- Popular fund up 10.26% in past six months
- Top three holdings flying high in 2023
- Meta Platforms’ 70% surge boosts performance
Terry Smith’s Fundsmith Equity Fund (B41YBW7) has made a strong comeback after last year’s temporary performance blip, with the popular global fund’s three biggest holdings off to a storming start to 2023.
While a short-term setback in 2022 means Fundsmith Equity has modestly underperformed the IA Global Sector over three years on a cumulative performance basis, the fund is up 10.26% over the past six months, comfortably ahead of the 5.91% generated by its sector.
WHY 2022 WAS TOUGH
Fundsmith Equity, the long-term global investor with £22.8 billion of assets at last count, delivered a first annual loss in 2022.
Noted investor Terry Smith was forced to contend with choppy markets following Russia’s invasion of Ukraine as well as rising interest rates, which prompted more investor selling of quality growth companies and a widespread rotation towards lower-quality value sectors.
TOP THREE ON A TEAR
However, a rally in quality growth names year-to-date has provided a tailwind for Smith’s fund.
Shares in software giant Microsoft (MSFT:NASDAQ), the fund’s biggest holding, are up more than 20% this year while Danish pharmaceutical company Novo Nordisk (NVO:NYSE) has rallied the best part of 40% over the past year.
Also working for Fundsmith Equity is France’s L’Oreal (OR:EPA), with shares in the world’s largest cosmetics company having jumped 22% so far in 2023.
Concentrated around a small number of high quality, resilient, global growth companies with 27 holdings at last count, Fundsmith Equity is now up 6.9% over 3 months on a cumulative performance basis versus a 3.6% return for the sector and has now delivered a top quartile performance over the last 3 months, 6 months and 1 year periods.
WHAT ELSE IS WORKING
According to Smith’s February 2023 factsheet, there were no outright sales or purchases made in the month.
Besides Novo Nordisk and Microsoft, February’s top five contributors included Facebook-owner Meta Platforms META:NASDAQ), whose shares have stormed 70% higher in 2023 to date, as well as medical implants maker Stryker (SYK:NYSE) and soft drinks-to-snacks giant PepsiCo (PEP:NASDAQ).
Detractors included cosmetics company Estee Lauder (EL:NYSE), tobacco titan Philip Morris (PM:NYSE) and Google-owner Alphabet (GOOG:NASDAQ), as well as online retail-to-cloud computing colossus Amazon (AMZN:NASDAQ) and sportswear giant Nike (NKE:NYSE).
