The light at the end of the tunnel for Finsbury Growth & Income (FGT ) shareholders has brightened with fund manager Nick Train maintaining 2022’s second-half rebound, matching the UK stock market’s advance in the first half of its financial year.’

After two years of underperformance, half-year results to 31 March today showed the net asset value of the £1.8bn portfolio of high-quality growth stocks rose 12.3%, bang in line with the FTSE All Share index.

Train – who gave himself extra incentive to turn the trust around by snapping up another £1m of shares in February to take his stake to £45m – saw the stock climb 12.5%, with dividends included, as he declared ‘things really do seem to be gradually getting better’ for the concentrated list of consumer brands.

The manager, who has run the closed-end fund since 2000, said ‘our basic economic assumption is that things for the world will keep getting better’, as technology delivers productivity gains which in turn drives GDP growth, with ‘the fruits of that growth… spent by consumers on products and services that improve their quality of life’.

‘The assumption may indeed be trite, but at least it provides an uncomplicated backdrop to investment decision-making,’ he said.

‘And that usefully discourages us from excessive trading of your portfolio, based on guesses about the ups and downs of economic life.’

Tide turning

With shares in the relatively low 2%-yielder still 58p off their pre-Covid 958p in September 2019, Train is aware of his followers’ disappointment at performance. Over three years, a 19% total shareholder return lags most of its rivals in the UK Equity Income sector and the All Share index which has offered 42%.

Longer term, the trust still leads the peer group with a 10-year total return of 138.6%, just over 2% more than rival Law Debenture (LWDB ).

Train pointed to the record share prices achieved by some of his companies as proof the tide was turning. These included luxury fashion label Burberry (BRBY), which hit an all-time high after a well-received first show from new creative director Daniel Lee.

Train (above) said the show ‘reminded investors that actually this is an iconic, global, luxury brand, well-positioned to benefit from wealth being created, notably in Asia and the Americas’. He noted that Burberry shares are up almost 10-fold since 2003. It is the third largest holding in the fund at 10.3%.

Data and analytics group Relx (RELX) also hit a new share price high on stronger-than-expected full-year results that demonstrated ‘how increasingly entrenched its data products and software services are in the day-to-day work of scientists, lawyers and risk professionals around the world’. Train said Relx – which is the largest holding in the portfolio at 12% – was up 4.5 times since 2003.

Shares in global confectionary brand Mondelez – which makes up 6.9% of the fund – hit a new high in January. The maker of Oreos, Belvita and Cadbury was inherited via Train’s holding in Cadbury when it was taken over in 2010.

‘Ten years ago, Mondelez was trading at $20, today it is above $70,’ he said. ‘The world loves chocolate. It is interesting to note Mondelez has now outperformed the Nasdaq over the five years to the end of March 2023; a period that contained both a big bull market for tech shares and a subsequent selloff.

‘My point? Although finding tech winners is a worthwhile exercise, it is also risky and that holding a predictable business like Mondelez makes sense for part of a portfolio too.’

While record highs may have been enjoyed by some of the biggest names in the portfolio, it continued to be held back by Hargreaves Lansdown (HL), which has weighed on the portfolio during the market selloff. Train noted that the online broker’s shares were down ‘another 6% over the last six months, despite the company reporting record results and client numbers’.

The position in Schroders (SDR) managed to avoid the mini banking crisis seen in the US and Europe, with shares returning 22% over the period, although Train said they ‘remain very lowly valued’.

‘Schroders has been busy in recent years building and acquiring new investment capabilities that should keep it relevant for both institutional and private clients,’ said Train.

‘The growth in assets in Schroders’ private wealth and private equity divisions through 2022, a difficult year for markets, is encouraging for investors in the parent.’

Credit where it’s due

While Train is not invested in banks, the recent fears that gripped the sector were not irrelevant to him, as illustrated by the flat performance of shares in credit-scoring Experian (EXPN) over the period.

‘As a credit bureau there is certainly a correlation between banks’ use of Experian’s services and their ability to extend credit – which would be compromised if problems in the bank sector are deep-seated,’ said Train.

Train added to Experian during the weakness of the banking tumult as ‘economic history is littered with brief panics associated with bank runs, most of which are localised and forgotten’.

‘Experian’s earnings have compounded at nearly 9% per annum since 2007 and we hope there is much more to come over the next 16 years and beyond,’ he said.

‘Evidently, as the biggest credit bureau in the world, including the biggest in the US, Experian is another attractive UK-listed play on long-term global growth.’

Investec analyst Alan Brierley maintained his ‘buy’ recommendation, saying the trust had recovered after a healthy recovery from last year’s growth selloff and had actively bought back shares to reduce the share price discount from 8% to 5%.

‘The interim results contain two clear messages from the manager: the portfolio is made up of strong companies that are performing well as businesses and, increasingly, in terms of their share prices; and secondly, the UK stock market is home to some exceptional companies by global standards,’ Brierley said.