from companies,” he said.
Train said if investors focus on “buying into euphoria”, and only waiting for the days when markets have good news then they will miss out on that opportunity.
And if you wait for days like the “incredible Pfizer day”, then “you just miss it”, he added.
“You simply can’t find the time to buy the Heineken, which you know is a wonderful business and will prosper for the next 50 years, but you won’t find that time to buy that when the news actually turns,” said the Finsbury Growth & Income manager.
Instead, Train and his team prefer to “sit on our hands and not follow the technical [analysis]”, instead investing on down days.
While the trust’s portfolio has remained largely unchanged this year, he has added two new holdings to the trust.
The first is Experian, which Train said fits into the ‘digital winners’ theme.
A consumer credit reporting company, Train said Experian currently makes up 2 per cent of the fund, but planned to increase the allocation in the future.
“We see Experian as evidently one of the UK’s rare – and it’s a shame that it’s rare – globally significant multi-billion sterling market cap companies doing something smart with data and digital technology,” he said.
The second new holding was premium drink mixers company Fever-Tree, falling into the luxury brand bucket.
Train said the moment he was convinced to invest in the company was when he saw his pre-existing holding, Diageo, use the soft drinks in its advertising campaign.
“Diageo’s marketing materials where the company combines images of Jonny Walker Black Label with Fever-Tree soda water it was that kind joint halo effect if you like,” said the manger. “The premium drinks brand choosing to enhance its reputations by associating itself with a premium mixer and vice-versa, that persuaded us that Fever-Tree’s brand is truly valuable and in our opinion has a long, long way still to go.”
Performance of trust vs sector & benchmark
Source: FE Analytics
The Finsbury Growth & Income Trust has made a loss of 2.15 per cent year-to-date (to 19 November), compared with a loss of 11.67 per cent for the FTSE All Share benchmark and 12.19 per cent for the average IT UK Equity Income peer.
The trust is currently trading at a premium to net asset value (NAV) of 0.9 per cent, is 1 per cent geared, a yield of 1.9 per cent, and has ongoing charges of 0.66 per cent as at 19 November, according to the Association of Investment Companies.