TIP526: Quality Investing: Lessons from Terry Smith

We Study Billionaires - The Investor’s Podcast Network

Stig Brodersen

Education, Investing, Business

4.6 • 3.6K Ratings

🗓️ 21 February 2023

⏱️ 59 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

On today’s episode, Clay Finck discusses the investment philosophies and framework of Terry Smith, who is the founder and CEO of Fundsmith and also known as the Warren Buffett of Great Britain.

Smith started Fundsmith in 2010, and ever since has returned 478% to his investors versus his benchmark returning 256%. He did this using the simple framework of buying good companies, not overpaying, and holding them for the long-term.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:12 - Why Terry Smith only seeks to own high-quality companies.

04:52 - How investors can go about determining the quality of a business.

08:01 - How Terry Smith compares the valuation of his portfolio against that of the S&P 500.

15:15 - Why investors must be cognizant of stock-based compensation when valuing a company.

29:28 - Why macroeconomic views and opinions are irrelevant for investors in quality businesses.

46:39 Why stocks are the best long-term investment relative to other asset classes.

53:51 - What Terry Smith’s top US equity holdings are today.

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Terry Smith’s Shareholder Letters.
Rebecca’s Article on Mean Reversion.
Don’t miss our review of Four Wide Moat Stocks for 2023.
Check out our takeaways from Warren Buffett's Shareholder Letters.
Follow Clay on Twitter.

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Transcript

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0:00.0	You're listening to TI-P.
0:03.0	Welcome to the Investors Podcast.
0:05.0	I'm your host, Clay Fink, and on today's episode, I'm going to be diving in to discuss
0:09.4	the investment philosophy and framework of Terry Smith, who is a founder and CEO of Fundsmith
0:16.1	and also known as the Warren Buffett of Great Britain.
0:19.6	He started his fund in 2010, and ever since has outperformed the market, as he's returned
0:24.8	478% to his investors, versus his benchmark returning 256%.
0:31.3	He did this by continuing to do three things really well, buying good companies, ensuring
0:36.7	that he doesn't overpay and doing nothing.
0:39.5	I really enjoyed researching Terry Smith because I loved his writing style of being a straight
0:44.4	shooter and telling it how it is.
0:46.2	He's not afraid of calling people out when he sees wrongdoing and sticking to his strategy
0:50.6	of buying and holding quality companies.
0:53.4	I'm always on the hunt for the next great company to add to my own portfolio.
0:57.5	An understanding Terry Smith's approach helped me take the next step of better understanding
1:01.8	what to look for, and at the end of the episode, I took a look at Terry's portfolio today,
1:06.9	as well as his more recent purchases, so be sure to stick around until the end of the
1:10.5	episode.
1:11.5	With that, let's dive right in.
1:13.8	You are listening to the Investors Podcast.
1:19.6	So we study the financial markets and read the books that influence self-made billionaires
1:24.0	the most.
	...

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