I have held FGT in my ISA for the past 7
years. It continues to deliver year after year and remains one of the top UK
investment trusts 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 £5,014 compared
to a total return of £2,385 from the benchmark FTSE All Share index.
Its aim is capital appreciation and income combined, with a total return in excess of the FTSE All-Share.
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.
Its aim is capital appreciation and income combined, with a total return in excess of the FTSE All-Share.
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. The trust's total expense ratio remains reasonably low at just under 0.7%.
Results
The trust has this week announced results for the full year to 30th Sept 2018 (link via Investegate). Share price total return is 13.2% compared to 5.9% return for the FTSE All Share.
 |
| 5 Yr Performance -v- FTSE All Share (click to enlarge) |
Top five portfolio holdings are: Diageo 10.0%, Relx 9.8%, Unilever 9.5%, Hargreaves Lansdown 9.2% and London Stock Exchange 8.6%.
Over the past year the dividend has increased by a respectable 7.7% to 15.3p (2017 14.2p). Revenues were 16.5p (2017 15.8p) and therefore there is a surplus after accounting for payments of dividends which will further bolster the dividend reserves.
It is worth noting that Nick Train has continued to add to his personal share holding in the Company - currently just over 2 million - which represents the whole of his personal investment in UK equity and is a significant portion of his total assets. Now that's called having skin in the game.
Commenting on the results, manager Train said
"I have been a regular buyer of FGT
shares for myself and my family through 2018. I have been so because I regard
the portfolio as a store of value that I expect will deliver much more growth
and income. As a shareholder I was delighted by the dividend increase your
board was able to announce this year, up nearly 8% to 15.3p. That’s an increase
driven by the underlying dividend growth of the companies in the portfolio,
many of which have long and proud histories of dividend growth – which we are
not expecting to end any time soon.
I can’t help thinking back to the first
dividend FGT paid under Lindsell Train’s stewardship, back in 2001, of 3.2p.
From 3.2p to 15.3p is a compound rate of dividend growth of c9.5% per annum
over 17 years. It will take all kinds of luck for me still to be reporting to
you in 2035 – although I can dream – and even more luck and good judgement will
be required to maintain a compound dividend growth rate of nearly 10% over the
next 17 years. But if all these did come to pass I’m sure that all shareholders
will be well satisfied".
The shares are currently trading at
760p and although many of my income trusts have been sold this past year in line with my revised strategy, this
trust is more focussed on growth and given its track record I am happy to
continue holding the shares in my portfolio for the coming year and beyond.
As ever, this
article is merely a record of my personal investment decisions and should not
be regarded as an endorsement or recommendation - always DYOR!
I'm glad I finally jumped on board and invested in FGT this year - better late than never, although they're not looking too good right now as the price has dropped but I'm obviously keeping them longterm.
ReplyDeleteGood to see you have added this to your portfolio weenie. I think we have missed out on the traditional Santa rally this year so you may be able to top up your holding with a lower price in the new year. I am encouraged to see the manager has increased his share holding by over 50% in the past year.
DeleteAs you say, focus on the long term...