Fundsmith, an investment management company based in London, released its 2022 yearly update. A copy of the same can be downloaded here. In 2022, the Fundsmith Equity Fund declined -13.8% compared to a 7.8% decline for the MSCI World Index in sterling with dividends reinvested. However, the fund is the best performer in the Investment Association Global sector since its inception in November 2010. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Fundsmith highlighted stocks like Microsoft Corporation (NASDAQ:MSFT) in the 2022 yearly investor letter. Headquartered in Redmond, Washington, Microsoft Corporation (NASDAQ:MSFT) is a multinational technology company. On January 11, 2023, Microsoft Corporation (NASDAQ:MSFT) stock closed at $235.77 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was -5.32%, and its shares lost 22.65% of their value over the last 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $1.758 trillion.
Fundsmith made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its yearly 2022 investor letter:
“Take the example of Microsoft Corporation (NASDAQ:MSFT) and Intuit. Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share-based compensation, in their estimates. If we include the impact of share-based compensation in Intuit’s 2023 EPS to make a more apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies.”
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Microsoft Corporation (NASDAQ:MSFT) hold the first position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 269 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the third quarter, which was 258 in the previous quarter.
We discussed Microsoft Corporation (NASDAQ:MSFT) in another article and shared Mormon Church’s biggest stock positions. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
