Terry Smith sells share he flagged as “concerning”
The Fundsmith Equity manager has dropped a big American cosmetics group and replaced it with a new holding.
4th September 2023 13:33
by Sam Benstead from interactive investor
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Star fund manager Terry Smith has chopped and changed his £23.5 billion portfolio again.
Over August, he sold out of US cosmetics group Estée Lauder, bought shares in hotel group Marriott to replace it, and started building a new holding for his flagship Fundsmith Equity fund, which he said "will be revealed when we have accumulated our desired weighting."
The top five contributors in the month were Novo Nordisk, Visa, Automatic Data Processing, Stryker and Alphabet. The top five detractors were Meta Platforms, LVMH, IDEXX, L'Oreal and McCormick.
Estée Lauder has been struggling, with shares down 36% this year on the back of a drop in sales compared with last year.
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Writing to investors in July, Smith said Estée Lauder was the only one of his biggest detractors to performance in the first six months of the year that “concerned” him.
He said: “It fell in response to poor figures occasioned by a build-up, and subsequent write-off, of stock accumulated in anticipation of a reopening of travel by the Chinese after the lockdown. While domestic travel has returned, it seems that Chinese consumers are buying watches, handbags, and other luxury goods first which it was harder to shop for online during the lockdown. It has revealed some severe weakness in Estée Lauder’s supply chain with no manufacturing capability in Asia.”
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Smith added that he held Estée Lauder as a complementary cosmetics company to top 10 stock L’Oréal and he would “await to see how the recent debacle is handled.”
Hotel group Marriott has now replaced it in the portfolio. Shares are up 39% in 2023 and up 57% over five years. It is benefitting from renewed travel demand follow the Covid-19 lockdowns.
It has an operating profit margin of 17.5%, according to data firm Morningstar.
Smith has made a number of other key portfolio changes recently. He has dropped technology stocks Adobe and Amazon, and added shares in US consumer goods giant Proctor & Gamble.
This year I class units of Fundsmith Equity are up 8.3%. This compares with 10.8% for the MSCI World index and 7.1% for the typical global stocks manager. Since launch in 2010 he has returned 533% compared with 296% for the index and 198% for the typical manager.
Fundsmith Equity is a member of interactive investor’s Super 60 listed of recommended funds.
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