In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This week our interviewee is Madeline Wright, Deputy Portfolio Manager of the Silver-rated Finsbury Growth & Income Trust.
Which Sector Shows the Biggest Promise in 2023?
This is shamelessly dodging the very first question, but as we’re strictly bottom-up investors seeking to buy exceptional companies to hold for the long term, we don’t think about the investment challenge in this way. We wouldn’t ever make changes to our portfolios based on short-term shifts within sectors.
What's the Biggest Economic Risk Today?
I’m certainly no macro expert, so I’m not sure if I feel confident to name a single biggest economic risk, but inflation is definitely a consideration both on a short- and long-term basis. Consider that in the 50 years between 1972 and 2022, the UK has seen a fourteen-fold rise in prices. We pay close attention to our portfolio companies’ ability to offer inflation protection over the long term plus the possibility of real growth on top: Burberry is a great example as its iconic trench coat has not just endured from 1916 to today but increased in price from 3 guineas to a whopping £1,790.
Describe Your Investment Strategy
We do our best to build a concentrated portfolio of truly exceptional companies – the kind that have endured and improved over multiple decades and often centuries – and then hang onto them for as long as possible. We look for ownership of unique brands, intellectual property, products and services that are hard for their customers and clients to replace or move away from. These kinds of companies tend to be highly cash-generative and with the ability to compound returns attractively over time. There aren’t many of these companies out there, so naturally our portfolios are concentrated. But we view the concentration as an advantage – our conception of risk is ‘permanent loss of invested capital’ and we would much prefer to invest in a handful of excellent companies than a lot of mediocre ones.
Which Investor Do You Admire?
Is it too much of a cliché to say Warren Buffett? Probably, but that’s my answer anyway! I really admire his ability to identify genuinely exceptional companies and then stay invested forever. It sounds easy to do, but in practice requires a great deal of discipline.
Name Your Favourite 'Forever Stock'
Given our aim is to build and maintain portfolios of nothing but ‘forever stocks’, I’ve got plenty to choose from. But if I had to pick one, I think Diageo is a great example of the kind of company you’d be pleased to hold for your great-grandchildren – it’s one of the largest spirits companies in the world with a portfolio of impossible to replicate, pedigreed brands that are increasingly benefiting from premiumisation. Despite already being the world’s #1 Scotch whisky, Diageo’s largest brand Johnnie Walker is showing no sign of slowing down – in 2022 it belied its 155 years with sales growth of 34%, disproportionately skewed to the more premium Blue and Black Labels. To us Johnnie Walker is still a young brand, and we look forward to many more years of growth. It is no surprise to us that the 9th and 10th biggest shareholders in Diageo (after us at number 8) are Bill Gates’ foundation and Berkshire Hathaway.
What Would You Never Invest In?
Capital intensive companies, producers of commodity products, and anything highly exposed to the risk of regulation – for example, tobacco.
Growth or Value?
The companies we’re looking for tend to combine both qualities. Particularly on a multi-decade time horizon which gives us plenty of time to capture the kinds of exceptional returns on capital that other investors with shorter time horizons often undervalue.
House or Pension?
I view my house as a home and not an ‘asset’. My pension is the investment.
Crypto: Brilliant or Bad?
As a speculative asset class which is likely to find itself at the mercy of more and more regulation over time, it’s not one for us. Although, as with all new technologies, we watch it closely to see how it impacts existing industries and companies.
What Can be Done to Improve Diversity in Fund Management?
Increasing diversity and broadening the number and range of perspectives within fund management is critical for future-proofing the industry. More work needs to be done to educate and attract bright young people from a wider range of backgrounds at a much earlier stage, e.g. internships, school and university events and collaborations with upward mobility programmes (we’ve had a great experience working with UpReach!).
Have you Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?
Given we invest in just 70 companies in total across all four of our strategies and hold for the long term, we can engage in a meaningful way. So as investors in several FMCG and luxury fashion companies, I’m very proud that Lindsell Train is a signatory of the modern slavery abolition initiative Find It, Fix It, Prevent It. We are particularly alert to modern slavery in the supply chain and the business risks it poses, so being part of this allows us to collaborate for change by encouraging all our companies to proactively identify and address any incidences of modern slavery in their supply chains.
What’s the Best Advice You’ve Ever Been Given?
“Never forget that you are looking after people’s savings.” Nick Train said that to me in my very first week at Lindsell Train and I have never forgotten it. Day to day, we deal with very large amounts of money. But - without allowing the responsibility to become paralysing – I have always found it focuses the mind to remember that no amount is trivial, and all decisions affect real people, the holders of the fund.
What Would You be if You Weren’t a Fund Manager?
A self-employed plumber. I really like manual technical challenges and problem-solving, and I value the ability to direct my own schedule.
