Thursday, 13 June 2013

Finsbury Growth & Income Trust (FGT)

Finsbury Growth & Income Trust is one the top 3 UK Growth & Income Trusts in terms of net asset value and share price performance over the past one, three and five years - its returns far outstripping those of the FTSE All-Share index.

FGT past 12m -v- FTSE 100
(click to enlarge)

Its emphasis is very much focussed on growth and yield is one of the lowest in the sector - currently 2.2% - but its aim is both capital and income, with a total return in excess of the FTSE All-Share.

Fund manager Nick Train has managed the trust since his firm, Lindsell Train was appointed in 2000. Train is influenced by the Warren Buffett approach to investing and favours a portfolio of ‘quality’ undervalued companies with strong brands or powerful market franchises, looking for attributes such as the ability to prosper through business cycles for many years; grow earnings every year; strong free cashflow and generate earnings growth without making heavy balance sheet investment.

He holds shares for the long term regardless of short-term volatility, aiming for them to double or more in value over time. This results in extremely low portfolio turnover, which saves on transaction costs.

The current portfolio consists of just 26 holdings weighted in favour of consumer goods and services and include Unilever, Diageo, Heineken and AG Barr.

The trust levies a performance fee on the annual increase in market capitalisation, provided attainment of absolute return hurdle of increase in retail price index (RPI) inflation plus 6 per cent. However, this extra fee is capped at 1.25% of market capitalisation and the trust's total expense ratio is currently just under 1%.

This has been on my watchlist for possible purchase for over 12 months, during which time the price has not dipped enough to provide a decent starting yield. However, the share price has increased around 35% during this period. As interest rates on savings have fallen even lower in recent months, a starting yield in excess of 2% with the prospect of significant capital appreciation is starting to look more attractive.

If the sp continues its recent decline, I think I will make an initial purchase before too much longer.

As ever, please DYOR.

3 comments:

  1. Interesting! I hadn't noticed the price slipping.

    I'd rather own Lindsell Train IT for the stake in Train's investment house, but that's at a absurd perma-premium these days. But otherwise FIGIT is all the same themes Train follows.

    Will have to look into what's driving this price lower. One thing could be this defensive dividend quality area being sold off a bit in fear of higher rates?

    ReplyDelete
    Replies
    1. Hello Monevator - thanks for dropping by.

      I expect there will be an element of profit taking after such a strong sp rise over the past 6 months. Looks like its sp has outperformed LTI over the past year.

      I could not consider buying into Lindsell Train on such a wide premium. Furthermore there is the small factor of a whopping 3% performance fee plus regular charges of an additional 1.1% - http://www.investegate.co.uk/lindsell-train-inv---lti-/rns/final-results/201305310700039547F/ (latest results)

      Think I will stick with FGT!

      Delete
  2. Makes sense, and I agree re: the premium. To Train's credit he's warned people to stay away from the high premium, too!

    The key reason to buy LTI over FGT is for the 15% it has invested in Lindsell Train itself. I think this will eventually grow like a cuckoo to outsize the entire portfolio, unless Train actively decides to reduce the exposure.

    ReplyDelete