Nick Train makes rare double buy for UK funds

The veteran UK stockpicker has snapped up a pair of new holdings, in his first buy for a year.

Lindsell Train manager Nick Train has surprised some by adding not one but two new holdings to his famously concentrated portfolios.

The firm’s UK Equity fund and Finsbury Growth & Income Trust (FGT ) have snapped up shares in Clarkson, a global shipbroker, and Intertek, a chemical testing and quality assurance firm.

The move to add new holdings to Train’s portfolios is a rarity. His last buy was online property portal Rightmove in November 2023.

The addition of Clarkson, while a small position, may mark a subtle shift for Train (pictured above), who is better known for his investments in consumer behemoths like Diageo and Unilever. So, what’s behind this intriguing change in tack?

According to Train, it’s all in the timing.

Having followed both companies for years, the drop in share prices in late 2024 was the ‘trigger’ needed to seize the opportunity and invest, Train wrote in the £2.7bn fund and £1.4bn trust’s latest factsheets.

‘The companies are beneficiaries of the growth of global trade, and rising macro-economic concerns about the prospects for global trade in [the second half of] 2024 have created an opportunity to invest on favourable terms,’ Train said. 

The ‘buy case’ for new holdings

Train said Clarkson had a dominant position in the global shipping industry – ‘providing hard-to-replicate transaction and data services to a $2tn industry’.

Train noted that Clarkson was ‘participating in the structural trends driving all financial markets’, from the electronification of trading to the embedding of technology in trading.

Essentially, Train sees Clarkson as more than just a traditional shipbroker. He views it as a data business with significant growth potential, particularly as global trade recovers from the pandemic.

Nevertheless, it hasn’t been plain sailing for the business.

Reported lower sales and profits in 2024 impacted its share price, which gave Train the opportunity he needed. The shares are yet to recover fully from their high in July last year.

However, over a 12-month view shares in Clarkson are still up 22.7%.

‘By December 2023, 80% of the world’s iron-ore producers were using Sea-Fix (a subsidiary of Clarkson),’ Train said. ‘Also, Clarkson has net cash of [circa] £130m, over 10% of the market value. It trades on [around] 14 times prospective earnings and has a dividend yield of 2.7%.

‘Profits have been very strong over the last two years, which is making analysts (and us) cautious. But we believe Clarkson is more of a data business than the valuation implies.’

Meanwhile, Intertek offers testing and assurance services across a wide range of industries.

According to Train, the company is well-positioned to benefit from increasing regulation and the growing demand for quality assurance, particularly in the burgeoning green energy sector.

‘Intertek enjoys high barriers to entry,’ he explained. ‘Its expertise, scale, capital, heritage and customer trust have all taken a long time to build up and would be difficult for a new player to disintermediate.’

Train also believes that Intertek’s strong return on equity and reasonable valuation as key reasons to invest

‘Intertek has an ROE of 24% and is trading on a prospective P/E multiple of [circa] 18.5 times, which we think more than reasonable given the market position and clear growth opportunity ahead of it,’ Train said.

The holdings, while disclosed in the latest factsheets, were first bought in November last year, according to Morningstar data.

A calculated gamble?

While these new additions diversify Train’s portfolios, they also come with risks. Both Clarkson and Intertek are exposed to the cyclical nature of global trade and economic growth.

For Clarkson, Train believes shipping is better understood not as ‘cyclical’ but rather ‘multi-cyclical’, meaning it has ‘been rare for all parts of Clarkson’s business to be pressurized at the same time’.

The new buys come after Train’s investors suffered another year of underperformance, with a 2.4% return for the open-ended fund versus the FTSE All-Share’s 9.5% gain in 2024. 

Shareholders in Finsbury Growth & Income, where Train recently topped up his stake ahead of a promised continuation vote next year, have seen a 12.4% return over the past five years, behind 25.5% for the UK benchmark. Returns have been similarly sluggish for the open-ended portfolio.

Investment company news brought to you by Citywire Financial Publishers Limited.