Sunniva
Kolostyak:
Welcome
to
Morningstar.
Today
I
am
joined
by
Lindsell
Train’s
Nick
Train.
Nick,
thank
you
very
much
for
being
here
today.
You
manage
the
Finsbury
Growth
&
Income
trust
(FGT).
Let’s
start
by
telling
the
viewers
what
your
investment
strategy
is.
Nick
Train:
Okay.
Good
morning.
Great
to
be
here.
What
I
would
say
about
the
strategy
is
absolutely
fundamentally,
there’s
an
old
stock
market
law
that
says,
in
order
to
create
wealth,
you
need
to
concentrate
your
portfolio.
In
order
to
protect
wealth,
you
should
diversify.
Now,
what
we’re
trying
to
do
for
Finsbury
shareholders
is
to
make
them
money.
So,
by
extension,
you
might
understand
we’ve
chosen
to
concentrate
the
portfolio
to
try
and
maximise
the
returns
that
we
can
generate
for
shareholders.
Just
putting
some
numbers
on
that.
It
is
a
concentrated
portfolio.
There
are
maybe
20
holdings.
The
top
10
holdings
account
for
over
80%
of
assets.
That
is
concentrated.
And
the
critical
aspect
here,
and
I
guess
the
assertion
on
which
the
strategy
sinks
or
swims,
is
that
it’s
concentrated
on
industries
and
businesses
that
have
proven
capable
of
generating
wealth
for
investors
over
time.
So,
concentrated
portfolio
on
wealth-creating
businesses.
Kolostyak:
Well,
you
said
your
goal
is
to
create
wealth.
So,
we’re
going
to
have
to
talk
about
the
performance
of
the
trust.
Train:
Do
we
have
to?
Kolostyak:
We
do,
sorry.
So,
you’ve
had
three
years
of
underperforming
the
benchmark.
So,
I’m
curious
about
your
take
on
this.
Because
I
know
you’ve
said
that’s
not
good
enough.
So,
what
is
it
that’s
held
your
back?
Train:
Well,
it’s
not
good
enough.
Let
me
say
it
as
well.
I
say
it
publicly
because
it
is
mortifying
for
me
and
my
colleagues
who
work
with
me
on
this.
It’s
not
the
outcome
that
we
have
been
working
toward.
Looking
back
over
the
last
three
years,
what
I
would
say
is,
to
my
mind,
two
big
factors.
The
first
is
that
we
own
nothing
in
the
oil
sector.
And
BP
(BP.)
and
Shell
(SHEL)
have
been
very
strong
performers
over
the
last
three
years.
Now,
we’ve
never
owned
anything
in
the
oil
sector.
I
think
I
can
say,
categorically,
at
least
as
long
as
I’m
responsible,
we
won’t
own
anything
in
the
oil
sector.
And
that
will
therefore
be
a
factor
for
good
or
for
ill
over
time
relative
to
our
performance.
The
second
thing,
and
actually
this
may
lead
into
other
topics
of
conversation.
The
second
thing
is
that
in
2019-2020,
we
really
did
understand
that
technology,
data,
software
was
going
to
be
critical
for
generating
investment
returns
looking
forward.
We
already
understood
that.
But
in
hindsight,
and
this
is
completely
down
to
me,
in
hindsight,
in
2020,
we
didn’t
have
enough.
We
had
something
in
UK-listed
technology
and
software
companies,
but
in
hindsight,
not
enough.
And
the
work,
in
a
sense,
or
the
change
in
the
portfolio,
particularly
over
the
last
couple
of
years,
has
been
building
that
exposure
or
an
exposure
to
companies
of
that
type.
And
let’s
hope
that
that
is
going
to
drive
improved
returns
over
the
next
three
years.
Kolostyak:
Yeah,
I
mean,
that
leads
into
my
next
question
because
we
had
you
on
three
years
ago,
and
you
were
talking
about
these
digital
strategies
and
strong
companies
with
digital
footprints.
So,
obviously
now
with
AI
coming
in
as
this
hyper-trend,
how
have
you
seen
that
kind
of
change
over
the
three
years?
Train:
Well,
it’s
an
enormous
question.
But
to
get
down
to
specifics
–
I
mean,
let
me
say
this,
because
I
think
this
comes
as
a
surprise
to
some
investors.
There
are,
in
fact,
a
number
of
London-listed
companies.
I
ought
to
just
reiterate
here,
this
is
a
UK
equity
strategy,
just
to
be
clear
about
that.
There
are
actually
a
number
of
globally
significant
London-listed
UK
companies
that
have
strong
technology,
digital
software
franchises,
that
not
only
are
doing
well
as
businesses,
but
also
increasingly
are
doing
well
as
share
prices.
I
suspect
as
global
investors,
global
asset
allocators
have
seen
this
incredible
data
AI
bull
market
that’s
been
led
in
the
United
States,
but
then
beginning
to
look
elsewhere
around
the
world
for
other
companies
that
can
give
you
similar
credible
access,
but
at
much
lower
valuations
than
now
pertain
on
the
Nasdaq.
And
we
underperformed
last
year.
Very,
very
frustrating
for
us
to
underperform
last
year,
because,
for
instance,
our
biggest
holding,
RELX
(REL),
which
is
a
top
10
company
in
the
UK
stock
market,
it’s
one
of
the
world’s
leading
data
providers
with
a
truly
credible
AI
strategy,
RELX’s
share
price
last
year
was
up
well
over
30%.
And
there
are
others,
but
that’s
–
I
find
that
very
encouraging
that
even
in
this
purported
backwater
of
the
UK
stock
market,
global
investors
are
beginning
to
acknowledge
that
there
are
some
businesses
that
can
allow
us
to
participate
in
this
theme.
Kolostyak:
So,
RELX,
that’s
one.
Have
you
got
any
others
in
your
portfolio
that
can
fit
in
with
this
AI/digital
strategy/data
theme?
Train:
Well,
so
far
as
Finsbury
Growth
&
Income
Trust
is
concerned,
today,
over
50%
of
the
portfolio
is
invested
in
companies
that,
let’s
say,
as
a
common
denominator,
the
companies
have
all
got
an
existing
artificial
intelligence
product,
which
they’re
beginning
to
exploit
commercially.
And
crucially,
the
businesses
that
we’re
invested
in
have
got
data
sets.
They
own
data
that
is
proprietary
to
them
that
they
can
work
the
AI
tools
on.
And
because
the
data
is
proprietary
to
those
companies,
other
companies
can’t
really
compete
with
that.
So,
in
addition
to
RELX,
I’d
highlight
the
London
Stock
Exchange
Group
(LSEG),
which
is
another
major
holding
for
us.
The
London
Stock
Exchange
Group
actually
isn’t
really
–
I
mean,
it
is
a
stock
exchange,
but
the
stock
exchange,
it’s
only
about
3%
of
the
business.
Essentially,
LSEG,
as
we
must
call
it
regrettably,
LSEG,
it’s
a
global
data
business.
It’s
the
world’s
number
one
provider
of
real-time
financial
data.
And
it
really
did
strike
us
and
continues
to
strike
us
that
the
most
powerful
vindication
of
LSEG’s
strategy
is
the
fact
that
Microsoft
(MSFT)
has
voluntarily
chosen
to
joint
venture
with
LSEG
on
delivering
LSEG’s
data
in,
let’s
say,
an
AI-enhanced
way,
using
Microsoft’s
AI
tools
to
take
LSEG’s
data
to
make
that
more
relevant.
That’s
actually,
really,
very
exciting.
The
world’s
biggest
credit
bureau
is
a
London-listed
company,
Experian
(EXPN).
Experian
has
more
data
on
more
individuals
and
more
data
on
more
businesses
than
any
other
corporation
on
the
planet.
And
you
speak
to
Brian
Cassin,
the
chief
executive
of
Experian,
I
mean,
he
is
just
so
bubbling
over
with
enthusiasm
and
optimism
about
what
this
latest
development
in
technology,
AI,
means
for
that
data
that
his
business
controls.
They
can
find
new
ways
to
create
new
product
and
new
value
out
of
that
data.
So
those
three
companies,
RELX,
London
Stock
Exchange
Group,
Experian,
I
talked
about
concentration.
That
can
cut
both
ways.
Believe
me,
I
know
that.
But
just
those
three
companies,
that’s
over
30%
of
the
portfolio.
If
they’re
right,
that
can
create
a
lot
of
value
for
shareholders.
Kolostyak:
I
certainly
hope
they
would
be.
So,
I’ve
got
one
more
question
on
AI
before
we
move
on.
And
that’s
just
around
–
you
are
a
bottom-up
stock
picker.
So
how
do
you
avoid
getting
tempted
by
big
trends
and
everything
else
–
because
there’s
a
lot
of
excitement,
there’s
a
lot
of
opportunities
that
must
look
very
tempting
to
you?
Train:
Well,
we’ve
always
looked
to
participate
in
multi-decade
industrial
themes.
And
that’s
always
been
a
feature
of
the
strategy.
One
of
our
other
major
holdings
is
Diageo
(DGE),
which
hurt
us
last
year
by
the
way,
regrettably.
But
I
won’t
say
it
doesn’t
matter,
but
in
a
sense,
it
doesn’t
matter
because
the
underpinnings
for
Diageo’s
business
and
Diageo’s
prospects
remain
really
very
strong.
But
a
reason
that
Diageo
is
a
major
holding
in
this
strategy
and
has
been
for
20
years
is
because
there
is
a
clear
over-trend
for
consumers
around
the
world
to
drink
less
alcohol.
You
might
think
that
was
disadvantageous
for
Diageo,
but
it
really
isn’t.
Consumers
drink
less
alcohol
as
they
get
wealthier,
but
they
drink
higher-quality
alcohol.
And
if
you
own
the
world’s
premium
collection
of
premium
spirits
and
beverage
brands,
that’s
a
multi-year
tailwind
driving
that
business.
So,
I
choose
Diageo
there.
That’s
an
example
of
another,
if
you
like,
bottom-up
chosen
business.
The
world’s
best
collection
of
alcoholic
beverages
happens
to
be
listed
on
the
London
stock
market,
thank
goodness,
where
we
can
capture
a
multi-year
theme.
RELX,
we’ve
owned
since
2003.
London
Stock
Exchange
Group,
we’ve
owned
since
2004.
Sage
(SGE),
which
was
up
60%
last
year
and
is
the
UK’s
biggest
software
business,
we’ve
owned
that
since
2004
as
well.
So,
AI
is
important
and
we’re
very,
very
keen
to
identify
other
businesses
that
can
participate
in
it.
But
in
a
sense,
AI
is
just
a
continuation
of
essentially
the
digitisation
of
the
world
that’s
been
happening
for
the
last
20
years
and
that
we’ve
been
alert
to
for
much
longer
than
just
the
last
couple
of
years.
Now,
I
know
that
you
have
a
question.
I
think
you
have
a
question
about
a
new
holding.
Kolostyak:
I
do,
I
do.
Let’s
move
on
to
that.
Train:
Well,
can
I?
Because
this
is
Rightmove
(RMV),
which
is
the
newest
holding
that
we
have
in
the
strategy.
We
started
accumulating,
we’re
still
gradually
building
a
position
last
summer.
It’s
the
first
new
holding
since
2020.
So,
we
don’t
often
buy
new
positions.
But
that’s
an
example,
to
my
mind,
of
us
thinking
through
the
implications
of,
what
did
you
call
it,
a
hyper-trend?
Kolostyak:
I
did
say
hyper-trend!
Train:
Thinking
through
the
implications
of
a
hyper-trend
and
saying
to
ourselves,
well,
we’ve
already
got
exposure
to
it,
but
can
we
find
other
London-listed
businesses
that
help
fit
that
category?
And
actually,
Rightmove
absolutely
does
do
that.
Rightmove
owns
the
most
extensive
and
hence
valuable
set
of
data
on
the
UK
residential
real
estate
market
of
any
business.
And
Rightmove
is
already
using
artificial
intelligence
tools,
applying
that
to
the
data
set
that
it,
Rightmove,
receives,
what
is
it,
2
billion
visits
every
year.
I
mean,
the
numbers
are
staggering,
the
engagement
that
people
have
with
that
site.
Every
visit
creates
new
data
for
Rightmove
to
make
more
and
more
sense
and
value
from.
So,
I
mean,
I
might
say
to
myself,
why
didn’t
I
own
Rightmove
10
years
ago?
I
rather
wish
that
I
had.
But
is
it
too
late
to
initiate
a
holding
and
build
a
big
position
in
Rightmove?
I
sincerely
hope
not.
I
said
to
you
earlier,
and
also
this
rounds
back
to
another
important
topic,
that
global
asset
allocators,
global
investors
need
to
look
outside
the
United
States
for
companies
that
can
give
them
access
to
these
digital
trends,
because
it’s
very
hard
to
argue
that
US
data
businesses
are
undervalued.
I
mean,
maybe
they
are,
but
they
are
more
highly
valued
than
data
businesses
elsewhere
around
the
world.
And
a
factor
in
us
building
a
position
in
Rightmove
is
our
awareness
that
the
closest
comparator
to
right
move
listed
on
Nasdaq,
a
company
called
CoStar
(CSGP),
which
actually
is
trying
to
access
the
UK
market
currently.
We’ll
see
whether
it’s
successful.
But
CoStar’s
equity
listed
on
Nasdaq
trades
on
something
like
65
times
earnings.
I’m
not
saying
that’s
expensive.
I
don’t
know.
All
I
do
know
is
that
we’re
buying
Rightmove
currently
on
more
like
20
times
earnings.
That’s
a
huge
gap.
I
don’t
know
whether
the
gap
is
going
to
close,
but
it’s
indicative
of
the
sort
of
valuation
disparity
that
opened
up
around
the
world
with
the
US
and
Nasdaq
having
done
so
incredibly
well
over
the
last
five
years.
Kolostyak:
So,
let’s
talk
about
the
UK
then
–
undervalued,
maybe
unloved
in
many
people’s
eyes.
What
is
it
that
needs
to
happen
to,
I
guess,
make
London
fashionable
to
invest
in?
How
do
you
attract
these
global
funds
to
invest
in
the
UK?
What
the
government
is
doing
in
terms
of
reforms?
Is
it
enough?
What
do
you
think?
Train:
I
can’t
offer
anything
more,
I
don’t
think,
than
blood,
sweat
and
tears.
I
just
think
that
it’s
so
obvious
why
the
London
stock
market
has
struggled.
The
constituents
that
make
up
the
heavyweight
holdings
in
the
London
stock
market
are
just
not
exposed
to
the
value
wealth-creating
themes
that
are
driving
the
global
economy
today.
That’s
a
shame,
but
it
is
what
it
is.
The
question
is,
is
there
enough
entrepreneurialism
and
ambition
in
the
UK
corporate
sector
to
over
time
allow
new
companies,
new
industries,
listed
along
the
London
market,
to
become
bigger
and
bigger
components
of
the
index?
That’s
what
needs
to
happen.
We
saw
the
story
yesterday
that
Arm
(ARM),
if
it
was
listed
in
London,
would
now
be
the
third
or
fourth
biggest
company
in
the
UK
stock
market.
That’s
history
now,
we
can’t
turn
that
back.
But
that’s
what
the
UK
stock
market
needs,
more
businesses
like
Arm
being
listed
on
London
and
working
their
way
up
the
FTSE
100
in
terms
of
size.
I
think
what’s
encouraging
is
that,
as
you
may
recall,
the
FTSE
100
celebrated
its
40th
anniversary
in
January.
Now,
I
can’t
quote
many
statistics,
but
one
thing
that’s
absolutely
evident
is
that
the
shape
of
the
UK
stock
market
has
changed
out
of
all
recognition
over
40
years.
The
UK
economy
culture
has
proven
capable
of
creating
new
industries,
new
winning
businesses
that
have
changed
the
shape
of
the
stock
market.
So,
let
me
just
say
this,
just
to
kind
of
summarise
here,
and
tying
a
number
of
strands
together.
The
biggest
holding
in
our
UK
strategy
is
RELX.
RELX
was
a
constituent
of
the
FTSE
100
back
in
1984,
40
years
ago.
It
was
already
in
the
top
100
companies
of
the
UK
You
probably
know
that
since
1984,
RELX
has
been
the
single
best
performer
in
the
UK
stock
market
over
that
40-year
period.
£100
invested
in
RELX
in
1984
is
worth
over
£35,000
today.
I
mean,
it’s
beaten
Nasdaq,
by
the
way.
I
mean,
it’s
truly
been
an
outstanding
multi-decade
investment,
and
its
best
years
are
still
ahead
of
it.
But
RELX
has
gone
from,
well,
in
the
lower
reaches
of
the
FTSE
100
to
being
a
top
10
constituent
now
in
the
UK
If
the
business
continues
to
grow
at
the
rate
that
it
is
currently,
sooner
or
later
it’s
going
to
be
bigger
than
Lloyd’s
Bank
(LLOY)
and
British
American
Tobacco
(BATS).
And
we
need
more
RELXs,
but
as
they
grow,
they
will
change
the
shape
of
the
stock
market,
and
the
stock
market
will
do
better.
That’s
all
I
can
say.
Kolostyak:
And
more
for
you
to
invest
in.
Train:
It’s
interesting.
There
were
a
flurry
of
IPOs,
new
issues
on
the
London
market
back
in
2020
and
2021.
A
whole
slew
of
kind
of
digital
businesses,
almost
all
of
which
have
been
very,
very
disappointing
as
share
prices,
because
they
came
overly
hyped.
But
again,
there
are
some
nuggets
there,
we’re
sure,
and
that’s
where
we’re
doing
quite
a
lot
of
work
at
the
moment.
And
again,
that’s
indicative
of
the
ability
of
the
UK
to
bring
new
companies
to
the
market.
Kolostyak:
So,
I
have
one
last
question
for
you,
and
that
is,
can
you
in
one
sentence
make
the
case
for
active
fund
management
and
stock
selection?
Train:
Can
I
say
it
in
two
sentences?
Kolostyak:
I’ll
give
you
two.
Train:
Look,
I’ve
got
to
say
–
and
I
fessed
up
to
disappointing
performance.
I
am
disappointed
by
our
performance
over
the
last
three
years.
I’ve
been
running
this
strategy
for
getting
on
for
a
quarter
of
a
century.
I’m
into
the
25th
year
–
well,
24
years
and
counting.
Over
that
period,
Finsbury’s
net
asset
value
total
return
has
compounded
at
9%
per
annum,
and
the
FTSE
All-Share
Index
has
compounded
at
just
over
5%
per
annum.
So,
I
can
say,
look,
a
concentrated
portfolio
concentrated
on
wealth-creating
businesses,
we’ve
very,
very
materially
outperformed
if
you’ve
had
the
patience.
By
the
way,
that
9%
per
annum
in
sterling
is
better
than
the
S&P
500
over
the
same
period,
just
showing
how
powerful,
if
you’re
lucky
enough
and
disciplined
enough
to
get
it
right.
The
other
thing
I
would
say
is
life
should
be
an
adventure.
I
mean,
it
really
should
be
an
adventure,
and
picking
individual
companies,
backing
individual
companies,
feeling
part
of
that
entrepreneurial
wealth
creation,
that’s
critical
for
progress
and
wealth
creation,
and
it
feels
a
lot
better
than
just
saying,
oh,
I’m
going
to
invest
on
a
pari
passu
basis
in
every
company.
I
don’t
care
how
good
or
bad
it
is.
Do
you
know
what
I
mean?
It’s
more
of
an
adventure.
And
within
reason
for
people’s
personal
finances,
I
would
say
take
an
adventure.
Kolostyak:
I’m
pretty
sure
that
was
more
than
two
sentences,
but
we’ll
allow
it.
Nick,
thank
you
very
much
for
coming
into
the
studio
today.
For
Morningstar,
I’m
Sunniva
Kolostyak.
