Finsbury Growth and Income trust (FGT) manager Nick Train is watching some of the UK's most disappointing flotation companies for buying inspiration, the star fund manager confirms in an exclusive interview with Morningstar.
During the full conversation, which will be published on Monday, Train says that there could be investment opportunities among UK companies that floated in 2020 and 2021 for his UK-focused equity portfolio.
"There was a flurry of IPOs, new issues on the London market back in 2020 and 2021. A whole slew of digital businesses, almost all of which have been very, very disappointing as share prices, because they came overly hyped," he says.
"But again, there are some nuggets there, we're sure, and that's where we're doing quite a lot of work at the moment."
Among the list of firms whose initial public offerings disappointed investors was Deliveroo (ROO), whose shares floated at £3.90. They're now worth just £1.19.
During the interview, the joint founder of Lindsell Train discussed investing in companies with strong digital strategies, his trust's recent underperformance, and why the London stock market remains out of favour with growth companies.
He says one of the obvious reasons the heavyweight constituents of the FTSE 100 are not exposed to the wealth-creating themes that are driving the global economy today.
"That's a shame, but it is what it is," he says.
"The question is: is there enough entrepreneurialism and ambition in the UK corporate sector to over time allow new companies, new industries, listed along the London market, to become bigger and bigger components of the index? That's what needs to happen."
"Arm (ARM), if it was listed in London, would now be the third- or fourth- biggest company in the UK stock market. That's history now, we can't turn that back. But that's what the UK stock market needs, more businesses like Arm being listed in London and working their way up the FTSE 100 in terms of size," Train says.
"Global investors need to look outside the US for companies that can give them access to these digital trends, because it's very hard to argue that US data businesses are undervalued."
He adds, amid a recent bout of underperformance: "I can't offer anything more, I don't think, than blood, sweat and tears."
To hear more about the trust's underperformance issues, the goal of Train's concentrated "buy-and-hold" investment strategy, the old and new stocks he believes in and how he navigates trends like AI, stay tuned for the full conversation on Monday.
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