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Lindsell Train buys Hargreaves for Global fund

Lindsell Train buys Hargreaves for Global fund

Nick Train and Michael Lindsell have taken a stake in online stockbroker Hargreaves Lansdown (HRGV) in their £3.2 billion Lindsell Train Global Equity fund, in their first new buy for the portfolio since 2015.

Train is a longstanding shareholder in the company, which he holds in his Finsbury Growth & Income (FGT) investment trust and Lindsell Train UK Equity fund.

Lindsell, who runs the Global Equity fund with Train and James Bullock, said the managers had for some time 'wanted to increase our portfolio exposure to both our positive view of equity markets over the long term, and to technological innovation'.

'Hargreaves Lansdown represented the best valued opportunity in our global universe to capture these,' he said.

'Although not a technology company per se, we see Hargreaves Lansdown as a technology platform business - in some ways more akin to an Amazon or Facebook than a traditional financial services company,' he said.

Lindsell (pictured) highlighted the company's 68% margins which made them 'by some measures, one of the most profitable companies we know' and its potential to benefit from the move to defined benefit and advised pensions, which still account for around 80% of the market in the UK, to defined contribution pensions under the saver's control.

'Looking in the USA, where web based service provision has been around for longer, the advised proportion of individual portfolios has fallen to c.50% over the last 10 years. We would expect to see the same trend in the UK,' he said.

He said that while the shares could seem expensive on conventional measures, trading on a price-earnings ratio of nearly 34 times, it was 'not a conventional company', with return on equity of around 70%, that could stay above 50% in the future.

'The dividend yield is 2.5% today,' he said. 'Dividend growth commensurate with such high return on equity might be of the order of 20% per annum in the future, which could mean the shares are priced on a yield today of maybe as much as 16% out to June 2028.'

Fee cut

Lindsell Train has meanwhile trimmed its fees on the Global Equity fund, with the fund having grown to over £3 billion in August.

Its 0.65% management fee will remain for the first £3 billion of the fund, but fall to 0.6% for assets over that.

The change does not apply to the D share class of the fund available on Hargreaves Lansdown, which applied a discounted 0.55% management charge.

Greene King gripes

Train has meanwhile bemoaned the management decisions of Greene King (GNK), the brewer and pub company he owns in his Lindsell Train UK Equity fund and Finsbury Growth & Income trust.

Shares in the company fell nearly 20% in September after it reported a drop in sales and warned of persistently weak consumer confidence.

'There does genuinely seem to be a squeeze on UK consumer spending, which is currently challenging all the brewery / pub companies,' said Train in his latest update to investors in the UK Equity fund.

'But sadly, Greene King has compounded the adverse effects of this squeeze by its acquisition in 2015 of Spirit, another pub owner. It is a shame and frustrating to me, because Greene King's capital allocation and business development had been exemplary for decades prior to this.'

Train said the only 'mild consolation' for investors in his fund is that he had barely added to the position, now just 0.6% of the portfolio,  over the last two years. 'We have not yet decided whether we should rebuild the holding, but will keep you informed,' he said.

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