Portfolio manager Nick Train, who co-manages the top-performing Lindsell Train Global Equity and UK Equity funds, is often referred to as ‘Britain’s Warren Buffett.’ The reason for this is that Train’s investment philosophy is very similar to Buffett’s – he simply picks out high-quality companies that are extremely profitable, and holds these companies for the long term. It’s a strategy that certainly works for the fund manager. Over the last five years, his UK Equity fund is up an incredible 95% versus just 36% for the FTSE All-Share index.
Interested to learn what FTSE 100 stock Train has been buying more of recently? Read on to find out.
Be greedy when others are fearful…
It’s no secret that Train is a fan of Hargreaves Lansdown shares (LSE: HL). A quick glance at the top 10 holdings of the Lindsell Train UK Equity fund will tell you that Hargreaves is a key holding for the fund.
However, what’s interesting is that since Hargreaves shares have taken a battering recently over the Woodford Equity Income fund suspension, Train and his team have been boosting their holding in the stock. Indeed, an announcement from Hargreaves on Thursday afternoon shows that Lindsell Train has recently boosted its stake in the online broker from 11% to 12% – an increase of 9%. Train appears to be following the classic Buffett advice: “Be fearful when others are greedy and greedy when others are fearful.”
Purchase rationale
Digging out the month-end commentary for the Lindsell Train UK Equity fund, Train had this to say about Hargreaves Lansdown shares: “We were not surprised by the fall and agree that HL’s reputation has taken a blow. As I write this report HL shares have recovered from the lows of June – up some 9% from that level. We take this as investors coming to the conclusion that HL’s reputation can recover – over time. We agree and accordingly have added to our holding over the last few weeks.”
Should investors follow?
Should investors follow Nick Train and load up on Hargreaves shares themselves?
Let me start by saying that I am a big fan of Hargreaves Lansdown as a company. The investment platform it offers is world class and its customer service is also exceptional. I also think the long-term growth story for the stock is extremely attractive as stock markets tend to rise over time, and this should benefit Hargreaves. For this reason, I bought some shares in the company myself late last year and early this year at around the 1,600p to 1,700p mark.
Would I buy more shares now though? Probably not. With the shares back above 2,000p, the forward-looking P/E is around 34, which doesn’t leave a big margin of safety. Even though the stock has pulled back as a result of the Woodford scandal, I would wait for a bit of market volatility before buying more, as HL is a stock that tends to experience sharp sell-offs when equity markets are volatile. Such volatility can provide very attractive entry points.
Overall, I think that Hargreaves Lansdown is a great stock to own for the long term, however, right now, the price is not right for me.