“Britain’s Warren Buffett” bought these FTSE 100 stocks which I would also buy
“Britain’s Warren Buffett” is the nickname given to portfolio manager Nick Train, who co-manages a number of the best performing equity funds. He is generally regarded as one of the best stock pickers in the UK. Indeed, his track record of performance is so impressive that “Britain’s Warren Buffett” seems to be a fair description.
This year, Train purchased a number of stocks for its portfolios amidst market volatility associated with coronaviruses. If you have money to invest right now, I think it’s worth looking at what the portfolio manager has bought.
The train loves this Warren Buffett type stock
One of the first titles purchased by Train when the titles began to wobble earlier in the year was the liquor champion. Diageo (LSE: LON :). It is an FTSE 100 company of which Train is a big fan. Today is the second holding of its Global Equity fund and the fifth largest holding of its UK Equity fund, according to data from Hargreaves Lansdown (LON :).
It’s not hard to see why Train likes Diageo (and why Warren Buffett himself might like it if he bought British stocks). In simple terms, it is a classic Buffett type stock. Not only does it have a strong competitive advantage thanks to the power of its brands (Johnnie Walker, Smirnoff, Tanqueray, etc.), but it is also very profitable. In addition, it is a reliable dividend payer with a superb long-term wealth generation record for shareholders.
Diageo’s shares have actually continued to fall since Train bought earlier in the year. This means that you can get the shares back at a lower price than it paid for.
Personally, at the current valuation (rear P / E ratio of 21), I think that Diageo’s actions seem attractive at the moment. Covid-19 will certainly roll back the business in the short term, but the long-term growth story associated with growth in emerging markets remains intact.
FTSE 100 benefits from the power
More recently, Train purchased shares in the financial services company Hargreaves Lansdown (LSE: HL). At the end of last month, Lindsell Train Limited increased its stake in the FTSE 100 share from 12% to 13%. This means that “the British Warren Buffett” has spent some £ 70 million on Hargreaves Lansdown shares. Obviously, he is confident in the outlook.
I can see why Train likes Hargreaves Lansdown. Like Diageo, it is really a Buffett type stock. For starters, the business is one of the most profitable of all. Last year, return on capital employed (ROCE) – a key measure of profitability – stood at 69%. In contrast, the five largest non-bank companies in the FTSE 100, AstraZeneca, Unilever (LON :), Shell (LON :), GlaxoSmithKline and British American Tobacco (LON :), an average ROCE of 11%.
Second, it is the industry leader in investment management platforms with a market share of around 40%. This provides a competitive advantage.
Third, the story of long-term growth seems attractive. We all need to save and invest more for retirement and Hargreaves should benefit. In addition, the rise in the stock markets should stimulate assets under administration over the long term.
Hargreaves Lansdown shares are currently down about 25% this year. At today’s prices, the rear P / E ratio is around 28. At this assessment, I consider the title to be a “purchase”.
The ticket “Britain’s Warren Buffett” bought these FTSE 100 shares which I would also buy. He first appeared on The Motley Fool UK.
Edward Sheldon holds shares in Diageo, Hargreaves Lansdown, Unilever, GlaxoSmithKline and Royal Dutch Shell, and has positions in Lindsell Train Global Equity and Lindsell Train UK Equity funds. The Motley Fool UK holds shares and has recommended GlaxoSmithKline and Unilever. Motley Fool UK recommended Diageo and Hargreaves Lansdown. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a diverse range of ideas makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool