Find out why Finsbury Growth & Income Trust underperformed again last year, 8 Dec 2022 11:28

Shares News
Find out why Finsbury Growth & Income Trust underperformed again last year

08 December 2022, 11:28

- Net asset value (NAV) slides 5.8%

- Second consecutive year of underperforming the benchmark

- Train shows confidence by buying shares

Nick Train-managed Finsbury Growth & Income Trust (FGT) suffered a disappointing 5.8% slide in its net asset value total return for the year ended 30 September 2022.

This represented a second consecutive year of underperformance against the benchmark FTSE All-Share Index, which the company pinned on a year when companies and markets were ‘buffeted by a relentless series of economic and geopolitical shocks’.

Nevertheless, the board displayed confidence in the fund’s future prospects by upping the total dividend by 5.8% to 18.1p.

It is also worth noteworthy that Train (pictured above) and his family have acquired over 800,000 shares in Finsbury Growth & Income Trust since December 2021 and currently hold sway over 2.2% of the equity, up from 1.6% a year ago.

The famed ‘buy and hold’ investor was at pains to point out performance improved in the second half of the financial year, ‘admittedly only by dint of falling less than the weak UK stock market’, and he sincerely hopes ‘this recent trend continues’.

TRAIN HAS BOARD’S FULL SUPPORT

Chairman Simon Hayes insisted the board continues to ‘fully support’ Train’s strategy of investing in high-quality companies that own durable and cash-generative brands.

‘It has delivered attractive returns over the longer term,’ said Hayes, ‘and we believe firmly that this will continue to deliver strong investment returns to shareholders in the future.’

WHO HAD A ‘MISERABLE YEAR’?

Charismatic money manager Train said the underperformance was particularly frustrating given that the business performance of most of the companies in the portfolio has ‘met or exceeded my expectations’.

Wealth managers Hargreaves Lansdown (HL.) and Schroders (SDR) suffered a ‘miserable year’ in share price terms, ‘even though their businesses have grown’.

CASH FLOW MONSTERS DELIVER

The best performers in the second half included Diaego (DGE), the drinks giant behind Johnnie Walker and Smirnoff, as well as beer brewing behemoth Heineken (HEIA), Oreo maker Mondelez (MDLZ:NASDAQ) and enterprise software group Sage (SGE).

These are all companies with ‘well-merited reputations for predictable cash flows generated from brands or business franchises that their customers are likely to continue patronising in all but the most adverse economic circumstances’.

Train also highlighted helpful share price gains in two big holdings where senior management changes have recently been announced, namely Burberry (BRBY) and Unilever (ULVR), where he sees the strategic value to be ‘meaningfully higher than the value currently accorded either in the stock market’.

He stressed that ‘while it is easy to categorise our investment approach for the company as purely “defensive”, we do not see it as such. Instead, it is my hope that by holding concentrated positions in such exceptional and predictable companies as those mentioned above and others - AG Barr (BAG), Experian (EXPN), Fevertree (FEVR:AIM), Rathbones (RAT), Remy Cointreau (RCO:EPA) and, yes, Hargreaves Lansdown and Schroders - we can not only protect our shareholders’ savings in difficult times, but also generate competitive absolute returns over longer periods.’