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2 FTSE 100 stocks I like owned by ‘Britain’s Warren Buffett’

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Edward Sheldon, CFA
·3-min read
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Businessmen teamwork brainstorming meeting.
Businessmen teamwork brainstorming meeting.

Portfolio manager Nick Train is often called ‘Britain’s Warren Buffett’. It’s not hard to see why. Since the launch of his UK Equity fund back in 2006, it has more than tripled the returns from the UK stock market.

Here, I’m going to discuss two FTSE 100 stocks that Train currently has large positions in. I’d be happy to buy both stocks for my own investment portfolio today.

A FTSE 100 data company

The first FTSE 100 stock I want to discuss is London Stock Exchange (LSE: LSEG). It’s a leading global financial markets infrastructure and data company that provides capital markets services, data and analytics solutions, and post-trade services. This stock was the largest holding in Train’s UK Equity fund at the end of February.

London Stock Exchange’s share price has taken a hit this month. That’s because the group recently advised in its full-year 2020 results that it’s going to face higher-than-expected costs of £850m this year. The market didn’t like this news.

However, I think the share price fall is excessive. Overall, the full-year results were quite solid with revenue up 3% and adjusted earnings per share up 5%. Meanwhile, the company hiked its full-year dividend by 7% to 75p per share, which suggests to me management is confident about the future. The company also said it’s well-positioned for future growth.

It’s worth noting that since the share price fall, a number of board members have stepped up to buy stock. I see this as encouraging. After all, no one has more knowledge of a company and its prospects than its executives and directors.

Even after the share price rise, LSEG shares aren’t cheap. Currently, the forward-looking price-to-earnings (P/E) ratio is about 26. That valuation doesn’t leave a huge margin of error. If future growth is underwhelming, the shares could fall further.

Overall however, I think this FTSE 100 stock is attractive at current levels.

Strong growth

Another Train-owned FTSE 100 stock I’d buy today is Hargreaves Lansdown (LSE: HL). It operates the largest retail investor platform in the UK. This was the eighth largest holding in his fund at the end of February.

The last time I covered Hargreaves Lansdown, I noted that increased interest in investing and trading was benefiting the company. Over the six-month period to the end of 2020, the group added 84,000 customers and generated revenue growth of 16%.

Encouragingly, the company is still enjoying strong growth. In a statement published recently, it said trading in January had been similar to previous lockdown periods with strong dealing volumes, significant engagement from clients, and robust net new client numbers.

Furthermore, it said it had continued to see elevated volumes of share dealing since the end of January. As a result, the group advised it now expects pre-tax profit for the year ending 30 June to be modestly above the top end of analyst expectations.

One risk that concerns me here is the threat of competition. Over the last year, rival Trading 212 has added a huge number of clients. This is something I’ll be keeping a close eye on. A P/E ratio of 26 also adds valuation risk.

All things considered however, I think this FTSE 100 stock offers a nice long-term risk/reward proposition. I’d buy it today.

The post 2 FTSE 100 stocks I like owned by ‘Britain’s Warren Buffett’ appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in London Stock Exchange and Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021