Does Terry Smith know something we don't?

Dear Reader,

I do not like funds. I do not like them at all. I am convinced that 99.99% of them are just very lucky or lousy performers -- what's the difference? -- and too expensive, untransparent and subject to heavy (re)selling pressure from your bank or wealth managers.

Although in the past I invested in many funds I am holding on to just one today. It is called a fund in fact and name but in reality it is not really one IMHO. It is just a legal structure in the same sense (or nonsense) as Warren Buffett's Berkshire Hathaway is a public stock holding.

The name is Fundsmith and it was founded by Terry Smith in 2010. Today there are 8 funds & investment trusts in the group and it is the largest active equity mutual fund in the UK with about ￡36B (as at 31st December 2023) in assets under management.

The flagship within the fund is named Fundsmith Equity Fund (-SICAV) and has $25B AUM. The reason why I believe this fund has not the typical fund characteristics is their list of "No" promises. All the NO lines below are typically what any other fund would do.

I do follow all of their AGM's and read Terry's annual and semi-annual newsletters with the same appetite as those of Warren Buffett. They are full of investor wisdom, key metrics and often unsalted opinions about the corporate business world. Terry Smith is challenged since a while by another upcoming UK fund manager: Stephen Yiu from Blue Whale Growth Fund.

Blue Whale Growth is much smaller with ￡1B AUM and the biggest difference is in their tech holdings, e.g. Blue Whale has invested heavily in Nvida lately, while Fundsmith has not. One can see this in the past performance where Blue Whale outperforms Fundsmith in the years 2020-2021 and 2024 but not in 2022-2023. I had the Blue Whale in portfolio for a while but sold it in 2022. If I would ever buy another second fund again, it likely might be this one.

The thing I want to share with you however is not about performance but about behaviour. I did point you in one of my previous posts to the Dataroma website which is a good source of information on Superinvestors. As Terry Smith is one of them, we can see his holdings (with some delay) as well as the line movements in portfolio tracked by their so-called 13F filings.

This is the latest one, up to date to 30th June 2024:

Besides some notable additional investments in Fortinet Inc ("FTNT") and Texas Instruments ("TXN"), we notice a relatively new position in Oddity Tech Ltd Class A. The website of ODD reads as following:

So yes, Terry finally fell also for "AI" in a very general and very generic way. It is a quite small position with 0.26% so could be a bit of a gamble too, but we'll see how this evolves.

The other intriguing thing is that the rest of the positions are ALL reduced in percentages. So Terry has sold a lot of the position percentages in Q2, for several billions of $. As also did Warren Buffett btw.

Which brings us to the title of this post: Does Terry know something we don't know?

Cheers, as always

Luc