When you think of good, dependable investments to buy and forget, a fund from Lindsell Train may spring to mind.

Its most popular one, Lindsell Train Global Equity (B3NS4D2), has generated a return of 347.9% since launch in March 2011, compared to a return of 165.7% from its MSCI World index benchmark.

LIMITED TURNOVER OF STOCKS 

Like a number of its peers in the fund management world, such as Fundsmith, it has what can be considered a low number of holdings in its portfolio with the number of stocks ranging from 20 to 35 on average.

It also has a very low turnover, meaning it doesn’t change around the companies it invests in that often, adopting a buy and hold strategy.

This becomes evident in the comments from its monthly factsheet. Most fund factsheets typically list the two, three or four companies the manager has sold that month and the ones they’ve purchased, with a small paragraph or two explaining why.

But given that Lindsell Train Global Equity is a fund with what’s called a ‘concentrated portfolio’ (this usually refers to a fund holding around less than 30 stocks) and has a low turnover, the manager often goes to town explaining why a new stock has been bought or, more likely, retained.

Earlier this year, the fund added the Italian luxury goods company Prada to its portfolio, the first new stock it has bought since 2017.

In its monthly factsheet for August, portfolio manager Michael Lindsell got through over 800 words justifying why he took a position in the company.

Covering the company’s long and storied history in detail, as well as his hopes for the Prada family’s prodigal son Lorenzo, Lindsell explained the investment case and what the fund desires in a business.

PUSHING PRADA

Believing Prada shares are ‘potentially worth two to three times more than today’s valuation’, Lindsell argues that the firm’s ability to innovate and drive its premium brand value will appeal to the ‘growing aspirational demographic’ in the world, where Prada is ‘uniquely positioned’ with high sales in China and other Asian countries.

That at its core is what the fund is about – investing in good, strong, well-known names which might be out of vogue with the market.

HOUSEHOLD NAMES

A look at the fund’s holdings from its annual report at the end of June reads like a who’s who of well-known brands.

Walt Disney, Ebay, Pepsi, PayPal, Heineken and Nintendo all feature, and for the football fans out there, so do Juventus and Celtic, two famous clubs with long histories.

Other names include Unilever (ULVR), Diageo (DGE) and Mondelez International the brains behind household brands Marmite, Guinness and Cadbury, respectively.

In the case of Prada, the story centres on the potential for fashion icon Muiccia Prada and her husband Patrizio Bertelli to recapture the brand’s ‘pioneering zeitgeist’ in order to seize the opportunities from an aspirational Asia and once again rise to the throne of the fashion world.

But the fund is not all iconic fashion brands, football clubs and consumer staples.

BACKING THE LSE

One of its biggest holdings is London Stock Exchange (LSE), the focus of much attention in the finance world at the moment having been the subject of a blockbuster £32bn takeover bid from the Hong Kong stock exchange operator HKEX.

The stock has been a strong performer in 2019, rising from £41.24 at the start of the year to around £72.50 now.

London Stock Exchange has long been a Lindsell Train holding, and the fund group is its largest UK-based shareholder.

The exchange’s strong share price performance has helped drive that of the fund, which over three years has done better than any other global equity fund available in the UK, and over five years is only beaten by Fundsmith Equity (B41YBW7).

Such success comes at a price, and while Lindsell Train Global Equity’s ongoing charges figure (effectively its yearly fee) of 1.15% per year isn’t the most expensive, it isn’t the cheapest either.

But with over £9bn of investors’ money poured into it, clearly many out there see it as a fee well worth paying.

SHARES SAYS: Lindsell Train manager Nick Train recently admitted his funds could embark on a period of poor performance after a strong run in the past decade. But the fund’s focus on higher quality, potentially lower risk businesses could see it hold up better than many other funds in a market downturn. We view it as an ideal buy and forget investment.

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