Nick Train has bought a new company for the Finsbury Growth & Income trust (FGT) for the first time in four years – and he is sticking to his tried and tested strategy. Remy Cointreau (RCO) the premium drinks company founded in 1724 now makes up 1.5% of the trust and joins 19 other holdings founded more than 100 years ago. Remy is also family run – another prominent theme in the portfolio, joining the likes of A G Barr, Fullers, Rathbone and Schroders.
Train said that it was Remy’s compelling valuation which drove the decision to buy the company, and its luxury brand premium.
“Remy shares fell 30% over the summer,” said Train. “Meaning the stock was worth half of the 2015 peak and on par with the 1990 share price. There are very few quality stocks you can buy now for the same price they were 25 years ago, aside perhaps from those listed in Japan.”
Train and his co-manager Michael Lindsell have bought just two new companies in the last seven years, and Train remarked that while that track record was not necessarily something to be proud of it proved: “You do not need a constant stream of hot new ideas to outperform. A collection of hot old ideas is enough.”
Train said that they would like to add to the Remy holding, should the share price be right. Remy is the sixth alcohol producer in the portfolio or 24 stocks, leading Train to joke that he and Lindsell were “alcoholics”.
“We love investing in alcohol companies,” he said at today’s AGM. “Booze will do wonders for your financial health. From 1900 to 2014 alcohol companies far outperformed any other sector. Am I worried about the social and political influences over the sector? No, tobacco has proved one of the most successful places to invest over the past 25 years, despite the health warnings. Whether we like it or not, peoples appetites for treats, may it be alcohol or chocolate is not going to wane.”
Train did add that brand premium was important. “Producers of vodka or lager may have a problem as competitors look to develop very similar products at a much cheaper price. But 80% of the eau de vie produced in the controlled champagne region goes into Remy produce, one bottle of their Louis XIII brandy is sold for £2,000,” he said.
“Pearson Was A Mistake”
It was not all good news at the AGM however. Train took the opportunity to apologise to shareholders about the performance of publishing group Pearson (PSON), which has lost significant value over the last year.
“Pearson is the closest thing we have made to a mistake for some time,” he admitted. “It is still a buy for now, partly because Lindsell and I are stubborn investors. I apologise to shareholders for its dreadful loss of value. But every year Pearson reaches more than 100 million users and it has invested more in its digital development than any other publisher. We hope the company will return to growth, but we do have some doubts.”
