Points to remember from Fundsmith’s 2020 annual meeting – GuruFocus.com

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Berkshire Hathaway’s annual meetings are considered to be filled with wisdom about investing, business and even life in general. Likewise, at Urbem, we believe that Terry Smith’s annual Fundsmith meetings are informative, relevant and rewarding for valuable investors. The investment guru, known as the “English Warren Buffett”, has consistently beaten the benchmark with his ODD (Invest in only the right companies, don’t pay too much and do nothing) strategy, which he applies to the global equity market. Regarding this year’s session, here are some of our Fundsmith team takeouts.

The best fund

With its outstanding performance since its inception, the Fundsmith Equity Fund has proven to be the best mutual fund in the global equity category both in absolute terms and risk-adjusted, which was exactly the aim. by the founder. Smith explained the importance of declaring the goal loud and clear:

“One of the things that a lot of people are bad at is being very clear about their goal, because the problem with setting a goal is that you have the ability to fail and make fun of yourself. I think something you have to face if you really want to be successful in life is this possibility. “

Earn money with old friends

“You never get poor by making a profit, but you don’t get rich either.”

Microsoft (NASDAQ: PYPL) and Paypal (NASDAQ: PYPL) have both been the main annual contributors to Fundsmith for many consecutive years. Smith likes to stick with his winning actions – “you make money if you do things right by persisting with them”.

Never declare victory

Smith hinted at an essential characteristic for him and his director of research, Julian Robins, to be long-term investors. According to them, one of the tricks of the trade is “paranoia”.

3M

Smith sold 3M (NYSE: MMM) in 2019 and believes the company misallocated capital by selling companies that were too cheap and acquiring companies that were too expensive. He also expressed disappointment with management teams “who do not tell the truth about (bad) decisions in a very direct way”.

A dark secret

The successful fund manager has revealed his so-called dark secret: he never looks at stock prices before buying companies. Smith even claims not to have a live price on his Bloomberg, citing two reasons: “I don’t care” and “it costs money”. At the same time, he provided a tip for getting live pricing for free verification via a Charles Schwab account.

Throughout the meeting, Smith encouraged investors to focus on reality rather than price. For example, the organic sales movement of a business is something they like to watch closely.

Political concern

“The main concern is not whether someone will be elected and do something dramatic, but whether someone will ever be able to do anything.”

When asked if the US presidential election could have an impact on the portfolio, Smith did not seem to foresee any long-term risk, noting that the American political system had more checks and balances than any other in the world. .

Timing of the market

“I don’t think we can predict economic downturns. I don’t think anyone else is particularly concerned.”

Having admitted the inability to predict the market or the economy, Smith believes that what is important is that his investments are economically defensive, providing protection in the event of a downturn, based on the fact that “people continue brush their teeth and feed their dogs. “

Google and Apple

Regarding the reason for not owning Google (NASDAQ: GOOG) (NASDAQ: GOOGL), Smith cited the company’s unimpressive return on capital as well as too many acquisitions made over the years. Regarding Apple’s move (NASDAQ: AAPL), Robins expressed concern over the fashionable nature of the business, which still requires a “guiding genius” to answer the question “what are you doing then”.

Chinese stocks

When it comes to investing in Chinese companies, Smith provided the non-investable cases of the country’s two largest companies. He described the structure of Alibaba’s variable interest entity (NYSE: BABA) and the government’s influence with Tencent (HKSE: 00700) as unreliable, particularly for minority shareholders.

Amazon

Smith believes that Amazon (NASDAQ: AMZN) may be the most vulnerable to threats from Walmart (NYSE: WMT) and Costco (NASDAQ: COST) instead of Alibaba. The two American retail giants have a fantastic reach in terms of collection and delivery capacity as well as reducing the cost of products for consumers.

Disclosure: Mention of any title in this article does not constitute an investment recommendation. Investors should always do a thorough analysis themselves or consult their investment advisers before acting on the financial market. We have no security mentioned in the article.

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About the Author:

Steven Chen

Steven CHEN is a quality investor (with bottom-up opportunistic approaches), a former Wall Street hedge fund analyst, a serial entrepreneur, a computer scientist and a free market capitalist.

Steven is a Managing Partner of Urbem Partnership, a value / quality investment partnership fund (www.urbem.capital), and Urbem Capital, the research boutique that focuses on the highest quality of 0.1 % of all public companies in the world.

Steven can be reached at [email protected] or via LinkedIn.

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