Tech companies drive Fundsmith's H1 returns following Amazon sale
Terry Smith (pictured) is the CEO of Fundsmith and manager of the Fundsmith Equity fund
In a letter to investors, Fundsmith CEO Terry Smith said the positive performance — although slightly below the 8.9% of the MSCI World index — was boosted by Meta's 70% gain over the last year and Microsoft's continued positive performance despite revenue growth slowing.
Meta and Microsoft were up 3.1% and 2.5%, respectively, over the period, Smith said. Other positive contributors included L'Oréal (1.5%), LVMH (1.1%) and Amadeus (1%).
Despite being the best performer in the portfolio, Smith said he is «too paranoid to ever declare victory» for Meta due to the company's share price volatility.
The biggest performance detractors in the fund were Waters and Estée Lauder — both down 1.2%. Waters was impacted by a slowdown in laboratory expenditure post-pandemic, whereas Smith deemed Estée Lauder a «concern».
Fundsmith Equity retains position as only active fund in ii's most bought in March
He said the company's share price declined followed the release of poor figures caused by a build-up and write-off of stock accumulated, as well as the lack of manufacturing capabilities in Asia, which hurt its performance in the Chinese market.
Smith also addressed the fund's sale of Amazon and Adobe over the six months. He explained Amazon's expansion into the grocery sector «ran counter» to the investment principles set out by CEO Andy Jassy.
He added: «In our view, Amazon has already stubbed its toe in this sector with the Whole Foods acquisition. Moreover, our recent experience of engagement with companies which we believe are making capital allocation and other mistakes has produced a much longer list of those who have ignored us than of those
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