Nick Train backs editorial positioning of Daily Mail

Train Nick Lindsell Train 2014

Fund manager Nick Train has backed the often controversial editorial positioning of the the Daily Mail and its sister titles as he confirms his UK equity fund has been adding to the newspapers’ parent DMGT.

The stock is down 11 per cent year to date and last month alone was down 3.6 per cent making it one of the Lindsell Train UK Equity fund’s main detractors from performance, which was 5.4 per cent in the last month compared to 4.4 per cent in the FTSE All Share.

“We have been steadily adding to the position in the belief there is real value in the current market capitalisation,” Train says.

He notes that since 1988 DMGT shares have risen eight-fold excluding dividends compared to 4.5x in the FTSE All Share.

“DMGT’s success has been built upon two related but historic factors. First the inherent cash generative nature and inflation-protection offered by a successful newspaper franchise.

“Next – love it or loathe it – the editorial positioning of the Mail titles has been canny. It knows its readers.”

The Conservative-leaning newspaper is regularly criticised for publishing inflammatory content.

IPSO received over 1,000 complaints after the newspaper slammed three High Court judges with a headline ‘Enemies of the People’ when they ruled that the triggering of Brexit’s Article 50 must go before a parliamentary vote.

In December, the Mail Online paid out £150,000 to a Muslim family that columnist Katie Hopkins falsely accused of links to al-Qaida.

Lego and The Body Shop have both announced they have stopped advertising in the Daily Mail due to its editorial content.

While Train acknowledges the internet has “fundamentally changed the newspaper business” – which he says has contributed to the £6.85 share price today being 40 per cent lower than its all time high in 2000 – he argues the Daily Mail will generate a lot more cash before it closes its printing presses.

Additionally he notes that the 49m visitors to the Daily Mail each day make it the the most visited English-language newspaper website.

“MailOnline is loss-making, but will this year generate over £100m revenues. In a world where the value of content that attracts eyeballs to devices is rising all the time, we believe MailOnline could be exceptionally valuable.”

The online version draws on the same editorial skills as the physical product, argues Train.

Furthermore, the controlling family have made moves to diversify the company with stakes in Euromoney and Zoopla as well as risk catastrophe modelling service RMS.

Train concludes: “DMGT is not the most predictable or lowest risk investment we own and we support the recent steps taken to reduce debt. However, the gap between current market value and potential market value is one of the widest in the portfolio, we believe.”