Nick Train adds two new shares to UK portfolios

Nick Train has added to new shares to his Finsbury Growth & Income and Lindsell Train UK Equity portfolios.

This is a rare move for the fund manager, who last purchased a new company, Rightmove, in November 2023.

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The new positions are in shipping broker Clarkson and industry testing and assurance business Intertek.

Clarkson shares have risen 37% over the past five years. They have a dividend yield of 2.43% and trade on a price-to-earnings (p/e) ratio of 15 times.

Intertek shares are down 18% over the past five years. They yield 2.3% and have a p/e ratio of 21 times.

Clarkson

On Clarkson, Train highlights its dominance in the shipping industry. He says that Clarkson is by far the world’s number one shipbroking company. The number two is another London-listed company, Braemar (LSE:BMS).

Train adds: “Clarkson’s revenues of £630 million in 2023 are over four times greater than Braemar’s and its market value is 13 times higher. The other eight of the top 10 shipbrokers are privately held or subsidiaries of diversified groups and have reported revenues of between £15 million and £30 million per annum.”

He notes that the cyclicality of the industry is not a big problem for investors, as shipping brokers do not own ships and are not principal risk takers, but rather intermediaries.

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Train says: “Since Andi Case became CEO in 2008, the biggest decline in annual revenues was 30% in 2009 and there was a similar fall in earnings in 2015. Despite the cyclicality, over the last 20 years, Clarkson’s share price has risen nearly seven-fold, in line with a seven-fold increase in revenues. If it can do the same out to 2044, shareholders won’t mind some cyclicality in the business.”

Another reason to own the company, according to Train, is that it is becoming a data business too.

Train adds: “What is interesting about shipbroking and Clarkson is that it seems that both are participating in the structural trends driving all financial markets: the electronification of trading; the embedding of technology through the trade process; and the growth in demand for data and the tools to analyse it.

“Clarkson claims market-leading data services that in its own words ‘underpin the workflows and decision-making of thousands of organisations across the global maritime industry.’”

Intertek

Train argues that Intertek is well placed to benefit from the ever-increasing burden of global regulation.

Intertek operates across a large range of countries and industries, including product testing, cargo inspections and quality assurance for large resources projects.

Train notes: “We view Intertek as likely to benefit from the green transition as all energy generation requires quality testing and assurance. Indeed, the green transition is bringing entirely new categories such as carbon certification, which didn’t exist 10 years ago.”

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The company also appeals to Train because it has built a competitive moat around its business.

He says: “The competitive landscape is stable with each global testing and assurance company dominating specific verticals with little overlap. There is also a significant opportunity in the form of the real competitors being Intertek’s customers, which have a genuine incentive to shift from in-house testing to third party as regulation becomes more complex and the penalties for non-compliance more onerous.”

Nick Train’s UK portfolios have underperformed their benchmarks over the past five years, but outperform over 10 years.

Returns for Nick Train’s UK funds over the past 10 years

FE Fund Info, total returns (%) to 14 January 2025. Past performance is not a guide to future performance.