Interactive Investor

RELX repays faith of star fund manager Nick Train

22nd April 2021 17:15

Graeme Evans from interactive investor

Shares rose 12% since Train urged investors to keep the faith in the blue-chip stock.

The faith of fund manager Nick Train in blue-chip RELX (LSE:REL) showed more signs of paying off today after the exhibitions-to-analytics business delivered an encouraging update.

The shares are now 12% higher than in mid-March, when Train urged investors in his LF Lindsell Train UK Equity fund to be patient following big post-results day falls of between 7% and 11% for four of his favourite holdings, including RELX. The old Reed Elsevier business accounts for just under 10% of the £6.4 billion fund.

RELX's 2020 profits were dented by inevitable Covid-19 disruption to its trade fairs division, but Train said in his March fund report that the remaining 90% of the business, providing information-based analytics and decision tools, had a reassuring story to tell.

He also drew encouragement from the company's 3% increase in the final dividend to 47p a share: “You may say a 3% hike is not enough for you to put out the bunting. But look at RELX’s share price over the decade to the start of 2020.

“The steady compounding of this formidable company generated very satisfactory total returns and, notwithstanding the hiatus for its exhibitions business, the board has signalled to investors it can see a continuation of steady, very profitable growth.”

All four of the stocks mentioned in Train's report have shown recovery progress since the start of March, with RELX up another 1% or 20.5p to 1,940p after today's update. It is now closing in on the 2,100p level seen prior to last year's pandemic sell-off.

Analysts at Morgan Stanley have been encouraged by the positive tone within the first-quarter update, particularly the stronger-than-expected guidance in the Risk division, as they re-iterated their 2,100p price target.

The Georgia-based Risk division, which provides insurers with the technology and algorithms to evaluate and predict risk, is now set for a year of strong underlying revenue growth after key markets moved in line or “slightly ahead” of pre-Covid trends.

The position in the LexisNexis-focused Legal division is stable, with RELX forecasting a year of modest revenues and profit growth. The same applies to its biggest market segment of scientific, technical and medical, which includes the world’s largest scientific and medical database and is also responsible for issuing more than 2,500 scientific journals.

The outlook in the exhibitions arm, however, remains highly uncertain after it only hosted 56 physical events in the year to date, mainly in China and Japan, with one in the US in March.

The RELX group is one of the 20 biggest stocks on the FTSE 100 index, with almost half of its 33,000 employees based in North America. As well as Nick Train, the business is a favourite stock of Keith Ashworth-Lord of the SDL UK Buffettology fund.

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