Fund manager Nick Train has revealed that despite many UK-listed companies trading at very low valuations, he isn’t interested in buying them.
Speaking on a webinar hosted by QuotedData, an investment trust research house and commenting on his role as manager of the Finsbury Growth and Income trust, a UK equity mandate, Train acknowledged that performance the Finsbury Growth and Income trust had been relatively weak “since the end of Covid.”
Finsbury Growth and Income trust has just 20 holdings, and has only added three new stocks since 2020. Since then, much has happened: inflation rose sharply, the pandemic ended with its effects still being felt, and Russia invaded Ukraine, to name but a few.
Train said he tried to keep the portfolio “super focused” and that he regarded over trading as a risk to portfolio returns.
He said: “Brokers and the media try to make us act, because that drives the industry and the headlines. But I think we are aware of how little we truly know about the future, and we know that trading is expensive, so we try to minimise that.”
Despite his optimism for the prospects of the UK stocks he owns, Train said: “I am not one of those people that says the UK has performed so badly that the market is a huge bargain, I’m not sure about that at the index level. But I think there have been some nuggets that got dropped down with the index.”
He said the FTSE All Share traded at about 14 times earnings, whereas Finsbury Growth and Income had a price to earnings ratio of above 20.
Train said this demonstrated that he was not offering investors in the trust access to the cheapest part of the market.
He added: “There is a lot of the UK stock market that is not very interesting. It is full of companies with 20th century business models and no clear route to a 21st century business model.
"For me, no one has to agree with me. I would rather pay over 20 times earnings for companies I think are getting more relevant in the 21st century, rather than own a collection of beaten up or low growth cyclical companies that are chepaly valued but are 20th century companies. .”
The Finsbury Growth and Income trust is £1.5bn in size and trades at an 8 per cent discount to its net asset value.
David.Thorpe@ft.com
