Fund manager Nick Train is often known as ‘Britain’s Warren Buffett’, for his focus on buying shares in high-quality businesses. His strategy involves holding stocks for many years and rarely trading, but he has been buying in this year’s stock market crash.
Train’s main UK fund has outperformed the FTSE All Share index by an average of 7.5% per year for the last 10 years. In a piece on Monday, I highlighted one of Train’s latest trades. Today, I want to look at three more shares this respected fund manager has been buying this year.
Fizzy result from a classy brand
Soft drink and mixer group FeverTree Drinks (LSE: FEVR) has corned the UK market for posh tonic, with a retail market share of about 40%.
The challenge for this firm is to continue growing. FeverTree’s main hope is the US market, where it’s the fourth-largest mixer brand and “the clear premium market leader.” Ginger ale and soda seem to be the main sellers at the moment, as the premium G&T trend isn’t so big in the US.
The FeverTree share price has fallen by more than 50% from its 2018 highs of £38. But the company’s recent 2019 results showed its high profit margins and strong cash generation remain intact. I thought the figures were very impressive.
Train has used the price weakness to take an initial position of 5.3% of FeverTree, spending around £70m. It’s still a small investment for his £5.4bn fund, but I share his view that it could be a rewarding buy over time.
Buy this FTSE 100 share cheaper than Train
The coronavirus started to affect markets back in January, before it was classified as a pandemic. One early faller was drinks giant Diageo (LSE: DGE), as investors speculated that the China lockdown would hit sales.
However, brands such as Tanqueray, Smirnoff, Guinness and Johnnie Walker look pretty bulletproof to me. Train appears to agree. He used January’s weakness to buy more shares in Diageo.
Events have moved on since then and the stock has continued to fall. You can now buy these shares for less than Train paid in January.
Diageo stock still looks pricey to me, on 21 times forecast earnings, and with a modest 2.6% dividend yield. But Train argues that stocks such as these offer attractive long-term returns compared to government bonds.
I’m still on the fence about buying Diageo, but I agree it’s an excellent business with great prospects.
I’m tempted to buy this share
Since February 2017, Train has been backing FTSE 100 publishing and education group Pearson (LSE: PSON). Unfortunately, Pearson’s stock has fallen by around 30% over this period, hit by a series of profit warnings and a difficult turnaround.
This hasn’t deterred Train, who has increased his stake in the firm from 5% to 11.2% since 2017. His most recent purchase was on 22 April when I estimate he spent a further £38m on this stock.
This isn’t just a random punt, in my view. Although Pearson’s exam and testing centres are closed due to the lockdown, its digital education business has seen a surge of interest. This is the firm’s main focus for growth.
With the shares now trading on just 11 times forecast earnings and offering a 4.3% yield, I think Pearson looks tempting. I’m considering buying these shares for my own portfolio.