Nov

Top fund manager says Real Estate Investment Trusts offer exceptional value…

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Star fund manger Nick Train’s Lindsell Train UK Equity Fund has produced a total return of 352% since its launch in 2006, compared with an 83% return for the FTSE All-Share.

The Finsbury Growth & Income Trust that is also managed by Train has performed equally as well, producing a 65% return for its investors over five years to 31st August, compared to 17% for the FTSE All-Share index.

The famously long-term buy and hold investor has held many of the stocks and funds in his portfolios for over ten years, but recently he’s been on something of a buying spree, taking new stakes in soap manufacturer PZ Cussons, drinks firm Fever-Tree, and credit rating agency Experian.

Train’s latest quarterly report for investors in the Lindsell Train UK Equity Fund makes for interesting reading, noting in particular that he thinks a number of property-based investments – especially Real Estate Investment Trusts (REITs) – look oversold right now, and he’s been taking advantage.

Since the end of September, for instance, he’s taken positions in Supermarket Income REIT, the Schroder Real Estate Investment Trust, HICL Infrastructure, and Regional REIT.

Despite the turmoil caused by Covid-19, says Train, investors in the UK are really spoiled for choice right now, though he does stress the importance of steering clear of the worst-hit sectors, such as travel and hospitality. Even the most conservative of investors is likely to find stocks with obvious appeal, he says:

“I genuinely believe this in part reflects the long period of disappointing absolute and relative returns delivered by the UK stock market,” Train writes.

“It’s simply that more opportunities are being presented to us as other investors give up on the UK. I don’t exaggerate when I say ‘give up’: have you seen the industry data showing monthly outflows from across all UK equity funds? They are substantial and sobering.”

In other words, thinks Train, a bit of a valuation gulf has opened up between what global investors are valuing UK stock market at, and Train’s own view of prospects the UK has to offer, particularly the kinds of high-quality UK stocks that he traditionally goes for.

Despite his reputation for his investing patience, at times “sitting on his hands” for many years on his favoured investments, with little by way of trading action, he now sees many opportunities in the market that are too good to miss. He will likely be making more purchases for his funds in the months ahead. That increased activity for Train includes property investments.

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