Finsbury Growth & Income is a high conviction investment trust. Manager Nick Train likes to take big bets on behalf of investors – the top three holdings make up 25% of the entire fund.
Bad news today then, the second of those top three stocks posted profit warnings in as many weeks. Shares in Diageo tumbled after the spirits and alcoholic beverage giant reported a slight dip in sales and missed analyst expectations for the first half of the year, despite a slight increase in profits.
Diageo is Train’s largest holding at 8.6%.
Media and education group Pearson, which Train has allocated 7.8% to last week said it faced tough conditions throughout 2013, and expects earnings and profits to be significantly lower than the previous year.
Diageo blamed steeper-than-expected decline in emerging markets, including its small but struggling Chinese white spirits business, and in Africa, in particular in Nigeria's beer market, where hopes of some improvement in the market, didn't materialise.
Pearson had troubles in developed markets, particularly in North America.
But just as Train has belief in his holdings, so to do analysts back Train’s capabilities. Finsbury Growth & Income is Gold rated by Morningstar closed-end analysts, who say Train is an experienced, talented, and pragmatic manager.
Szymon Idzikowski said that Train’s process is thorough and well-proven over a number of market cycles.
“It’s an approach that’s been applied consistently and results in a concentrated list of stocks. Train selects companies from the bottom up and looks for unique and strong franchises that can prosper through a number of business cycles,” he said.
“He sells a stock only if he no longer considers it of sufficient quality, or when its growth in value causes it to become too large a proportion of the portfolio, at which point he will trim it.
“All told, we think there is much to like here: an experienced manager, a tried-and-tested process that has delivered excellent returns, and a competitive fee structure.”
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