Should I add to my investment in Finsbury Growth and Income Trust now?

An investment trust is a public limited company (PLC) traded on the stock exchange. So, in that respect, they are like any other stock that we can buy, for example BP or AstraZeneca.

But unlike a company that owns a direct business, an investment trust earns its living by buying shares of other companies or owning other financial assets. And I think they are a good way to achieve portfolio diversification.

Risk and potential positive

The investment trusts I like the most tend to focus on publicly listed stocks. So, it can be a good way to take some profit (or loss) from a certain investment strategy. And this is because it is managed by investment managers and their teams.

But buying shares in an investment trust means we effectively outsource the responsibility of running the strategy. And sometimes things go wrong. Or perhaps the trust simply underperforms other funds that use the same strategy by a smaller but consistent margin.

So, investment trusts come with risks as well as potential. But I have some in my portfolio along with my own stock picks. And one thing I’m optimistic about is Finsbury Growth and Income Trust (LSE: FGT). I’ve been holding back for a while. But the question for me now is, should I increase my investment?

The trust’s portfolio manager is Nick Train. And he opened it as a concentrated portfolio of about 30 stocks aimed at high-quality business targets.

The goal is to capture multi-year returns from a company that can increase earnings over time. So, they look for businesses with strong brands or strong market franchises.

The strategy is similar to US billionaire investor Warren Buffett. And like Buffett, Sepur aims to buy stocks that fall below his company’s estimated value. Then he held her for a long time, ” regardless of short-term volatility“.

What’s under the bonnet?

We can get a strong idea of ​​what we earn with Finsbury by looking at the top 10 holdings. Together, they make up about 83% of the money invested in the trust. Equal Rest, Diageo, London Savings Exchange, Unilever, Burberry, Mondalez, Experience, Sage, Schrodersand Remy Cointreau.

I would describe all these businesses as quality operators with a price tag to match. Indeed, FGT is not looking for basement companies or deeper situations.

However, in the decade between 2009 and 2019, the trust’s share price increased by around 470%. And that suggests the return of the strategy is worth having. However, the highest share price was just over 950p in September 2019. And it’s not too far from the current price of close to 858p. Meanwhile, the value of the trust’s price-to-book value is close to one, indicating that the price corresponds to the event.

And in the past year, the stock is down just under 2%. But I think the underlying business has a good chance of doing well over the next 10 years. Although, nothing is certain and I am easily wrong. Or, perhaps, good performance in business may not translate into decent stock returns.

However, I am optimistic and would increase my position in FGT now if I had money to invest.