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Why one stockpicker thinks the FTSE 100 is ‘pregnant with value and opportunity’

FTSE 100: UK markets are ready to kick off again after recent acquisition bids, Nick Train has said.
FTSE 100: UK markets are ready to kick off again after recent acquisition bids, Nick Train has said.

UK markets including the now-fast-rising FTSE 100 are “pregnant with value and opportunity”, according to fund manager Nick Train.

Nick Train, manager of the £1.6bn Finsbury Growth and Income Trust, argued during his monthly fund commentary that the long period of underperformance in UK markets has “thrown up opportunities we are keen to capture”.

The manager, who also manages the £3.6bn Lindsell Train UK Equity fund, noted that late April had seen two multi-billion pound bids for UK companies, namely Anglo American and Darktrace.

“We do not own Anglos or Darktrace and we don’t want any of our companies to be bid for at current valuations,” added Train, but said that his portfolio should “participate in any improved confidence about London-listed equities“.

FTSE 100 on a tear

Finsbury Growth and Income Trust currently has a weighting of 10 per cent or more in drinks maker Diageo, credit reporter Experian, London Stock Exchange, analytics expert RELX, and software company Sage.

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All but one of these holdings (Experian) have been in the portfolio for 20 years or more.

Its largest holding, Diageo, was “notably weak” in April, Train said, which hurt the performance of the trust.

The group’s share price has fallen 30 per cent from its 2021 peak, but Train said it was “likely to recover”.

In April, the trust saw its share price drop by three per cent, even as the FTSE All-Share index rose by 2.5 per cent.

The FTSE 100 has also been on a recent tear.

Train credited this to the trust’s lack of investment in oil and mining companies as they have rallied, with its “meaningful positions” in the premium and luxury consumer spaces eating into performance.

He added that the ongoing weakness of Rightmove, which fell over six per cent throughout April, had allowed the trust to add to its stock holdings.

There is potential for Rightmove “to be a much bigger business over coming years,” Train said, seeing a path for the group to embed itself “ever more deeply into the UK’s property transaction ecosystem”.