Nick Train says he continues to add to expensive defensives despite share prices hitting all-time highs and the threat of rising interest rates.
The £148.8m Lindsell Train Investment Trust holds Diageo, Mondelez, Heineken and Unilever, which Train notes are all in the low 20x P/Es for 2017.
“It is important to note that we continue to add to each of these holdings where we can – especially Diageo and Mondelez. So, clearly, we do not think they are overvalued,” Train says in his latest monthly outlook.
Diageo is the investment trust’s second largest holding at 7.2 per cent. Unilever and Heineken are also top-10 holdings representing 6.6 per cent and 3.9 per cent respectively.
Kraft’s takeover bid for Unilever indicates consumer staples are worth “much more” than investors expect, Train says, suggesting theoretically these companies could be worth up to 40x earnings or more.
Unilever fended off a £115bn takeover bid from Warren Buffett-backed Kraft Heinz in February.
However, Train warns that the stocks stand to perform poorly if interest rates rise in 2017/18.