Terry Smith’s big tech buying spree has continued with the star manager now adding Google’s parent company to Fundsmith Equity.
Smith revealed in the £26.1bn fund’s latest factsheet he had completed the purchase of a position in Alphabet in January and began buying two new holdings for the fund, but would not disclose their names.
Alphabet’s inclusion in the portfolio comes months after Smith built up a stake in ecommerce giant Amazon. The purchase caught many by surprise, as Smith had refused to own the stock for years and had only months before lambasted the company as being “barely profitable” without its Amazon Web Services.
Smith has also been critical of Alphabet, noting at his 2020 annual shareholder meeting that while it has an “unassailable” market position in online search and a duopoly in digital advertising with Facebook, its share price “isn’t actually shooting the lights out”.
He also harped on the company’s excessive 235 acquisitions, most of which he said had been “dire failures,” leading him to wonder if this was intentional.
“I wonder whether they meant them to fail, whether they’re actually buying things and shutting them down and whether one day as a result we may see some great returns emerge again because they’ll have killed everybody who has competed with them,” he said.
Smith’s latest big tech buys raise questions over how he intends to shape the fund for the future.
Fundsmith Equity has consistently been one of the strongest performers in the IA Global sector, returning 419.5% over the last decade compared to the 183.8% average. But in 2021 it had one of its toughest recent years of performance as markets carried on rallying from the coronavirus pandemic. According to Trustnet, the fund has lost 5.1% over the last six months compared to the average fund’s 2.2% losses.
Alongside the new investments he has initiated, Smith has axed a number of longstanding holdings, including Intertek, Sage and Becton Dickinson. He also sold out of Intercontinental Hotel Groups in October.
Fundsmith Equity’s top five contributors during January were Philip Morris, Visa, McCormick, Pepsico and relative newcomer Church & Dwight, which Smith purchased last February.
The top five detractors were Idexx, Estée Lauder, Intuit, Paypal and fellow tech giant Microsoft.