While Lindsell Train Investment Trust’s share price and net asset value are still in the red, its latest factsheet reflects considerable improvement when compared with its June update.
In the seven months to 31 July 2022, LTIT’s share price dropped 8.4%, while its NAV was down 6.4%. This compares with a -4.5% return by its benchmark, the MSCI World Index, over the same period.
While those figures might not seem like much to crow about, they make happier reading than the 18.3% share price drop and 11.7% NAV decline that LTIT recorded over the six months to 30 June.
The £233m trust is now trading at a 5.9% premium, having sat on a 2.1% discount in June.
The top contributors in July were Lindsell Train Ltd, Diageo and PayPal, while Laurent-Perrier and Mondelez weighed most heavily on the fund.
Enthusiasm for owning Heineken in no way diminished
Co-manager Michael Lindsell (pictured) penned the July factsheet’s commentary and chose to dedicate it to a single holding: Dutch brewer Heineken.
In March 2017, Heineken represented 4% of NAV, but this has fallen to 2.6% as of July 2022 despite a 19% increase in the number of shares LTIT owns.
LTIT is able to invest in the less liquid Heineken Holdings shares, Lindsell added. This means it can “access the equity at a current elevated circa 20% discount to the main quote with a current P/E ration of just 15x”.
Year-to-date, Heineken’s share price is down 9.7% at €91.62. Over one year it has fallen 1.1%, while its five-year return is 4.2%.
While there has been a divergence in the performance of the brewer and LTIT’s other holdings, not least its unquoted shareholding in Lindsell Train Ltd, this “has in no way diminished our enthusiasm for owning the company”, Lindsell wrote.
He pointed to its portfolio of 300 brands and international footprint, having “morphed from a European-centric business to a global one, with representation in 190 countries”.
“The company has faced unprecedented headwinds over the last few years. Lockdowns in Asia, bar closures in Europe and consumption bans in Mexico hit sales hard. Now, though, the company’s mojo is returning with this year’s first half organic sales and profits up 24%,” Lindsell wrote.
He added a couple of caveats, however, noting that brewing and selling beer “is a more capital-intensive business than most of our other portfolio companies engage in”.
“There are also material environmental issues to consider with water usage, packaging and carbon output and social issues around alcohol consumption.”
Lindsell stated: “Notwithstanding these hurdles the considerable runway for growing the business under the current business strategy, when matched with the reassuring durability associated with a 150-year-old brand, sustains a compelling investment proposition.”