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Burberry and Pearson falls hit FTSE and Train

Luxury brand and educational publisher fall to bottom of FTSE 100, dealing blow to big fund manager backer Nick Train.

 
Burberry and Pearson falls hit FTSE and Train
 

Update: Burberry and Pearson have fallen to the bottom of the FTSE 100, dealing a blow to Citywire AA-rated fund manager Nick Train, a big backer of both stocks.

Burberry (BRBY) fell 7.7% to £16.48 after the luxury brand reported a 2% fall in retail revenue over the Christmas quarter.

It was joined at the bottom of the FTSE 100 by Pearson (PSON), down 6.4% at 672.2p as the educational publisher continues to feel the pressure in its North American business.

That weighed on the FTSE 100, which fell 15 points, or 0.2%, to 7,740.

Burberry is a top 10 holding in Train's Finsbury Growth & Income (FGT ) investment trust and LF Lindsell Train UK Equity fund.

Pearson's slump from a peak of nearly £15 in early 2015 has meanwhile seen the stock fall out of the top 10 in Train's funds, but his Lindsell Train fund group remains one of the stock's biggest investors with 5.2% of the shares, according to Reuters.

Burberry's sales fall was sparked by the UK, which suffered compared to the Christmas period the year before, when the pound's fall following the Brexit vote had helped to boost sales from tourists.

Steve Clayton, who holds Burberry in his HL Select UK Shares fund, said that while the third quarter figures were 'drab', the investment case for Burberry was focused on new boss Marco Gobbetti's plan to drag the brand further upmarket.

'Progress on this front is said to be strong, but with returns unlikely to be visible in the profit and loss account for some time, investors have to take Gobbetti on trust,' he said.

Pearson's fall came as the embattled educational publisher reported a 3% fall in sales of US higher education course materials.

Roddy Davidson, analyst at Shore Capital, retained his 'hold' rating on the shares on the news.

'We remain wary on trading conditions in the North American higher education space (which has experienced several "false dawns") and on execution risk as the company continues to negotiate the substantial organisational and cultural change required to align itself to a digital future,' he said.

Informa (INF) was another heavy faller, down 7.2% at 693.4p after the trade show organiser announced it was in talks to buy rival UBM (UBM). UBM jumped to the top of the FTSE 250 on the news, up 11.4% at 876p.

At the top of the FTSE 100 sat Rolls-Royce (RR), up 6.4% at 907.8p after announcing it was considering the sale of its commercial marine business as part of a restructure of the aircraft engine maker.

On the FTSE 250, Provident Financial (PFG) slumped 14.8% to 684.2p as analysts at Liberum warned the risks of investing in the embattled lender were 'still too great' following yesterday's trading update.

Among 'small-cap' stocks, Interserve (IRV) was down 1.7% at 119p, having recovered the bulk of the morning's heavy losses, as the government downplayed fears over the outsourcing group's financial health following Carillion's collapse.

7 comments so far. Why not have your say?

joseph o neill

Jan 17, 2018 at 11:23

Most top fund managers have skeletons in their cu boards, Nick Train is no exception,not only is he a top class fund manager he's a very honest genuine guy.Just another bump.

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Keith Cobby

Jan 17, 2018 at 14:24

Pearson is Kodak, not responding quickly enough to the digital age.

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Law Man

Jan 17, 2018 at 15:38

Mr Train is an excellent fund manager. However, I am slightly concerned that he has held on to Pearson for so long. A comparison can be drawn with the similarly successful Mr Woodford and his retention of Provident and Capita. Progress to be monitored.

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King Lodos

Jan 17, 2018 at 16:57

You can see Pearson's Return on Equity here

https://www.gurufocus.com/term/ROE/NYSE:PSO/ROE-Percentage/Pearson%20PLC

What I don't understand is why Train was holding it in the first place .. It doesn't seem to be cash-generative, nor meet any of the criteria Train is known for employing.

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richard tomkin

Jan 17, 2018 at 19:17

I suppose one saving grace for Pearson is that it is no longer in construction and project management,once its core activity.

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Jim99

Jan 17, 2018 at 22:05

Pearson is not going to get better; it is only going to get worse. I just cannot see how Nick thinks it will. Frankly, this is one case where Nick and his team really do not understand the business they are investing in. There have been enough warnings over the past 2 years; the company has sold off the family silver in order to pursue a pipe dream. Pearson's are going to get killed in the US market as FANGS move further into education. At the AGM later this month someone needs to ask what are his model/projections for the return on FGT's current investment in Pearson. Nick and his team are on the whole really good at what they do. This I am afraid is a real blind spot.

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anglo29

Jan 18, 2018 at 10:33

I had wondered about these two share choices, Pearson has been reportedly a laggard on the digital front, while Burberry is essentially a high price luxury brand. Is it likely this would flourish at a time when even the relatively well off feel the need to economise, and Chinese tourism (a primary Burberry market) is on the decline?

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