The stock market crash has tested the most experienced investors, as star fund manager Nick Train acknowledges. Despite 39 years in the business, he says he has never seen anything like it. If you stick with it though, you can still get rich from investing and retire early.
Train isn’t shunning markets right now. Quite the reverse. His investment trust Finsbury Growth & Income is fully invested. In his latest update, he shares some wise advice we have long advocated at the Fool.
Investing like Nick Train
He writes that “being fully invested means the portfolio will participate in any eventual rally and recovery”. That is my thinking too, as history shows it is impossible to identify the bottom of a stock market crash. It is also difficult to invest after the market has turned, “because prices rally so quickly”, he adds.
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There is no point in holding back in the hope the stock market crash has further to run. You will never find the absolutely perfect time to buy shares, and shouldn’t try.
Alongside fund manager Michael Lindsell, Nick Train’s approach is to identify “excellent companies” and hold them for the long term. They believe too many investors underestimate the value of what they call “survivability” in a company. Train defines it as the likelihood of being around in 10 years as a surprising number of companies won’t be, even in normal economic conditions.
He likes companies with conservative balance sheets and lots of net cash, and picks out three asset management companies in his portfolio. FTSE 100 listed Hargreaves Lansdown and Schroders, and Rathbone Brothers from the FTSE 250. All three also benefit from regular, subscription-type revenues.
As do several other holdings in Finsbury Growth & Income, including analytics and information provider RELX, and accounting software company Sage Group. These two can charge customers regular fees for services they need to stay in business.
I’d buy these to survive the stock market crash
Train also likes to invest in “beloved or essential consumer brands”, including IRN-BRU maker AG Barr, spirits giant Diageo, premium mixer specialist Fevertree Drinks, and household goods giant Unilever. People like comfort treats in an economic downturn, so sales tend to hold up.
Luxury label Burberry might seem an odd choice, as sales have been weak. Train highlights its net cash position, and reckons a burst of post-Covid-19 hedonism will see people rushing out to buy trench coats and other designer items to make themselves feel better.
There is no surefire method in investing and Train says all these companies will face unexpected challenges and dividends are not guaranteed. AG Barr has suspended its payout, for example. Others will follow.
However, history shows companies can recover from shocks surprisingly quickly. Stay invested and you will benefit. Just like Nick Train.
