It’s generally something of a rare event if Nick Train adds even one new holding to a fund. As such, the recent revelation that two new names have entered his UK portfolios, Lindsell Train UK Equity (GB00B18B9X76) and Finsbury Growth & Income (FGT), might come as something of a shock.
What has prompted such action? Train notes that he has followed the companies Clarkson (CKN) and Intertek (ITRK) for years, but that research on them intensified in 2023 and 2024, as the investment team looked to bulk up its exposure to UK-listed companies with good intellectual property and data credentials. That chimes with Train’s recent promises to focus on such themes, and to exploit low valuations in the UK market by cutting back his overseas exposure.
The companies have quite different profiles, given Clarkson focuses on shipbroking and Intertek works in testing and assurance around the world. Train sees Clarkson benefiting from the electronification of trading and the embedding of technology into the trading process, while he thinks Intertek could flourish in an era of increased global regulation.
However, as is often the case, the entry of both into the portfolio has been hastened by share price weakness, in this case in the second half of 2024.
Readers can certainly argue about the case for or against following the manager into such stocks, and there will also be arguments about whether Train himself still deserves backing. The manager has recently apologised again to investors for performance trailing the broader market, and we will certainly continue to probe the case for using his portfolios.
What’s also interesting, however, is the sense that Train might not be alone in upping his portfolio activity. We have already seen plenty of disruption in the first month of 2025 alone. Bond yields briefly spiked, Donald Trump has returned to the scene, meaning trade wars have started to heat up again and China’s DeepSeek has helped to undermine the assumptions of the US artificial intelligence advocates.
This matters in the funds space because such developments can raise questions about many an investment thesis. Clearly, the trajectory of any trade wars may have big effects on all sorts of areas, from European exports to the US tech majors and China. That can, in turn, impact how a fund manager builds a portfolio, be it an emerging markets manager wondering whether Chinese stocks look attractive or a US manager considering whether to move away from the Magnificent Seven.
Similarly, big news such as the launch of DeepSeek can cause big share price falls, even if a company ultimately turns out to be less affected than some had first assumed. That means stocks might briefly become cheap for those who are waiting patiently for just such an opportunity.
So it could be worth looking especially closely at fund commentaries this year to see how managers are adapting to shifting events and volatile markets. After all, many managers, including Terry Smith to name but one, have picked up some of their better-performing shares at times when these are challenged and out of favour.
Having said that, investors would do well not to get carried away themselves, at least when it comes to asset allocation and moving too far in one direction. If markets do prove to be turbulent this year, diversification is likely to matter much more than it does in a period of serenely rising share prices.