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magazineFundsmith upbeat despite difficult market conditions
Fundsmith Equity (B41YBW7) 416p
Gain to date: 1.2%
Original entry point: Buy at 411p, 26 March 2020
Holders of Fundsmith Equity (B41YBW7) had the opportunity to digest the thoughts of manager Terry Smith on the recent market volatility as he put out his latest letter to investors.
The first quarter performance of the fund for 2020 shows it outperformed the MSCI World index by nearly 8% even if it fell 7.9% in absolute terms.
Smith notes that its investments in airline reservations business Amadeus and InterContinental Hotels (IHG) have been most in the firing line.
He says they have been securing liquidity to ensure they can ‘hold their breath for 18 months or so’ with no revenue and even if ‘equity in both is vaporised’ the fund would only lose about 5% of its current portfolio.
‘Whilst we have various stocks exposed to knock-on effects in travel retail, for example in cosmetics and drinks, and supply chain issues in other portfolio companies, if we were forced to guess we think about a third of the portfolio will endure this year with increased revenues – Microsoft, the payment processors, Clorox, and Reckitt Benckiser (RB.), for example.’
Two new holdings have been added to the portfolio which in Smith’s words ‘have been hard hit in this market because of China exposure and a classic “glitch”’, albeit their identities have yet to be disclosed.
SHARES SAYS: Keep buying this quality fund.
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