In this article, we discuss the top 10 stock picks of Terry Smith’s Fundsmith LLP. If you want to skip our detailed analysis of Smith’s history, investment philosophy, and hedge fund performance, go directly to the Top 5 Stock Picks of Terry Smith’s Fundsmith LLP.
Terry Smith, a renowned British investor often referred to as “the English Warren Buffett” for his investing style, is the founder and CEO of Fundsmith LLP.
Smith began his career at Barclays Bank after graduating from University College Cardiff in 1974. He developed an interest in stock analysis which motivated him to obtain an MBA degree from Henley Management College in 1979. In 1992, Smith joined Collins Stewart, and became CEO of the company in 2003.
Smith established Fundsmith LLP, with headquarters based in London, in 2010. The portfolio value of the hedge fund at the end of the second quarter of 2021 was $36 billion with the top 10 holdings comprising 63.8% of the portfolio. Smith’s portfolio consists of investments concentrated in the technology, healthcare and the consumer goods sectors.
Some of the top stocks in Fundsmith portfolio at the end of the second quarter of 2021 were PayPal Holdings, Inc. (NASDAQ:PYPL), Microsoft Corporation (NASDAQ:MSFT) and Facebook, Inc. (NASDAQ:FB), amongst others.
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Our Methodology
With this context in mind, here is our list of the top 10 stock picks of Terry Smith’s Fundsmith LLP. These were picked from the investment portfolio of Fundsmith at the end of the second quarter of 2021.
Why should we pay attention to Smith’s stock picks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
10. Visa Inc. (NYSE:V)
Fundsmith LLP Stake Value: $1.5 billion
Percentage of Fundsmith LLP’s 13F Portfolio: 4.23%
No. of Hedge Fund Holders: 162
Visa Inc. (NYSE:V), headquartered in Foster City, California, is a payments technology corporation that makes digital currency more accessible to individuals, businesses, banks, and governments. It enables electronic payments through Visa-branded credit cards, debit cards, and prepaid cards. The company has a market cap of $505.7 billion and stands tenth on the list of top 10 stock picks of Terry Smith’s Fundsmith LLP.
Smith’s Fundsmith LLP increased stake in Visa Inc. (NYSE:V) by 1% during the second quarter of 2021 compared to the first quarter.
On August 17, investment advisory JPMorgan kept an Overweight rating on Visa Inc. (NYSE:V) stock and increased its price target to $267 from $249, saying that the firm expects performance to revert to pre-pandemic levels.
At the end of the second quarter of 2021, 162 hedge funds in the database of Insider Monkey held stakes worth $27.6 billion in Visa Inc. (NYSE:V), down from 164 the preceding quarter worth $26.6 billion.
Just like PayPal Holdings, Inc. (Nasdaq:PYPL), Microsoft Corporation (Nasdaq:MSFT) and Facebook, Inc. (Nasdaq: FB), Visa Inc. (NYSE:V) is one of the top stock picks of Terry Smith’s Fundsmith LLP.
9. McCormick & Company, Incorporated (NYSE:MKC)
Fundsmith LLP Stake Value: $1.6 billion
Percentage of Fundsmith LLP’s 13F Portfolio: 4.35%
No. of Hedge Fund Holders: 34
McCormick & Company, Incorporated (NYSE:MKC) is ninth on the list of top 10 stock picks of Terry Smith’s Fundsmith LLP. Headquartered in Hunt Valley, Maryland, the company makes and distributes spices, seasoning mixes, and condiments to various food manufacturers and foodservices industries. The company has a market cap of $21.6 billion.
On September 17, investment advisory Deutsche Bank kept a Hold rating on McCormick & Company, Incorporated (NYSE:MKC) stock and decreased its price target to $91 from $95, saying that downside to gross margins is the company’s biggest problem.
Smith’s Fundsmith LLP increased stake in McCormick & Company, Incorporated (NYSE:MKC) by 4% during the second quarter of 2021 compared to the first quarter. The company represents 4.35% of the total investment portfolio of the hedge fund at the end of the second quarter of 2021. At the end of the second quarter of 2021, 34 hedge funds in the database of Insider Monkey held stakes worth $2 billion in McCormick & Company, Incorporated (NYSE:MKC), down from 35 the preceding quarter worth $1.9 billion.
Out of the hedge funds being tracked by Insider monkey, Fundsmith LLP is one of the biggest stakeholders in McCormick & Company, Incorporated (NYSE:MKC) with 17.8 million shares worth $1.6 billion.
8. Stryker Corporation (NYSE:SYK)
Fundsmith LLP Stake Value: $1.8 billion
Percentage of Fundsmith LLP’s 13F Portfolio: 5.04%
No. of Hedge Fund Holders: 48
Stryker Corporation (NYSE:SYK) is a medical technology firm. The company provides orthopedic, medicinal and surgical and neurotechnology products. The Michigan-based company, with a market cap of $98.5 billion, is eighth on our list of top 10 stock picks of Terry Smith’s Fundsmith LLP.
Based on latest security filings, Smith’s Fundsmith LLP owns 7 million shares worth $1.8 billion in Stryker Corporation (NYSE:SYK). This represents 5.04% of the total holdings of Fundsmith LLP. At the end of the second quarter of 2021, 48 hedge funds in the database of Insider Monkey held stakes worth $3.4 billion in Stryker Corporation (NYSE:SYK), up from 46 the preceding quarter worth $3.2 billion.
In the second quarter of 2021, Stryker Corporation (NYSE:SYK) reported an EPS of $2.25, beating estimates by $0.13. The company’s revenue in the second quarter came in at $4.29 billion, an increase of 55.4% year over year, and beat revenue estimates by $150 million.
On July 29, investment advisory Argus kept a Buy rating on Stryker Corporation (NYSE:SYK) stock and increased its price target to $320 from $280, appreciating the company’s strong Q2 results.
Just like PayPal Holdings, Inc. (Nasdaq:PYPL), Microsoft Corporation (Nasdaq:MSFT) and Facebook, Inc. (Nasdaq:FB), Stryker Corporation (NYSE:SYK) is one of the top stock picks of Terry Smith’s Fundsmith LLP.
Nelson Capital Management, an investment management firm, published its Q2 2021 investor letter and mentioned Stryker Corporation (NYSE:SYK). Here is what Nelson Capital Management has to say about the company:
“We bought a position in Stryker (tkr: SYK), a medical device company that acts as a one-stop shop for hospitals and ambulatory surgery centers. Stryker is positioned to outperform due to higher anticipated demand for elective procedures.”
7. Philip Morris International Inc. (NYSE:PM)
Fundsmith LLP Stake Value: $1.9 billion
Percentage of Fundsmith LLP’s 13F Portfolio: 5.31%
No. of Hedge Fund Holders: 46
Philip Morris International Inc. (NYSE:PM) is a Swiss-American holding firm. The company makes, sells and distributes various tobacco products and cigarettes. It is seventh on our list of top 10 stock picks of Terry Smith’s Fundsmith LLP. Smith’s Fundsmith LLP owns 19 million shares worth $1.9 billion in Stryker Corporation (NYSE:SYK), which represents 5.31% of Smith’s 13F portfolio. The hedge fund decreased stake in the company by 1% during the second quarter of 2021 compared to the first quarter.
In the second quarter of 2021, Philip Morris International Inc. (NYSE:PM) reported an EPS of $1.57, beating estimates by $0.02. The company’s revenue in the second quarter came in at $7.59 billion, an increase of 14.1% year over year, and missed revenue estimates by $120 million.
Our data shows that Fundsmith LLP is one of the biggest stakeholders of Philip Morris International Inc. (NYSE:PM) with 19 million shares worth $1.9 billion.
At the end of the second quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $5.9 billion in Philip Morris International Inc. (NYSE:PM), down from 48 the preceding quarter worth $5.5 billion.
Just like PayPal Holdings, Inc. (Nasdaq:PYPL), Microsoft Corporation (Nasdaq:MSFT) and Facebook, Inc. (Nasdaq:FB), Philip Morris International Inc. (NYSE:PM) is one of the top stock picks of Terry Smith’s Fundsmith LLP.
Broyhill Asset Management, in its Q2 2021 investor letter, mentioned Philip Morris International Inc. (NYSE:PM). Here is what the fund has to say about the company:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.”
6. The Estée Lauder Companies Inc. (NYSE:EL)
Fundsmith LLP Stake Value: $2.2 billion
Percentage of Fundsmith LLP’s 13F Portfolio: 6.02%
No. of Hedge Fund Holders: 50
The Estée Lauder Companies Inc. (NYSE:EL) is ranked sixth on our list of top 10 stock picks of Terry Smith’s Fundsmith LLP. The company, headquartered in Midtown Manhattan, New York City, makes and sells skincare, cosmetics, fragrance and hair products. It has a market cap of $112 billion. Smith’s Fundsmith LLP increased stake in The Estée Lauder Companies Inc. (NYSE:EL) by 1% during the second quarter of 2021 compared to the first quarter.
Our data shows that Fundsmith LLP is one of the biggest stakeholders of The Estée Lauder Companies Inc. (NYSE:EL) with 6.8 million shares worth $2 billion. At the end of the second quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $4 billion in The Estée Lauder Companies Inc. (NYSE:EL), down from 59 the preceding quarter worth $4 billion.
On August 23, investment advisory Berenberg kept a Buy rating on The Estée Lauder Companies Inc. (NYSE:EL) stock and increased its price target to $383 from $327, adding that it expects the company’s revenues to improve in 2022.
Just like PayPal Holdings, Inc. (Nasdaq:PYPL), Microsoft Corporation (Nasdaq:MSFT) and Facebook, Inc. (Nasdaq:FB), The Estée Lauder Companies Inc. (NYSE:EL) is one of the top stock picks of Terry Smith’s Fundsmith LLP.
Cooper Investors, an investment management firm, published its Q4 2020 investor letter and explained why it had to liquidate its Estée Lauder Companies Inc. (NYSE:EL) stake. Here is what Cooper Investors has to say about the company:
“Estee Lauder was sold because the business is experiencing a very significant share price appreciation in a short period. We bought this great company earlier in 2020, however Value Latencies appear exhausted – to highlight this point Estee Lauder now trades on 45x Free Cash Flow.”
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Disclosure: None. Top 10 Stock Picks of Terry Smith’s Fundsmith LLP.
