Johnson & Johnson has become the latest longstanding holding Terry Smith has jettisoned from his Fundsmith Equity fund.
The divestment was revealed in a February factsheet for Smith’s £24.8bn global equity fund. No other portfolio holdings were bought or sold during the period.
Smith first invested in the US pharmaceutical and consumer healthcare giant back in 2014 and by December 2015 it was among Fundsmith Equity’s largest holdings. Though it has remained out of the top 10 since then, documents for the fund show it was one of the largest purchases in the six months to 30 June 2020, with Smith snapping up £80m worth of shares.
Although the drugmaker’s shares were boosted following the approval of its single-dose Covid vaccine, they have lost some of their shine amid allegations of the company’s involvement in the US opioid crisis and lawsuits alleging its talc-based baby powder products caused cancer.
To restore its tarnished reputation, Johnson & Johnson has flown in new CEO Joaquin Duato and intends to spin-off its consumer healthcare business, much like Glaxosmithkline in the UK.
Shares in the company are down 0.8% year-to-date, at $170.15 a pop, comfortably below their $179.44 peak last August.
Johnson & Johnson is the latest legacy holding Smith has kicked to the curb. Over the first half of 2021, he sold out of Intertek and Sage and in October he ditched Becton Dickinson, one of the fund’s original top 10 holdings when it debuted in 2010.
Meanwhile, he has been busy adding tech giants to the fund, initiating a stake in e-commerce giant Amazon in October and Google parent Alphabet in January. His latest purchases, particularly Amazon, have caught many investors off guard and means he now owns all the Faang stocks apart from Apple.
But his tech bets have been ill-timed as growth stocks trading on frothy valuations have been severely punished in the market downturn this year. Alphabet and Amazon have lost 11% and 18%, respectively, so far; while Microsoft, which Smith has owned for some time, is down 16%. Meta Platforms, previously Facebook, has seen 44% of its value wiped this year.
Fundsmith Equity has now lost 12.2% over six months, worse than the IA Global sector’s losses of 8.6%. However, its long-term track record is still stronger than peers, with the fund returning 79% over five years compared to the 50% average.
See also: Terry Smith takes aim at Unilever’s ‘gin rummy management’
