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Nick Train: Choose wisely, don’t be swayed by markets

Fund manager Nick Train is the ultimate buy-and-hold investor. He tells Citywire how he keeps his cool and chooses stocks for the long run.

 
Nick Train: Choose wisely, don’t be swayed by markets

The fast paced environment of finance can make it a challenge to stick to your strategy but Nick Train, co-founder of Lindsell Train, is an experienced advocate of the ‘buy and hold’ approach to investing. 

Train seeks high quality companies for long-term investment and many of his top holdings have featured in his portfolios since day one when he set up Lindsell Train, with Michael Lindsell in 2001.

He says: ‘We think longevity is a much underestimated criteria for what makes a good or bad investment.

‘We’re immediately interested in companies that have been around for a long time. If you find a company that has survived many decades, perhaps even centuries, and has prospered over the long run then that’s telling you something really important about the calibre of whatever it is the company does.’

How to pick stocks for the long run

Train is a Citywire AA-rated manager and oversees the Lindsell Train UK Equity and Global Equity funds, alongside the Finsbury Growth & Income trust.

The UK Equity fund has returned 39% over the past five years, to outperform the FTSE 100 index returns of 10.43%.

The funds top holdings are in Diageo (DGE.L), Unilever (ULVR.L), both in Citywire Top Stocks®, and Heineken, and Train says they all share characteristics of what he looks for in a company.

‘What we look for in particular are companies that own brands, as that tends to be what allows them to survive and prosper. So a big focus is constructing portfolios around companies that own great brands or really strong business franchises’, he explains.

He says Unilever is one of the holdings with strong brands he foresees having for the next decade.

‘Amongst UK quoted companies there are only a handful that have such a substantive and credible emerging market strategy as Unilever. It has long established positions in emerging markets which are going to drive growth probably decades to come.

‘The only reason we’d exit the company would be if they decide to sell their emerging market activities or if a mania develops for companies like Unilever and the shares went up so high and we felt we couldn’t justify owning them anymore. But we’d be really disappointed by that, we’d much rather earn steady compounded returns from the investment.’

The strategy means there aren’t many big moves in his holdings, but Train most recently increased his position in Heineken, which now makes up 6.54% of the portfolio.

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8 comments so far. Why not have your say?

dan cahill

Mar 02, 2012 at 13:35

Nick takes after his father probably the best of his time!

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gravedigger

Mar 02, 2012 at 13:40

I kinda thought Hornby would be a core holding of his

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Barry1936

Mar 02, 2012 at 13:49

Hmph! There are plenty of examples that give the lie to that philosophy - Cookson, Costain and Rolls Royce all come to mind because I caught a serious cold on all of those, albeit in the distant past, but there are others both now and in the future. How about Cable & Wireless; a good long established business - until it split into two! How many hundred years has RBS been around? I don't disagree with the generalisation but you still need to keep a close eye on each investment and ditch it at the first doubt.

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Abel Springbok

Mar 02, 2012 at 14:01

Great strategy...and one point that wasn't mentioned...you are saving dealing costs as well. Churning = more and more dealing costs, which of course eats rapidly away into one's performance.

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Maverick

Mar 02, 2012 at 15:15

What's wrong with the idea of doing your research on the companies, then buying the ones you feel happy about? However, if the performance drops off (I use a period of 4 months) sell them and buy something that is performing. You can always buy the first share again if it recovers later. Quite frequently it turns out that I was right about a particular share, but six or eight months later than I'd bought it.

I never thought I'd hear a fund manager say, "I don’t know what would make me willingly invest in a bank again." Me neither.

"How many hundred years has RBS been around?" Barry1936 asks. Probably about the same number as Glasgow Rangers football club . . . . .

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John Wakefield

Mar 03, 2012 at 10:25

Vigilance still needs to be exercised when employing a buy and hold strategy otherwise the market will soon teach you the downside of neglect.

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Jaymak

Mar 05, 2012 at 16:50

If my memory of History of Banking studies ( in the late 1950s ) serve me correctly RBS was founded in 1726---21 years after Bank od Scotland in 1695.

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Jaymak

Mar 05, 2012 at 16:52

Correction 31 years

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