Terry Smith’s £23.7bn flagship fund sold its holding in US coffee chain giant Starbucks, per Fundsmith’s May factsheet.
The difficult market backdrop proved a persistent headwind for the global equity fund, which had weighed in at £25.5bn the month before.
In May, it was also revealed that the firm is to undergo an FCA-mandated review.
See also: Fundsmith highlights 2bps fall in charges in latest value assessment
Leadership and union challenges
Updates from Smith are famously succinct, offering little beyond performance figures and statements of fact – what’s in and what’s out.
Year to date, Starbucks’ share price is down 31.9%, having fallen 28.6% over one year.
Like most retailers, the pandemic was not kind, but Starbucks drive-throughs were credited with helping it make a “full recovery” by spring 2021.
Across five years the picture looks rosier, with shares up nearly 28%. However, on closer inspection, it has ceded all the ground it conquered after bouncing out of the March 2020 trough.
The company is currently on the hunt for a chief executive, having wooed founder Howard Schulz back to the helm after Kevin Johnson retired in April after 13 years with the company, five as CEO.
Schulz will remain interim CEO until a successor is found, which is expected to be by the autumn. Only external candidates are being considered, he told The Wall Street Journal.
Other than the change in leadership, another factor that could have prompted Smith to kick the coffee shop to the kerb is the growth of unions among its workforce.
A New York branch has claimed that their location is being shut down in retaliation for their union activism, reports CNN.
It is by no means the only Fundsmith holding to face growing pressure from workers to form unions. Amazon is facing similar challenges and was added to the fund in October 2021, after years of Smith shunning the stock.
The tech giant has, unsurprisingly, been one of the biggest detractors of Fundsmith for the past two months.
May performance
The top five contributors in May were Waters, Philip Morris, Kone, Adobe and Mettler-Toledo, the latter two only joining the roster the previous month.
Starbucks is the second holding to be shown the exit in 2022 after Smith jettisoned a long-standing stake in Johnson & Johnson in February.
Fundsmith Equity lost 12.7% over six months compared with the IA Global sector which was down 7.8%. Over five years it has gained 64.1% against the IA Global’s 48.6%.
