LF LINDSELL TRAIN UK EQUITY D

Investment Process

The UK Equity Fund has an investible universe of around 50 companies. A company must have a particular set of outstanding characteristics to be considered for the fund - these include heritage, predictable earnings through pricing power and/or intellectual property, low capital intensity and sustainably high returns on capital. Train has identified four key strategic areas for ideas: digital winners, luxury/premium, beloved trusted brands, and the private wealth industry. He finds most of his investments in a select group of industry categories – consumer branded goods and internet/media/software - as people will never tire of being entertained or informed. Other strong categories include financials and pharmaceuticals, but he avoids heavy, old industry and particularly cyclical sectors. Train values his candidate investments using a variety of approaches, the most important being a discounted cash flow calculation. He has a very long-term investment horizon, looking at companies with a view of the next 25-plus years. He will only look to sell a holding if there is a ‘significant breach’ of its valuation target or when the investment premise is no longer valid. This is because he believes that owning great companies for the long haul makes sense and that transaction costs are a tax on his clients’ money. The result is a concentrated portfolio with the number of stocks, most valued over £1billion, unlikely to exceed 35. Its top 10 holdings typically make up around 80% of its assets.