Finsbury Growth & Income (FGT) has enjoyed a welcome 11% bump to its share price in July after a number of its quality growth favourites saw a turnaround in performance.
In his cheeriest update in several months, manager Nick Train (pictured) highlighted a bevy of companies that helped his £2bn trust deliver a net asset value total return of 8.1%, nearly double the FTSE All Share’s 4.4%.
Experian led the portfolio’s big gainers, with shares climbing 19% last month, followed by Remy Cointreau (14%), and Schroders (11%). Elsewhere, Diageo and Sage shares leapt 10% and Burberry and Relx each enjoyed a 9% uplift.
Hargreaves Lansdown, which has seen nearly 28% knocked off its share price this year, also enjoyed a bounce back in July, with shares rising 7.5%, matching Unilever’s gains.
“With the possible exception of Hargreaves Lansdown, I think it true that all of the above have delivered in-line or better than expected results in 2022,” Train wrote.
See also: Nick Train in ‘disbelief’ over Finsbury Growth & Income worst performers
‘I wish we had sufficient insight into geopolitical and macro uncertainties’
The “common denominator” between July’s biggest rebounders is they have suffered steep falls in 2022. After reaching dizzying new heights during the pandemic, growth stocks have come back to Earth with a thud, as investors prep for an era of higher interest rates.
But last month, many of these same stocks came roaring back, as bleak global growth forecasts cast doubt on how aggressively central banks could tighten monetary policy.
“Growth companies have been out of favour in 2022, for familiar reasons wearisome to rehearse,” said Train.
“I wish we had sufficient insight into these geopolitical and macro-economic uncertainties to make investment calls that were certain to add value for our clients. But we don’t. And therefore, can’t think of anything better to do than to keep your portfolio fully invested in a collection of companies that earn high and defensible returns on capital and offer participation in a secular growth opportunity.”
Train loads up on more Fevertree
While many of Train’s quality growth names enjoyed a reversal of fortunes, July brought fresh pain for Fevertree. The tonic water maker saw another 12% wiped off its share price, after warning that transportation and glass costs had dented earnings ahead of its H1 results.
Though shares in the company bounced back not long after Train initiated a holding in early 2020, this year they have plunged to a multi-year low of £10.21, down two thirds from January.
In the July update for FGT, Train said he had bought more shares in the business.
“We spoke to management in the aftermath of the warning and did so because we wanted to congratulate them for doing, in our opinion, the right thing for the business,” he said, citing the company’s refusal to cut marketing spend, hike prices or limit supply to its key market of the US to protect profit margins.
“During the course of our meeting we were given some general colour about the recent success of Fevertree’s business in the US. And we hope more specific data, released with the results, will remind investors why sticking with the shares of a company that is on track to become the global leader in an emergent brand category makes sense.”
Schroders and Hargreaves have a ‘secular growth opportunity’
Train’s holdings in investment giants Schroders and Hargreaves Lansdown have also been under acute pressure this year. Volatile markets have prompted investors to move risk-off, resulting in billions of pounds walking out the door at asset managers and platform groups.
Schroders is the second worst performer, behind Experian, in FGT’s top 10 holdings. The FTSE 100 fund group grew its assets under management (AUM) to £773.4bn in the first six months of the year, but much of this was down to M&A deals bolstering its total. Its mutual funds saw £2.9bn worth of redemptions during the period.
“For the sceptics about the asset managers we own … let me just remind you that Schroders’ assets under management have grown at a compound 10% per annum over the last five years and Hargreaves’ at 18%. These too have a secular growth opportunity,” Train wrote.
Worst performers in FGT top 10 holdings (share price ytd)