The Lemon Fool

ReallyVeryFoolish wrote:For those interested in this fund, Terry Smith's annual letter to investors is now available on the Fundsmith website.

Thanks RVF, link below:
https://www.fundsmith.co.uk/docs/defaul ... f?sfvrsn=4

I dropped my holding in Fundsmith today from 5.5% of my portfolio to 1.5%. I realise this may not be the right decision (always impossible to say if it is as don't know how will pan out) and probably a minority on this thread. But to me the recent (three month, one year) performance hasn't justified the cost (OCF 0.95%). Realise this is short term to many but how long do you tolerate underpreformance before doing something, one year, two, three? The one year return is 12.2% less OCF of 0.95% = 11.2%, which is slightly lower than my tracker Fidelity Index World 11.4% - 0.12% = 11.3%. Which is poor compared to its benchmark and peers. 5 year annualised return is a different story. Another reason is reports including from Goldman that markets are frothy and unsustainable, referencing world markets (but what they really mean is the US market). So by switching funds to increase China/Asia Pac have helped reduce my US exposure and increase non-US.

Adamski wrote:The one year return is 12.2% less OCF of 0.95% = 11.2%, which is slightly lower than my tracker Fidelity Index World 11.4% - 0.12% = 11.3%.

Just had a look. The only way i could replicate your year performance info was with the i income units from Jan22 to Jan22 which gives 12.22%. But that number has the OCF of 0.95% already baked into it. It's not a separate charge. So 12.22% is the return you get. Add 0.95% to get an estimate of the funds underlying / pre charges performance. Unless you're using a date I've not tried yet. The site I used (AIC) would not let me use 26th Jan. So maybe that's what you've got here.

Adamski wrote:but how long do you tolerate underpreformance before doing something, one year, two, three?.

Probably at least a year. The character of what has returned well has changed over the past few months - maybe what is characterised as a rotation into value (or what Terry calls junk or similar).

I've got various moderate yield low growth assets I've not got round to getting rid of that have returned about 20% over the last say 4 months. I consider that a pleasant bonus for not finding the share certificates.

IMHO, if you're going to sell for a few months underperformance (I'm not unhappy at 18.3% for 2020 as a whole), I'd suggest putting the whole lot in LS80 or similar (say VWRL and an appropriate bond fund) and not looking at the portfolio until you need money out of it, you stand too high a risk or buying into things just as a run of good performance comes to an end.

I have also been an investor since almost the beginning and agree with the last couple of posts. When Fundsmith launched quality shares were cheap and neglected and he had clearly seen a good entry point. They are no longer cheap and neglected. I still have a large holding but I think I will scale back not because the management has gone if the boil, I see no sign of that, it has been excellent, but because other factors will have their day. I don't have any prophetic ability but I do wonder how long value can shine for. I think it will do well when the world's economy picks up being that I don't know. Younger members may not remember that value dominated for a long time and growth funds offered poor returns based on their part performance.

Has the tide turned?

ReallyVeryFoolish wrote:I have a similar situation. But what do you buy if you sell Fundsmith? A serious question. Since in the last year to Friday just gone it has returned a little over 25 per cent. Not to be passed over lightly.

Smithson?

(I hold it as 50% of my pension. No holding in Fundsmith.)

Best wishes

Mark.

ReallyVeryFoolish wrote:

AWOL wrote:I have a similar situation. But what do you buy if you sell Fundsmith? A serious question. Since in the last year to Friday just gone it has returned a little over 25 per cent. Not to be passed over lightly.

RVF

That is a good question. I have struggled to answer it so haven't sold any Fundsmith. SWDA is a pedestrian possibility and the global nature of it brings the average P/E down a bit. My last purchase was Monks using profits taken from Smithson so that's probably a BUY signal for SSON and a sell signal for MNKS

ReallyVeryFoolish wrote:

AWOL wrote:I have also been an investor since almost the beginning and agree with the last couple of posts. When Fundsmith launched quality shares were cheap and neglected and he had clearly seen a good entry point. They are no longer cheap and neglected. I still have a large holding but I think I will scale back not because the management has gone if the boil, I see no sign of that, it has been excellent, but because other factors will have their day. I don't have any prophetic ability but I do wonder how long value can shine for. I think it will do well when the world's economy picks up being that I don't know. Younger members may not remember that value dominated for a long time and growth funds offered poor returns based on their part performance.

Has the tide turned?

I have a similar situation. But what do you buy if you sell Fundsmith? A serious question. Since in the last year to Friday just gone it has returned a little over 25 per cent. Not to be passed over lightly.

RVF

Good to get some different perspectives on Fundsmith.

I have 10% in it right now.

Every time I read/see/hear anything by Terry Smith I'm very sorely tempted to make it a lot more.

ReallyVeryFoolish wrote:I have a similar situation. But what do you buy if you sell Fundsmith? A serious question. Since in the last year to Friday just gone it has returned a little over 25 per cent. Not to be passed over lightly.

RVF

These shares in my portfolio have done better than that so far this year:

06/07/2021         
                   
Epic         Change
IMI          47.12%
BT.A         44.54%
KGF          37.43%
LLOY         27.44%
AV.          27.09%
MARS         24.80% (Now 10.85%)

That was last Tuesday, so slightly out of date now. It is often the case that last years losers are this years winners, and vicce veresa.

TJH

ReallyVeryFoolish wrote:Fundsmith has averaged something like 18 or 19% (I haven't checked recently but it's of that order) per annum for almost 11 years with tolerable volatility. How many of those stocks did that? (None of mine).

Probably none or few of mine, either. I do have some good'uns:

Simply looking at the share prices and ignoring dividends (an important component):

Diploma (held since November 2012) has returned 23% CAGR to date;
Renishaw (held since October 2011) has returned 20% CAGR to date;
Spirax Sarco Engineering (held only since March 2015) has returned 28% CAGR to date.

Best wishes


Mark.

ReallyVeryFoolish wrote:Well done on some excellent stock picking. Something I generally sub-contract to managers such as Smith or Yiu at Blue Whale. I do hold some stocks, but by far my best buy has been Fundsmith. I am amongst the world's worst stock pickers. At least I do know that, which is a positive.

Thanks, but it was more luck than judgement. (I did hold a small number of Patisserie Holdings because the financials looked good: they did, because they were fake! I had a large holding in my pension, which I sold above £4, but I kept a smaller holding in my dividend growth portfolio which got extirpated.) I did feel smug when Smithson's portfolio list included Spirax and Diploma, though.

Best wishes


Mark.

ReallyVeryFoolish wrote:Congratulations, naturally. I also have some shares that did more than Fundsmith over the last year.

However, Fundsmith has averaged something like 18 or 19% (I haven't checked recently but it's of that order) per annum for almost 11 years with tolerable volatility. How many of those stocks did that? (None of mine).

RVF

Since you ask, here are the IRR figures for my portfolio, since the dates indicated.:

EPIC   Share                            IRR      Since    
IMI    IMI plc                          44.78%   30-Mar-09
RIO    Rio Tinto plc                    34.87%   27-Apr-16
IMB    Imperial Brands plc              21.31%   01-Oct-96
LLOY   Lloyds Banking Group plc         17.02%   22-Dec-88
ADM    Admiral Group plc                16.40%   05-Mar-14
AZN    AstraZeneca plc                  16.04%   01-Jun-93
DGE    Diageo plc                       15.77%   06-May-09
SMDS   DS Smith plc                     14.13%   08-Feb-07
NG.    National Grid plc                13.68%   20-Oct-00
CPG    Compass Group plc                12.95%   31-Jan-01
TATE   Tate & Lyle plc                  12.74%   21-Jul-99
RB.    Reckitt Benckiser Group plc      12.47%   21-Mar-11
LGEN   Legal & General Group plc        11.55%   14-Jun-16
ULVR   Unilever plc                     11.10%   19-Feb-10
BA.    BAe Systems plc                  11.02%   26-Nov-99
SGRO   Segro plc                        10.30%   04-Sep-07
SSE    Scottish & Southern Energy plc   10.28%   28-Sep-10
UU.    United Utilities Group plc       10.23%   09-Aug-01
BT.A   BT Group plc                     10.16%   28-Nov-84
PHP    Primary Health Properties plc     9.44%   25-Mar-20
BP.    BP plc                            9.30%   09-Nov-79
BATS   British American Tobacco plc      8.70%   19-Feb-10
KGF    Kingfisher plc                    7.98%   04-Sep-07
BLT    BHP Billiton plc                  7.90%   19-Feb-10
GSK    GlaxoSmithKline plc               7.17%   28-Sep-10
BLND   British Land plc                  5.94%   01-Oct-10
TSCO   Tesco plc                         5.87%   19-Jun-97
S32    South32 Ltd                       5.79%   18-May-15
AV.    Aviva plc                         5.70%   26-Oct-10
VOD    Vodafone Group plc                5.60%   16-Aug-06
PSON   Pearson plc                       5.21%   22-Oct-09
TW     Taylor Wimpey plc                 4.92%   30-Aug-05
RDSB   Royal Dutch Shell plc B           4.51%   07-Jun-06
MKS    Marks & Spencer plc               4.29%   09-Feb-70
MARS   Marstons plc                      2.92%   17-Feb-11
IGG    IG Group Holdings plc            -5.29%   29-Dec-20
                                                          
       Median                           10.20%

I'm not claiming anything special, but pointing out that Fundsmith is not unique.

TJH

What utterly ridiculous performance comparisons are being made on this thread! You cannot meaningfully compare the CAGR returns of your best performing individual shares to the performance of a fund, like Fundsmith. I guarantee the overall CAGR of Fundsmith will blow away the performance of the portfolios that contain these shares.

simoan wrote:What utterly ridiculous performance comparisons are being made on this thread! You cannot meaningfully compare the CAGR returns of your best performing individual shares to the performance of a fund, like Fundsmith. I guarantee the overall CAGR of Fundsmith will blow away the performance of the portfolios that contain these shares.

A slightly out of date article (Oct 2020)

https://www.sharesmagazine.co.uk/articl ... ne-so-well

"Since inception in 2010 the fund has delivered a compound annual growth rate (CAGR) of 18.3% a year after fees, which means investors have seen the value of their investment go up more than five-fold."

simoan wrote:What utterly ridiculous performance comparisons are being made on this thread! You cannot meaningfully compare the CAGR returns of your best performing individual shares to the performance of a fund, like Fundsmith.

That's the contrast being drawn. I have a few good ones which have beaten Fundsmith but I don't think anyone claimed their portfolio had beaten it overall.

Best wishes


Mark.

tjh290633 wrote:Since you ask, here are the IRR figures for my portfolio, since the dates indicated.:

EPIC   Share                            IRR      Since    
IMI    IMI plc                          44.78%   30-Mar-09
RIO    Rio Tinto plc                    34.87%   27-Apr-16
IMB    Imperial Brands plc              21.31%   01-Oct-96
LLOY   Lloyds Banking Group plc         17.02%   22-Dec-88

[tablulated data removed - to shorten the post]

MKS    Marks & Spencer plc               4.29%   09-Feb-70
MARS   Marstons plc                      2.92%   17-Feb-11
IGG    IG Group Holdings plc            -5.29%   29-Dec-20
                                                          
       Median                           10.20%

I'm not claiming anything special, but pointing out that Fundsmith is not unique.

TJH

Sorry Terry but shouldn't you include your "Oozlums" in the calculation if you are quoting a median figure?

FWIW I have come to the conclusion that TS's way of investing stands the test of time. My biggest individual shareholdings are all from his stable. The plan is to hold for the ultra long term. Pepsico PEP demonstrated today why I should not tinker one iota.

If buying a share that is not in the FS, Smithson stable I always ask myself why I am not buying one that he has. Whats not to like about buying more L'oreal for example.

Why didn't I invest earlier and more? I've been plugging some in monthly since 2015 and the XIRR last time I checked was around 16%.

But there's always the thought: how does he do it, and how can it possibly carry on being this good?

Knocks spots off most managers and two-three times better than I can do. But, Woddford, etc - I would feeling giddy putting too much money in one fund.



Arb.

Is there a situation where people think Fundsmith could go terribly wrong?

I don't mean lag behind the index a bit I mean literally go terribly badly wrong.

Aminatidi wrote:Is there a situation where people think Fundsmith could go terribly wrong?

I don't mean lag behind the index a bit I mean literally go terribly badly wrong.

I would like to say Terry is too sensible to do a Woodford. However Woodford was OK as long as he was part of a big organisation and answerable to independent management and defined processes. He went off the rails when he effectively became a one man band doing whatever he liked and not having to go through processes and challenges by others as happens in large organisations.

I suspect Terry is very much his own master, so I don't think one could rule it out completely.