The Lindsell Train Investment Trust (LTI), whose largest position is a stake in the management firm Lindsell Train Limited itself, posted a 13% share price total return and a 21% net asset value total return for the six months to the end of September, lifting the shares 2% to £1,330.
That performance compared with a 2% return for the firm’s benchmark - the annual average running yield on the longest-dated UK government fixed-rate bond plus a premium of 0.5% - and a return of 23.6% for the MSCI World total return index in sterling, which is arguably more applicable.
MIXED BAG
Among the big winners were holdings in London Stock Exchange (LSE), Nintendo, Paypal and Unilever (ULVR) while among the losers were Dutch brewer Heineken and soft-drinks maker AG Barr (BAG).
Commenting on the results, manager Nick Train drew a clear distinction between the two camps. ‘Clearly, those companies with a digital growth story that can demonstrate that the pandemic has positively acted as an accelerant for their business have done best.
‘We have been fortunate that investors perceive our biggest direct equity holding, the LSE, as belonging to this favoured category. We agree by the way.’
For its part, Unilever not only benefited from a surge in demand for cleaning and hygiene products but was able to respond to changing shopping habits by boosting its online presence.
‘This is not to argue that Unilever is turning into an internet company’, adds Train, ‘but it is demonstrating that a channel shift is not necessarily damaging to the owners of trusted or beloved brands.’
LESS DEFENSIVE
On the other hand, the trust’s holdings in other consumer stocks such as drinks makers - which might normally be expected to hold up in a falling market - proved a disappointment as the out-of-home market shrank due to lockdown restrictions.
‘What is more of a surprise to us, and an unpleasant one, is that none of our beverage companies have been able to grow in 2020, or to protect short term stock market value’, said Train.
‘In previous recessions or financial shocks drinks companies have earned a reputation for being “defensive” and I had incorrectly expected the same this time round.’
In summing up, the manager observed that ‘with current short and long term interest rates so low, the warranted value of even just steadily profitable companies, so long as they offer long term inflation protection, is very high.’
Given the mix of stocks in the portfolio, and the consistent strategy employed by Lindsell Train Limited across its funds, there is scope to be ‘optimistic about the prospects’ both for the fund and its largest asset, Train added.
| Lindsell Train Investment Trust Top 10 Holdings | |
| Holdings | Weighting |
| Lindsell Train Limited | 47.3% |
| London Stock Exchange | 9.4% |
| Nintendo | 8.1% |
| PayPal | 6.7% |
| LF Lindsell Train NA Equity Fund | 6.5% |
| Diageo | 5.0% |
| Unilever | 4.8% |
| Mondelez | 3.0% |
| RELX | 2.8% |
| AG Barr | 2.8% |
| Total | 96.4% |
| Source: Lindsell Train Investment Trust | |
| Data correct as of 30 September, 2020 | |
