Lindsell Train 'took advantage' of coronavirus sell-off panic

In the January factsheet for the £6.6bn LF Lindsell Train UK Equity fund, manager Train said it had been "a difficult month to get a handle on, as coronavirus began to predominate investor thinking".

He said there were "predictable beatings" for Burberry, which fell more than 11%, Remy Cointreau, which was down over 13%, and Diageo which lost nearly 6%, but that "we took advantage of the panic to add to each".

Train said: "We did so not because we have any insight into the severity and duration of the epidemic. Instead, because we have been rewarded more often than not during previous unsettling episodes by treating them as buying opportunities.

"We hope we are right again on this occasion and that the distress and suffering the virus has already caused will soon dissipate."

In the January factsheet for the £8.2bn Lindsell Train Global Equity fund, co-managed by Train, Michael Lindsell and James Bullock, the managers said the effects of the coronavirus outbreak on investor sentiment were "evident in portfolio share price movements this month".

Asia and luxury spending holdings in the portfolio include Shiseido, which fell more than 8%, Prada which was down 6% and Diageo.

"We took advantage of the panic to add to some of these, notably Shiseido," the managers said, citing the same reasons as for the UK Equity fund.

In the Global Equity fund, the portfolio managers noted that its consumer staple holdings held up, with actual share price gains delivered by Unilever, Mondelez, Pepsi, Heineken and Brown Forman, and adding that "folk will drink Jack Daniels whatever and maybe even more so through a global health scare".

In the UK equity fund, Train said it was the defensive holdings that "came to the rescue for the fund's relative performance", with actual share price gains delivered by Mondelez, Unilever, Heineken and AG Barr.

"Barr was up 4% after it confirmed its annual profits will be better than feared, despite falling year on year," the manager added.

In both fund factsheets, the managers also commented it was "notable" that the NASDAQ index rose 2% in January and hit another all-time high in the process. 

Train said: "In a sense this is not supposed to be happening. Many investors believed that ‘growth' (and NASDAQ is the pre-eminent global ‘growth' index) had topped out as an investment theme during 2019, to be replaced by ‘value'. After a long period when the former has trounced the latter. 

"Nonetheless, tech-driven growth companies have marched on during the first month of 2020. This matters for your fund, because several of our biggest holdings are perceived to fall into this ‘growth' category."

In the UK equity fund, Train said the obvious examples were the London Stock Exchange and Relx, both of which were up in January, while in the global equity fund, in addition to the same two holdings, Intuit and PayPal benefited from this trend.

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• Topics
• Investment
• Michael Lindsell
• James Bullock
• Nasdaq
• Remy Cointreau
• Diageo
• Shiseido
• Unilever
• AG Barr
• Nick Train
• coronavirus
• Asia
• Lindsell Train
• Lindsell Train UK Equity