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Steven Chen
Steven Chen
Articles (206)  | Author's Website |

Nick Train's Three Big Ideas

Good references to construct your portfolio for the next 20 years

Nick Train, the self-proclaimed "copycat" of both Warren Buffett (Trades, Portfolio) and Peter Lynch in terms of investment strategies, is the co-founder of Lindsell Train Limited. The investment firm has consistently outperformed the market since its inception, employing a concentrated approach looking to hold multi-baggers for the ultra-long-run.

During an interview, the British star money manager elaborated on his three big ideas underpinning his long-shot holdings. Regardless of how the world evolves, Train thinks that these ideas can drive significant equity returns for patient shareholders over the next 20 years, just like what they did over the past couple of decades for his firm.

Products that taste good

"I don't think technology is ever going to take away the attraction of a product that consumers enjoy eating or drinking," Train described. Browsing through his top holdings, we see a number of positions across globally-recognized food and beverage brands, such as Heineken Holding (XAMS:HEIO), Diageo (LSE:DGE) and PepsiCo (NASDAQ:PEP).

At Urbem, we value top-mind-share, customer-winning products, which not only dig out wide economic moats but also help secure organic growth. Take a look at Monster's (MNST) energy drinks, which keep gaining market share against Red Bull in a fast-moving category while delivering solid returns on capital. No wonder that Domino's (DPZ) wanted so badly to fix its "cardboard-taste" pizzas.

People never get bored of being informed or entertained

The media and entertainment industry appears to be where this investment guru tries to capitalize on the never-ending advancement of technologies and ride the megatrend of the ever-expanding digital world. One example of this in Train's holding is the Japanese consumer electronics and video game giant Nintendo (TSE:7974). Media conglomerates like Walt Disney (DIS) and Netflix (NFLX) may also fit well into this category, in our opinion.

The stock market does well over time

In this regard, Train favors businesses that do well when the stock market does well while taking advantage of opportunities caused by pessimism among market participants from time to time. Some classic examples of Train's investments in this area include London Stock Exchange Group (LSE:LSE) and Japan Exchange Group (TSE:8697).

Besides exchanges, the asset management industry also benefits from the long-term up-trend of the stock market. The Australian fund house Platinum Investment Management (ASX:PTM) is one of our favorites in this space. Nevertheless, to mitigate the competitive risk of "race to zero," we think that investors may want to consider FinTech businesses that support industry: e.g., FactSet Research Systems (NYSE:FDS) and SimCorp (OCSE:SIM).

Disclosure: The mention of any security in this article does not constitute an investment recommendation. Investors should always conduct careful analysis themselves or consult with their investment advisors before acting in the stock market. We own shares of FactSet Research Systems, SimCorp, Domino's Pizza, and Monster Beverage.

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About the author:

Steven Chen
Steven CHEN is a quality-focused, business-perspective investor (with bottom-up opportunistic approaches), an ex-hedge fund analyst on Wall Street, a serial entrepreneur, computer scientist, and free-market capitalist.

Steven is the Managing Partner of Urbem Partnership, a value/quality-focused investment partnership fund (www.urbem.capital).

Steven can be reached at [email protected], LinkedIn, or WeChat (ID: LSCHEN2005).

Also, check out his column at Smartkarma on the Asian market - www.smartkarma.com/profiles/steven-chen

Visit Steven Chen's Website


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