Monday, 8 December 2014

Finsbury Trust - Final Results

This trust is not the highest yielder but is the top UK Income Trust in terms of net asset value and share price performance over five and ten years, its returns far outstripping those of the FTSE All-Share index. A sum of £1,000 invested 10 yrs ago would now be worth £3,388 compared to a total return of £2,202 from the benchmark FTSE All Share index.

At around 2.1%, its yield is one of the lowest in the sector but its aim is capital and income, with a total return in excess of the FTSE All-Share. However, the trust's portfolio is constructed without reference to a stock market index.

Nick Train
Long standing manager Nick Train’s approach is based on that of Warren Buffett’s and involves building a concentrated portfolio of “quality” companies that have strong brands and/or powerful market franchises.

The characteristics that define a quality company for Lindsell Train are:

  • durability – companies that can prosper through business cycles for many years to come;
  • high return on equity – companies with the ability to grow earnings year-in, year-out are favoured over those with rapid short term growth, but uncertain long term prospects; and
  • low capital intensity/high free cash flow generation – companies that do not have to make heavy balance sheet investment to generate earnings growth.


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. These costs over the past year amount to just 0.09% of net assets. The trust's total expense ratio remains reasonably low at around 0.8%.

Top five portfolio holdings are: Unilever 9.0%, Diageo 8.3%, Pearson 7.4%, Reed Elsevier 7.2% and Heineken 6.8%.

Results

The trust has today announced results for the full year to 30th Sept 2014 (link via Investegate). Share price total return is 8.6% compared to 6.1% return for the FTSE All Share.

Over the past year the dividend has increased by a respectable 7.6% to 11.3p (2013 10.5p). Revenues were 12.6p and therefore there is a small surplus after accounting for payments of dividends which will further bolster the dividend reserves.

Commenting on the past year, manager Nick Train said his portfolio was focussed on quality rather than size "Biggest is not necessarily best, if it's investment returns you're after. We believe what really matters is the calibre and unique nature of the companies you're invested in. This is what makes money over time. And, to reiterate, we think we own a collection of special companies".

You cannot argue with the returns he has provided for shareholders over many years. I took an opportunity to top up my holding in October and obviously very happy to continue holding for the long term.

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