Terry Smith has sold out of software company Sage, in the latest of a number changes to the Fundsmith Equity fund.
Smith (pictured) announced the £24bn fund had completed the sale of the Newcastle-based FTSE 100 company in the fund’s latest factsheet, dated 28 May.
Sage provides cloud accounting software for businesses. In its results for the six months ended 31 March 2021, it said it was focusing on cloud native solutions, as well as increasing its strategic investments in sales, marketing and innovation across Sage Business Cloud, as well as embedding SaaS (software as a service) capabilities.
It reported revenue growth of just 1% at a time when other software companies are booming. However, it said it expects organic recurring revenue growth for the full-year 2021 to reach the top end of its guidance range of 3% to 5%.
Sage’s share price nosedived in March last year as the pandemic struck, falling 33% from 794.6p per share to 534.8p between February and March 2020. Its share price has still not recovered to its pre-pandemic levels at 654.4p per share on Wednesday.
Smith flagged Sage as ‘in the doldrums’ in 2020 report
Sage was highlighted as one of the fund’s underperformers in 2020 according to Fundsmith Equity’s report for the year ended 31 December, detracting 0.6% from its returns.
In the report, Smith said: “Sage’s share price remains in the doldrums as we wait to see whether the new management team can make the product fit for purpose in the age of the cloud and subscription software and compete effectively with those who can.”
The sale of Sage comes on the back of a number of changes in the fund already this year. Smith ditched shares in product tester Intertek in February, picking up a stake in consumer products giant Church & Dwight instead. The manager, whose slogan is “Buy good companies. Don’t overpay. Do nothing”, finished last year by tapping into French luxury goods giant LVMH.
Performance has lagged this year
The fund’s performance has lagged over the past year as it features in the fourth quartile of the IA Global sector with returns of 17.7%, compared to the average of 24.8%, according to Trustnet. However, on a five-year basis, it has returned 134.2%, outperforming the peer average of 94%.
The fund has seen outflows over the first four months of this year, totalling at £363m according to Morningstar data.
The latest factsheet also highlighted the fund’s top five detractors in May as Paypal, Estée Lauder, Stryker, Microsoft and Visa.
In contrast, L’Oréal, Novo Nordisk, Amadeus, Waters and Diageo were the biggest contributors last month.
