Nick Train: ‘generational’ opportunity to buy UK growth firms

It's my pleasure, Sam.

I just felt that I had to respond to the change in value that was becoming increasingly apparent. Everybody knows that the UK stock market has been a disappointing market to invest in for longer than I care to think about, but the fact is that as it underperformed and in some cases fallen, the value, at least as we see it, has got greater and greater. And in particular, and I think this is such a crucial aspect of at least our thinking here, contrary to common opinion, there are some truly global growth businesses listed on the London Stock Exchange. And when you can buy great growth businesses at a discount to peers and to global markets, we just felt that we had to respond to that. And the obvious thing to sell in order to fund that increased exposure to these outstanding UK growth businesses were the non-UK holdings that we had. You're right, that is now historic. Time will tell.

All I know is that it's good discipline to respond to price changes when the prices are falling and value is increased. So that would be my answer.

You know, the UK has four or five world-class data, software, technology, advantage-type companies. Again, people don't know that, or maybe they do, but they haven't really acknowledged that. And I would say as examples of such global, substantive data technology advantage companies, a business like RELX, London Stock Exchange Group, Experian, Sage. We're very, very interested in the opportunity that Sage has currently, and it's those types of businesses that we've reallocated the capital to.

I will do at a kind of headline level. In part, I mean, to talk against myself, these are still two relatively small positions that we're looking to gradually build up. So I don't necessarily want to encourage your listeners to rush out and buy stock in this pair. But what I'd say at a high level about Clarkson and Intertek is that they are both world-class global franchises. You know, they're both very, very internationally oriented businesses. Over a meaningful period of time, let's say 20 years, that's a meaningful period of time, both Clarkson and Intertek have outperformed the NASDAQ, the US technology index, in sterling terms. And that's kind of interesting, isn't it, when you can find world-class UK companies that over a meaningful period of time have done better than the NASDAQ. At least that's interesting, and obviously you hope that they will continue over time to do better than the NASDAQ. Clarkson is the world, by some margin, actually number one shipbroking business. Intertek is one of the four global testing and assurance companies, and as a result is locked into some very, very strong secular growth trends in world industry today. As I say, both of them have done really well as businesses and as share prices over a longer period of time. Last year, when we initiated, both of them were at a relatively low e in terms of their share price, and we thought that presented an opportunity.

I mean, let's just be absolutely clear. We have bought some more Diageo this morning. And again, as I was saying earlier, when world-class businesses, as every business does, goes through a tougher period when the share price falls, we didn't expect it to fall as much as it has, then the disciplined thing to do is to buy more, assuming that the original investment case or thesis remains intact. We do think that that investment case remains intact, and that the share price fall is therefore a significant opportunity.