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Nick Train cheers 'multi-decade technology bull market'
Technology, brand quality and a few Buffett principles guide Finsbury Growth & Income investment trust manager Nick Train in his investment decisions.
Markets
Technology stocks have enjoyed an upbeat year so far. The Dow Jones US Technology Index has risen 9.2% so far in 2012, and it remains the most favoured equity sector among fund managers.
Although the sector has a long way to go to mirror its early 2000 peaks, Finsbury Growth & Income investment trust manager Nick Train remains convinced the technology bull market has just begun.
Train, whose fund contains a large holding in technology and media companies, said: ‘To us it’s absolutely self-evident, beyond any shadow of a doubt, that we are in only the very, very early stages of a major multi-decade bull market in technology.
'The world will never be bored of being informed or entertained. We’ve got 30% of the strategy invested in technology or media companies that are utilising technology to enhance the value of their products or service.’
Nick's picks
Among the businesses Train holds are Daily Mail & General Trust (DMGT.L), Sage (SGE.L), Pearson (PSON.L) and Reed (REL.L).
‘These companies deal in knowledge. Essentially they’re intellectual property (IP) businesses,' he said. 'The cash return to successful IP companies is extraordinarily high. That cash has allowed Pearson to pay 20 years of consecutive dividend growth increases.'
The biggest dividend growth in the trust has come from software support provider Sage. Its dividends have increased 72-fold since 1988 and it paid out 9.75p in 2011.
Despite the backdrop of the technology bubble in the early 2000s, Train sees continued growth in the sector: ‘I think there’s an important analogy to what happened at the end of the 1840s to the railroad industry and what happened in the early 21st century to the technology industry.
‘There was a massive crash in the late 1840s in railway stocks, investors lost 90% of their wealth in railway-related businesses. But by 1900 over half of all quoted companies were either railroads or companies servicing the railroads.’
Beating the benchmark
The trust has given net asset value (NAV) total returns of 25% over the past five years as its share price has increased 25%.
The returns far outperform the UK income growth sector average NAV total return, which shed 1%, and the benchmark FTSE All Share return of 2% over the same period. The trust is currently trading at 343p, a 1% premium to its NAV per share of 339.5p.
Train has managed the trust for over 11 years, during which time its core holdings have remained largely unchanged. It has a low turnover of 6.2% per annum and Train attributes this to having long-term or strategic holdings at the core of the trust.
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- Unilever PLC (ULVR.L)
- Diageo PLC (DGE.L)
- Heineken NV (0O26.L)
- Pearson PLC (PSON.L)
- A G Barr P L C (BAG.L)
- Sage Group PLC (SGE.L)
- Daily Mail and General Trust PLC (DMGO.L)
- Reed Elsevier PLC (REL.L)
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1 comment so far. Why not have your say?
William Phillips
Jun 28, 2012 at 21:05
"That cash has allowed Pearson to pay 20 years of consecutive dividend growth increases."
Not very fast, though. Reed Elsevier has also been rather close-fisted. There is a whiff of jam tomorrow in perpetuity about these IP conglomerates, and what with its out-of-scale position in another low yielder, Barr the fizzy drink maker, Finsbury has an incongruously low yield for a Growth & Income trust.
Incidentally another of Train's favourites, Daily Mail, has been ejected from the All-Share Index for being non-voting.
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