Terry Smith’s (pictured) flagship £25.5bn equity fund continued its pivot towards tech stocks despite recent additions Amazon and Alphabet being among the biggest drags on performance.
According to the April factsheet, the fund added positions in computer software company Adobe and Mettler Toledo, a manufacturer of weighing scales and analytical instruments.
The latest additions could refer back to a statement in the January 2022 factsheet which confirmed, in addition to taking a stake in Alphabet, the fund had begun buying two new positions, “the names of which will be revealed when we have accumulated our desired weighting”.
Having jettisoned a long-standing stake in Johnson & Johnson in February, no further divestments were made in March or April.
The factsheet was released amid reports that Fundsmith was to undergo a Financial Conduct Authority-mandated skilled person review. A spokesperson for the company declined to comment and the FCA stated it cannot confirm or deny if a section 166, as it is known, had been issued.
It would see the firm reviewed by a third party, most likely one of the ‘Big Four’ accountants or a law firm.
Tech troubles
Smith name-checked both Adobe and Mettler Toledo in a Q&A session with Interactive Investor in March last year when asked if there were any companies that he felt he had missed out on.
Since listing in 1997, Mettler Toledo’s share price had been on a very slow but steady ascent before hitting the accelerator in January 2020, presumably driven by its pharma and biotech solutions division and production of laboratory equipment as the pandemic started to emerge.
The company’s share price peaked at $1,622.79 (£1,296.80) in December2021 and has been slowly drifting south ever since. Its share price is down 21% since the start of 2022.
The tech rout since the start of the year has seen Adobe fall sharply by 28%, while it is down 16% over 12 months.
While Adobe may be new to the equity fund, it has featured in the Fundsmith Long/Short fund that was set up to manage a portion of Smith’s personal assets. The latest information available on the US Securities and Exchange Commission (SEC) regarding the Cayman Islands-based long/short fund, however, is dated May 2021.
The addition of Adobe comes after Smith surprised investors by buying Amazon in October last year, before adding Google parent Alphabet in January. As it stands, the only Faang stock not featured in the equity fund is Apple.
The inclusion of Adobe echoed the manner in which Amazon was added, with the long/short fund – which Smith does not manage – initiating a stake in the e-commerce giant ahead of the equity fund adding a position.
April performance
The top five contributors to the equity fund in April were Philip Morris, McCormick, Pepsico, Novo Nordisk and Automatic Data Processing.
In contrast, IDEXX, Paypal, Alphabet, Microsoft and Amazon were the biggest detractors.
Fundsmith Equity has lost 9.9% over six months, against the IA Global sector which is down 8.5% over the same period. Over five years, however, it has gained 78.4% against the IA Global’s 54.3%.
