- Smith replaces underperforming Kone with Otis
- New small position initiated in Apple
- Fund lags as ‘tech wreck’ continues
Having ditched its long term holding in Finnish elevator company Kone (KNEBE:OMX) in the summer, Fundsmith Equity Fund (B41YBW7) revealed it had purchased US peer Otis Worldwide (OTIS:NYSE) in its latest fact sheet as well as initiating a new position in technology company Apple (APPL:NASDAQ).
While the fund made a gain on its Kone shares the company’s underlying performance has been disappointing from a fundamental perspective, so it is not surprising the position was sold.
As highlighted by Shares in October 2020, Kone has delivered a lacklustre 4% annualised earnings growth over the last decade which falls well short of Terry Smith’s expectations from a growth company.
More promisingly, Otis Worldwide has doubled its earnings per share over the last five years, representing annualised growth of 15% a year.
Otis shares have been more resilient than Kone’s over the last year, falling around 12% while Kone has dropped over 25%. Meanwhile, earnings revisions for Otis have held up well compared with double-digit downgrades for the Finnish group.
TAKING A SMALL BITE
The Fund said it had initiated ‘a currently small holding’ in technology giant Apple, which suggests Smith is taking a patient approach to building a position.
This may prove wise given the crushing effect of rising interest rates on longer-duration assets. So far Apple has held up well, with the shares down around 15% year-to-date.
Apple fared better than other big tech names in the latest earnings season thanks to strong Mac sales linked to new product launches. However, there were signs of weakness elsewhere in the business and a notable lack of guidance to match the uncertain outlook.
Another of Fundsmith’s holdings, Facebook owner Meta Platforms (META:NASDAQ), touched seven-year lows last week with the shares down 73% year-to-date.
Fundsmith listed Meta as one of the biggest detractors from performance in October along with Estee Lauder (EL:NYSE), Microsoft (MSFT:NASDAQ), Amazon (AMZN:NASDAQ) and L'Oreal (OR: CAC).
The fund was flat in October, underperforming the MSCI World index which gained 3.9% for the month.
