6 days ago
Terry Smith Abandons Fundsmith’s ‘Do Nothing’ Investment Strategy
Terry Smith runs an investment fund called Fundsmith.
He was known for buying strong companies and holding them for a long time.
This was sometimes called a “do nothing” strategy.
But Fundsmith has changed its investments a lot in recent years.
Its U.S. stock portfolio became much smaller between 2021 and 2026.
In the latest quarter, the fund bought 13 new stocks and sold six completely.
Its biggest holdings now include Marriott International, Stryker, Waters Corp, Visa, and Uber.
Smith says market behavior has made it harder to simply hold a company while its share price falls.
He also says Warren Buffett could use that approach more easily because Berkshire Hathaway was a closed fund he controlled.
Fundsmith’s U.S. stock portfolio fell from $36.09 billion across 43 companies in June 2021 to about $13.65 billion across 41 in June 2026.
Portfolio turnover reached 51.8% in the first half of 2026 after several years of underperformance.
Marriott International, Stryker, Waters Corp, Visa, and Uber became the five largest holdings, together representing about 29.7% of the portfolio.
Fundsmith added 13 positions, including Mastercard, Netflix, Taiwan Semiconductor, AppLovin, and Veeva Systems, during the quarter ending June 2026.
The fund fully exited six positions in that quarter, including Home Depot, Zoetis, Mettler-Toledo, and Otis Worldwide.
- Who
- Terry Smith and his investment firm, Fundsmith; the comparison also discusses Warren Buffett.
- What
- Fundsmith significantly increased portfolio turnover, added 13 stocks, exited six positions, and shifted away from its traditional long-term “do nothing” approach.
- Where
- The reported holdings are Fundsmith’s U.S. stock portfolio, based on U.S. Securities and Exchange Commission filings.
- When
- The changes described are for the quarter ending June 30, 2026, with comparisons to June 30, 2021; turnover is reported for the first half of 2026.
- Why
- Smith said market conditions, including passive and momentum-driven trading flows and sharp stock-price swings, have made the traditional strategy more difficult to execute.
Long-Term Holding
Active Portfolio Rotation
Investment approach
Long-Term Holding
Fundsmith’s original strategy emphasized buying quality companies at reasonable prices and avoiding active management.
Active Portfolio Rotation
The latest portfolio changes show a willingness to rotate substantially into new companies and faster-growing technology and consumer names.
Buying through market declines
Long-Term Holding
Smith said buying quality companies during a rough patch worked for Warren Buffett and had previously worked for Fundsmith when it bought Microsoft.
Active Portfolio Rotation
Smith argued that this approach now resembles “catching a falling knife” amid passive and momentum-driven flows and large daily stock-price swings.
Fund structure
Long-Term Holding
Buffett could hold through difficult periods while controlling Berkshire Hathaway in a closed fund.
Active Portfolio Rotation
Smith said the same approach is harder to use in an open-ended fund such as Fundsmith.
Key facts
- Portfolio value
- About $13.65 billion in June 2026, down from $36.09 billion in June 2021.
- Number of holdings
- 41 companies in June 2026, compared with 43 in June 2021.
- Portfolio turnover
- 51.8% in the first half of 2026.
- Top five holdings
- Marriott International, Stryker, Waters Corp, Visa, and Uber.
- Top five combined weight
- Approximately 29.7% of the portfolio in June 2026.
- New positions
- 13 stocks were added in the quarter ending June 2026.
- Complete exits
- Six positions were fully sold in the same quarter.
Quotes
Terry Smith
Founder of Fundsmith and investment manager discussing the limits of his strategy compared with Warren Buffett’s.
“in a closed fund which he controlled, not an open-ended fund.”
financialexpress.com
Sources
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