Should you invest in Finsbury Growth & Income? How to buy great UK shares at a discount

Sorry seems to be the most difficult word in the investment field. Even poor performance can be covered up.

But this week, former star fund manager Nick Train did something unusual.

He apologized for the poor performance of his British investment fund, which focuses on well-known British stalwarts.

Train attributed the decline to the trust’s lack of interests in mining, oil and technology.

Large stakes in luxury goods group Burberry and asset manager Schroders – which Train and his team thought would be “meaningful positions” – failed to materialise.

Over the past six months, the return on his Finsbury Growth & Income trust has been 3.8 per cent, compared to a sector average of 12.8 per cent.

His Lindsell Train UK Equity fund, whose portfolio is identical to that of the trust, is also lagging behind. This is bad news for the thousands of people who supported Train when his reputation couldn’t have been better: he started to fall from grace in 2021.

But while he is remorseful, Train is also optimistic, aware that his next steps will be closely watched.

He and his team ‘feel the UK market is pregnant with value and opportunity’.

A revival is already underway as investors wonder why shares in solid British companies are so unloved, thinking many might succumb to takeovers.

For new investors, Finsbury Growth & Income could be a cheap way to back Britain, as the trust’s share price is at an 8.6 percent discount to the net value of its assets.

Existing investors may be angry, but Dan Boardman-Weston says high-quality companies Train favorites will shine again.

As we outline, some of the trust’s substantial holdings are laggards but may appear attractive to bargain-hunting predators. Other stocks are already recovering and are on the cusp of further appreciation.

Leaders

Relx: A stake in this £81.5 billion analytics, data, exhibitions and publishing group makes up 12 percent of the trust’s portfolio.

Relx shares have risen 41 percent to 3,415 cents in the past twelve months, driven in part by excitement about the exploitation of artificial intelligence (AI) in the legal services department. Goldman Sachs and UBS analysts are among those rating Relx a ‘buy’, targeting a price of 4,000 pence.

London Stock Exchange: The £48.6 billion company has come under fire for its apparent failure to prevent London-listed companies from leaving for the hustle and bustle of Wall Street.

But the shares are up 7 percent in the past year on views that the company has some of the hallmarks of a tech giant thanks to its acquisition of financial data group Refinitiv and its partnership with Microsoft.

Experian: Demand for the global credit rating group’s services has been boosted by the improving economy – plus expectations that interest rates will be cut, which should encourage borrowers to take out loans. Shares are up 29 per cent in the past year to 3,653p.

Stragglers

Burberry: Shares in the luxury fashion group have fallen 56 percent to 1,056 cents in the past year, put on a low by a slowdown in spending among the wealthy.

Hyper-luxury top brands such as Hermes, favored by the fabulously wealthy, are proving more resilient in what has been called ‘brand splitting’. Founded in 1856, Burberry strives to appeal through its ‘British character’.

The latest bags now bear names like Knight and Rocking Horse. But the hope is less for a turnaround than for the emergence of a buyer. This is why most analysts rate the stock as a hold.

Schroeders: Train states that Schroders has a ‘differentiated and winning strategy’.

If it can deliver ‘even a little bit of secular growth’, the share price could reverse the 15 per cent fall to 389p in the past year. The rebound has already started, with a jump in recent weeks. Against this backdrop, UBS has upgraded the stock’s rating from ‘hold’ to ‘buy’. Other brokers consider the stock a ‘hold’.

Schroders, an active management company, has been struck by the belief that ‘passive’ index funds deliver reasonable returns at low costs. As an active manager, Train must prove he is worthy of investors’ trust.