Fundsmith Equity Fund

Thanks for your points. I think they are valid.

It’s just: we are not talking about buying Meta from the perspective of a single investor, but as part of Fundsmith portfolio. We have to either trust that Terry Smith and his team are doing proper DD or we don’t trust his decisions and have to remove our money.

I think Terry Smith and his team have been doing a great job so far, and I don’t think that I’m smarter than him. For me, investing with Fundsmith is a (rather small) bet on active investing. Could it turn out well? Yes. Can it turn out worse than the average market? Absolutely.

So Fundsmith investing in Meta is something I can’t do anything about it, other than not putting my money in active investing in the first place.

Please don’t get me wrong: your points and what @San_Francisco mentioned are very valuable!

I would have liked Fundsmith (FEF) to have shared some kind of analysis on FB’s forward looking ROC in the AGM

FEF strategy includes not to buy tech businesses they don’t understand and to buy businesses that will continue generating returns for a very long time.

What I am not clear about - and my fear - is whether FEF was blinded by FB’s historical ROC and growth and bought a business without understanding the risks about what could happen to those numbers in the future.

FB announced lower growth forecast. The huge investment in metaverse seems at odds with FEF strategy buy “companies who have already won” .

All this said, I think the damage is already done in terms of FEF performance. FB is no longer one of the top 10 FS investments. Personally I do also suspect that FB has been oversold currently - the valuation now seems quite low, I would not sell FB shares right now

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all healthy discussions !! and for what it’s worth I’ve done very well with FS so not knocking the strategy. I love the returns and for sure TS is smarter than I am (in this domain :slight_smile: ) but coming from an IT technology background and working on corporate strategy for a few years now I have an opinion.

I won’t move my money out of FS but like others on this thread feel narrative on the Meta investment is unclear. Hopefully they know something we don’t and the returns continue high


I agree with the healthy discussions :slightly_smiling_face: Same for me with the IT background. And indeed TS might have invested in something he doesn’t understand well enough.

Crossing fingers here as well

Disclaimer: I have no position in FB, as I am only invested in Smithson and not the main FEF fund.
What follows is just my hypothesis; just an hypothesis, and not my definitive opinion.

As said earlier, FB is with Google a duopoly for online advertising. As of 2021, if you are a small business owner, the platform with the highest return on marketing investment is FB, by far.


So the big question is whether FB will continue to be as interesting for small businesses in terms of returns on advertising investment.

So far, the advertising business has been very, very good for FB. So good that Zuck had to go several times in front of congress to testify about FB’s business practices.

I think Zuck’s main concern at the moment is to make sure that regulators don’t split up the company because of its dominant position in online advertising. And i think that’s why he has been very vocal during 2021 about how everybody is introducing measures against FB and how it is bad for them.

Yes, IOS14 is bad news for Facebook and introduces a lot of friction. The release was in April 2021. We will see the full results after one year when FB will publish their financials for Q1 2022. But it looks like so far, even with everybody conspiring against Facebook (according to Zuckerberg) , profits are going to be up 33% compared to last year. If that’s the only impact of IOS14 and it can keep regulators at bay, I think he can live with it.

Of course we will see the long-term impact in the next few years. But as long as FB is the best offer for small businesses in terms of advertising, the company may still have a bright future…

… or maybe i am wrong, the metaverse will be an abject failure and a new social network will completely disrupt FB’s advertising business. But as I don’t have a position, I don’t have to be right on this one :smiley:


Separately, did anyone see TS say much more about Paypal other than “management took their eye of the ball in 2021 by looking too much at Acquisitions of Pintrest” ? I did not watch the whole 90 min video

Paypal was a FEF bigger holding than FB and unless I am mistaken the share price has declined by higher %

I believe the metaverse is a complete bullcrap without a device that is small and compelling enough for its consumption. The current headsets aren’t those devices… But ultimately, time will tell, and even until then, FB has a lot of cash to burn on what Alphabet called “Other bets”. I just wish they hadn’t changed their name to Meta. Oh well…

I wonder how Terry thinks about Mark’s comments in the latest quarterly call

So over the next several years our goal from a financial perspective is to generate sufficient operating income growth from Family of Apps to fund the growth of investment in Reality Labs while still growing our overall profitability. Unfortunately, that’s not going to happen in 2022 given the revenue headwinds, but longer term that is our goal and our expectation. Of course, our priority remains building for the long term, so while we’re currently building our plans to achieve this, it’s possible that prolonged macroeconomic or business uncertainty could force us to trade off against shorter term financial goals. But we remain confident in our long term opportunities and growth.

so is the metaverse a strategy or a side project that FB has no idea what it really means? :slight_smile:

This thread is more about Fundsmith’s main fund (“Fundsmith Equity Fund”) I believe, however one of their other products (Fundsmith Emerging Equities Trust, or FEET) also has been mentioned a few times in this thread, so I post here, instead of starting a separate FEET thread.

FEET uses the same strategy as the Fundsmith Equity Fund but focussing on companies with majority of their operations in, or revenue derived from, Developing Economies, providing direct exposure to the rise of the consumer classes in those countries.
It nicely also avoids China (I dislike China market as an investment), so I bought some FEET some time ago.

Last week Tuesday (when everything else was red), the price seemed to jump up 10%, strange, but couldn’t find anything about it.

Now I found this, which is quite irritating and also not terribly understable (to me) - FEET will be be placed under voluntary liquidation.

YTD -12% (in CHF) = one of the better performing holdings for 2022.
EM overall has not seen terribly good performance last 5-10 years, so it hasn’t been an easy sector.
EM of all markets needs the longest to develop positively IMO, and ditching it after 8 years seems premature.

Why the 10% jump, is that the discount to NAV that it was trading at? Yes, I suppose so → “As at 31 Aug 2022, Price 1215.00p NAV 1421.56p Discount -14.5%
Keep until the liquidation proceeds are distributed (November 2022?), or sell now?
And now to figure out whether to re-invest in something like VFEM or simply VT?

Edit: this YTD of -12% (in CHF, as of 18.9.2022) that I quoted is deceptive, since at the liquidation announcement (14.9) it jumped about 11%. So the performance, at pre-announcement, of YTD of about -23% should be used for comparison, for example compare with VWRL & VFEM which are at about -16% at this time.


Thanks for making me aware.

I have (accidentally) kept a foreign fund through liquidation and IBKR reported it as mixed income in their statement, deducting withholding tax on the full proceeds.

Example: had I bought 100 shares at 80$ each, the share price increased and it were liquidated at 100$/proceeds, IBKR would have withheld 15% WHT on the entire 10‘000$ „mixed income“ proceeds from liquidation (instead of only on the minuscule amount of dividend income received by the fund). Needless to say, I was not amused - am still waiting on the assessment from the tax office.

Now, I suppose there shouldn’t be tax withheld in the case of FEET, since it’s a UK fund. But I don’t want to risk having another „mixed income“ item on my next taxes.

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Thanks as well for raising awareness!

I didn’t see the (tentative) timelines for it in the link you posted - do we know until when we “have time”?

Found the relative answer:

“FEET is expected to be placed into voluntary liquidation by the end of November”

Anyone else attending the Fundsmith Annual Shareholders‘ Meeting on 28 feb in London this year?

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Would love to listen to the stream, is there going to be one?

I think they‘ve been posting recordings shortly afterwards - but no live stream.

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Right, if I remember correctly they are all on Youtube but it could take a few days or weeks until they publish the video. I think last year I was eager to watch it and waited and waited…



VWRA in GBP went down only -8.17% in 2022, so nothing to be really proud of :rofl:.

Oh, Terry definitely wasn’t. But to be fair, they did mention on previous occasions that a time would come where they’d trail the benchmark.

By the way: most undervalued stock in their portfolio? Terry thinks it‘s Meta - while admitting they didn’t do well on the timing for their purchase.

Also, while it technically shouldn’t have been on the agenda, they did briefly comment on the reasons for winding down of FEET (their emerging markets counterpart), also citing the currency headwind, and that currencies like the INR can’t be hedged properly.

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The video is here