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‘Britain’s Warren Buffett’ just bought this FTSE 100 stock. Should you buy too?

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

Portfolio manager Nick Train is often referred to as ‘Britain’s Warren Buffett.’ This is due to the fact that he has a fantastic performance track record. His UK Equity fund has literally smashed the FTSE 100 over the long run.

Recently, Train has been buying a new FTSE 100 stock for his portfolio. Interested to know what the stock is? Read on and I’ll tell you.

Nick Train just bought this FTSE 100 stock

The FTSE 100 stock that Train has bought for his UK Equity fund recently is Experian (LSE:EXPN). Experian is a technology company that collects data on people and provides credit reports to individuals and businesses. Its services help organisations make faster, smarter decisions and lend responsibly.

Train says the reason he bought Experian is that he wants to own more UK companies with “credible and globally-competitive assets in technology, data and analytics.”

He believes that Experian has a strong business model. The portfolio manager also likes the fact that the company is shifting from simply selling data to selling it enhanced by decision tools. He believes this will enhance the utility of the underlying data and increase the ‘stickiness’ of Experian’s customer relationships.

We believe EXPN’s datasets will continue to be essential products, but the shift to decision tools is what will drive substantial growth over the next decade,” Train commented.

It’s worth noting that Train has most likely paid a high valuation for Experian. Currently, its forward-looking P/E ratio is almost 40. Clearly, high valuations are not a deal-breaker for the portfolio manager.

Concerns that any company’s shares are too expensive have not been particularly helpful over the last few years and into 2020. Instead, apparently ‘expensive’ companies with a strategic growth opportunity have often carried on doing well in share price terms,” Train said in July.

Should you buy Experian too?

Experian is a FTSE 100 stock I’ve looked at personally quite a few times recently. The reason being, I’m quite bullish on the technology sector.

Here’s what I like about the company:

  • How much data it has access to. In today’s digital world, it’s positioned well. After all, they say data is the new oil.

  • The fact that there are only a few players in its industry. This provides a competitive advantage.

  • How profitable it is. Over the last three years, return on capital employed has averaged nearly 20%.

  • The dividend growth track record. Over the last decade, the payout has more than doubled.

However, I’ve never bought the stock for my own portfolio because:

  • Revenue growth has been underwhelming. Between FY2015 and FY2020, revenue only grew 7.7% in total. Revenue growth is forecast to pick up in FY2022, however.

  • Debt has looked quite high. At 31 March, the group had total liabilities of $6,624m vs equity of $2,275m on its balance sheet.

  • The valuation has been quite high, especially given the underwhelming top-line growth.

Overall, I do see appeal in Experian. I would be interested in owning the FTSE 100 stock at some stage. However, I wouldn’t rush out to buy it today. Right now, the valuation is a bit too high, in my view.

I’m going to keep EXPN on my watchlist for now. If the FTSE 100 stock pulls back in a market correction, I’ll take another look.

More reading

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Experian. 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 2020