Terry Smith

Fundsmith

Fundsmith, Terry Smith's buy good companies, do not overpay, do nothing approach

Fundsmith is one of the cleanest public examples of global quality investing. Terry Smith's letters, owner manuals, and fund reports explain why the firm prefers durable businesses with high returns on capital, recurring revenues, and low capital intensity.

Sources Fundsmith official site SEC EDGAR profile Fundsmith factsheet Fundsmith 2024 annual letter

High-quality global compounders CIK 1569205

2026-03-31 Latest 13F 20 Current holdings 126 Last 4 periods Change 13 Public materials

Latest 13F snapshot 2026-03-31 · 34 disclosed positions · $12.8B Top five 37.8%: MAR, SYK, WAT, V, GOOGL

Public materials

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Shareholder letters / memos 13

Interview 0

Public video 0

Public Q&A / speeches / presentations 0

Current holdings

13F period 2026-03-31 · Filed 2026-05-15

Stocks	Shares	Value	Weight
MAR	3,370,872	$1.1B	8.6%
SYK	3,061,416	$1.0B	7.8%
WAT	3,212,075	$956.6M	7.5%
V	3,104,090	$938.2M	7.3%
GOOGL	2,956,198	$850.1M	6.6%
PM	5,113,163	$845.4M	6.6%
IDXX	1,465,786	$823.6M	6.4%
ADP	3,855,105	$783.3M	6.1%
MSFT	2,079,737	$769.9M	6.0%
META	1,321,375	$756.0M	5.9%
MTD	568,516	$717.0M	5.6%
CHD	6,641,508	$619.8M	4.8%
PG	4,199,914	$606.6M	4.7%
TXN	2,623,124	$509.3M	4.0%
FTNT	6,156,675	$503.1M	3.9%
ZTS	3,877,559	$458.4M	3.6%
OTIS	2,731,635	$210.6M	1.6%
MSCI	64,788	$34.9M	0.3%
ROL	619,935	$33.1M	0.3%
MEDP	62,668	$30.1M	0.2%

Last 4 quarters US 13F new / increased / reduced / sold-out positions

As of 13F 2026-03-31 · Filed 2026-05-15

Last 1 quarters Last 2 quarters Last 3 quarters Last 4 quarters

Stocks	Action	13F period	Current shares	Previous shares	Share change	13F value change
IDXX	Major reduction	2026-03-31 Filed 2026-05-15	1,465,786	1,876,035	-21.9%	-$445.6M
INTU	Sold out	2026-03-31 Filed 2026-05-15	0	625,619	-100.0%	-$414.4M
WAT	Minor reduction	2026-03-31 Filed 2026-05-15	3,212,075	3,557,978	-9.7%	-$394.9M
NKE	Sold out	2026-03-31 Filed 2026-05-15	0	5,770,181	-100.0%	-$367.6M
V	Minor reduction	2026-03-31 Filed 2026-05-15	3,104,090	3,534,684	-12.2%	-$301.5M
ADP	Minor reduction	2026-03-31 Filed 2026-05-15	3,855,105	4,177,969	-7.7%	-$291.4M
SYK	Major reduction	2026-03-31 Filed 2026-05-15	3,061,416	3,687,511	-17.0%	-$290.1M
GOOGL	Major reduction	2026-03-31 Filed 2026-05-15	2,956,198	3,498,519	-15.5%	-$245.0M
MSFT	Minor reduction	2026-03-31 Filed 2026-05-15	2,079,737	2,079,971	-0.0%	-$236.1M
META	Minor reduction	2026-03-31 Filed 2026-05-15	1,321,375	1,363,539	-3.1%	-$144.1M
PM	Major reduction	2026-03-31 Filed 2026-05-15	5,113,163	6,124,597	-16.5%	-$137.0M
MAR	Major reduction	2026-03-31 Filed 2026-05-15	3,370,872	3,979,927	-15.3%	-$132.2M
MTD	Minor reduction	2026-03-31 Filed 2026-05-15	568,516	580,507	-2.1%	-$92.3M
ODD	Sold out	2026-03-31 Filed 2026-05-15	0	2,074,167	-100.0%	-$83.3M
QLYS	Major reduction	2026-03-31 Filed 2026-05-15	226,077	647,806	-65.1%	-$66.2M
OTIS	Minor reduction	2026-03-31 Filed 2026-05-15	2,731,635	3,112,380	-12.2%	-$61.3M
MSCI	Major reduction	2026-03-31 Filed 2026-05-15	64,788	166,619	-61.1%	-$60.7M
NSSC	Major reduction	2026-03-31 Filed 2026-05-15	383,596	1,779,857	-78.4%	-$59.1M
CPRX	Major reduction	2026-03-31 Filed 2026-05-15	844,887	3,363,807	-74.9%	-$57.6M
DOCS	Major reduction	2026-03-31 Filed 2026-05-15	691,786	1,650,002	-58.1%	-$56.9M
PAYC	Major reduction	2026-03-31 Filed 2026-05-15	219,457	523,433	-58.1%	-$56.7M
ROL	Major reduction	2026-03-31 Filed 2026-05-15	619,935	1,478,629	-58.1%	-$55.6M
CHD	Minor reduction	2026-03-31 Filed 2026-05-15	6,641,508	6,728,404	-1.3%	+$55.6M
TXN	Minor reduction	2026-03-31 Filed 2026-05-15	2,623,124	2,623,552	-0.0%	+$54.1M
NTNX	Major reduction	2026-03-31 Filed 2026-05-15	577,392	1,377,158	-58.1%	-$49.2M
GGG	Sold out	2026-03-31 Filed 2026-05-15	0	579,016	-100.0%	-$47.5M
VRT	Major reduction	2026-03-31 Filed 2026-05-15	91,254	410,944	-77.8%	-$43.7M
VRSN	Major reduction	2026-03-31 Filed 2026-05-15	113,467	270,634	-58.1%	-$37.6M
CLX	Major reduction	2026-03-31 Filed 2026-05-15	257,217	613,497	-58.1%	-$35.2M
MANH	Major reduction	2026-03-31 Filed 2026-05-15	120,888	288,332	-58.1%	-$33.9M
ZTS	Minor reduction	2026-03-31 Filed 2026-05-15	3,877,559	3,900,803	-0.6%	-$32.4M
ADMA	Major reduction	2026-03-31 Filed 2026-05-15	1,649,493	2,102,054	-21.5%	-$23.5M
BMI	New	2026-03-31 Filed 2026-05-15	142,491	0	-	+$21.7M
HD	Major reduction	2026-03-31 Filed 2026-05-15	28,611	80,206	-64.3%	-$18.2M
MEDP	Major reduction	2026-03-31 Filed 2026-05-15	62,668	82,567	-24.1%	-$16.3M
SABR	Major reduction	2026-03-31 Filed 2026-05-15	9,013,783	21,499,095	-58.1%	-$16.2M
FTNT	Minor reduction	2026-03-31 Filed 2026-05-15	6,156,675	6,516,011	-5.5%	-$14.3M
PG	Minor reduction	2026-03-31 Filed 2026-05-15	4,199,914	4,248,048	-1.1%	-$2.2M
GOOGL	Major reduction	2025-12-31 Filed 2026-02-17	3,498,519	6,289,352	-44.4%	-$433.9M
SYK	Major reduction	2025-12-31 Filed 2026-02-17	3,687,511	4,591,293	-19.7%	-$401.2M
IDXX	Major reduction	2025-12-31 Filed 2026-02-17	1,876,035	2,610,457	-28.1%	-$398.6M
MSFT	Major reduction	2025-12-31 Filed 2026-02-17	2,079,971	2,583,369	-19.5%	-$332.1M
OTIS	Major reduction	2025-12-31 Filed 2026-02-17	3,112,380	5,819,151	-46.5%	-$260.2M
META	Minor reduction	2025-12-31 Filed 2026-02-17	1,363,539	1,558,664	-12.5%	-$244.6M
ADP	Minor reduction	2025-12-31 Filed 2026-02-17	4,177,969	4,311,603	-3.1%	-$190.8M
FTNT	Major reduction	2025-12-31 Filed 2026-02-17	6,516,011	8,420,092	-22.6%	-$190.5M
PM	Minor reduction	2025-12-31 Filed 2026-02-17	6,124,597	7,188,144	-14.8%	-$183.5M
WAT	Minor reduction	2025-12-31 Filed 2026-02-17	3,557,978	3,955,498	-10.0%	+$165.5M
MAR	Minor reduction	2025-12-31 Filed 2026-02-17	3,979,927	4,228,298	-5.9%	+$133.5M
PG	Minor reduction	2025-12-31 Filed 2026-02-17	4,248,048	4,577,040	-7.2%	-$94.5M
MTD	Minor reduction	2025-12-31 Filed 2026-02-17	580,507	590,654	-1.7%	+$84.2M
V	Minor reduction	2025-12-31 Filed 2026-02-17	3,534,684	3,854,336	-8.3%	-$76.1M
NTNX	New	2025-12-31 Filed 2026-02-17	1,377,158	0	-	+$71.2M
NKE	Minor reduction	2025-12-31 Filed 2026-02-17	5,770,181	6,129,483	-5.9%	-$59.8M
TXN	Minor reduction	2025-12-31 Filed 2026-02-17	2,623,552	2,721,881	-3.6%	-$44.9M
ADMA	New	2025-12-31 Filed 2026-02-17	2,102,054	0	-	+$38.3M
ZTS	Minor increase	2025-12-31 Filed 2026-02-17	3,900,803	3,615,131	7.9%	-$38.2M
CHD	Minor reduction	2025-12-31 Filed 2026-02-17	6,728,404	6,794,644	-1.0%	-$31.2M
QLYS	Major reduction	2025-12-31 Filed 2026-02-17	647,806	870,859	-25.6%	-$29.1M
GGG	Major reduction	2025-12-31 Filed 2026-02-17	579,016	900,545	-35.7%	-$29.0M
DOCS	Major increase	2025-12-31 Filed 2026-02-17	1,650,002	1,355,944	21.7%	-$26.1M
VRT	Major reduction	2025-12-31 Filed 2026-02-17	410,944	591,450	-30.5%	-$22.6M
MEDP	Major reduction	2025-12-31 Filed 2026-02-17	82,567	127,537	-35.3%	-$19.2M
HD	Minor reduction	2025-12-31 Filed 2026-02-17	80,206	84,860	-5.5%	-$6.8M
ODD	Major increase	2025-12-31 Filed 2026-02-17	2,074,167	1,416,956	46.4%	-$4.9M
INTU	Minor increase	2025-12-31 Filed 2026-02-17	625,619	604,456	3.5%	+$1.6M
META	Major reduction	2025-09-30 Filed 2025-11-14	1,558,664	3,568,752	-56.3%	-$1.5B
MSFT	Major reduction	2025-09-30 Filed 2025-11-14	2,583,369	4,941,509	-47.7%	-$1.1B
PM	Major reduction	2025-09-30 Filed 2025-11-14	7,188,144	9,074,195	-20.8%	-$486.8M
GOOGL	Minor reduction	2025-09-30 Filed 2025-11-14	6,289,352	6,803,454	-7.6%	+$330.0M
IDXX	Minor reduction	2025-09-30 Filed 2025-11-14	2,610,457	2,639,289	-1.1%	+$252.2M
FTNT	Minor increase	2025-09-30 Filed 2025-11-14	8,420,092	8,418,362	0.0%	-$182.0M
SYK	Minor reduction	2025-09-30 Filed 2025-11-14	4,591,293	4,677,007	-1.8%	-$153.1M
INTU	Major increase	2025-09-30 Filed 2025-11-14	604,456	368,540	64.0%	+$122.5M
CHH	Sold out	2025-09-30 Filed 2025-11-14	0	733,892	-100.0%	-$93.1M
ADP	Minor reduction	2025-09-30 Filed 2025-11-14	4,311,603	4,362,099	-1.2%	-$79.8M
ZTS	Major increase	2025-09-30 Filed 2025-11-14	3,615,131	2,884,831	25.3%	+$79.1M
WAT	Minor increase	2025-09-30 Filed 2025-11-14	3,955,498	3,608,407	9.6%	-$73.6M
TXN	Minor increase	2025-09-30 Filed 2025-11-14	2,721,881	2,720,290	0.1%	-$64.7M
CHD	Minor reduction	2025-09-30 Filed 2025-11-14	6,794,644	6,824,289	-0.4%	-$60.5M
MAR	Minor reduction	2025-09-30 Filed 2025-11-14	4,228,298	4,236,599	-0.2%	-$56.3M
EXPO	Sold out	2025-09-30 Filed 2025-11-14	0	746,820	-100.0%	-$55.8M
VRSK	Sold out	2025-09-30 Filed 2025-11-14	0	176,195	-100.0%	-$54.9M
V	Minor increase	2025-09-30 Filed 2025-11-14	3,854,336	3,854,071	0.0%	-$52.6M
NSSC	Major increase	2025-09-30 Filed 2025-11-14	1,779,857	954,912	86.4%	+$48.1M
MTD	Minor increase	2025-09-30 Filed 2025-11-14	590,654	590,037	0.1%	+$32.0M
PG	Minor increase	2025-09-30 Filed 2025-11-14	4,577,040	4,572,280	0.1%	-$25.2M
PAYC	Major increase	2025-09-30 Filed 2025-11-14	523,433	413,510	26.6%	+$13.3M
QLYS	Major increase	2025-09-30 Filed 2025-11-14	870,859	718,602	21.2%	+$12.6M
CPRX	Major increase	2025-09-30 Filed 2025-11-14	3,363,807	2,709,086	24.2%	+$7.5M
VRT	Major reduction	2025-09-30 Filed 2025-11-14	591,450	724,923	-18.4%	-$3.9M
HD	Minor increase	2025-09-30 Filed 2025-11-14	84,860	83,367	1.8%	+$3.8M
MSFT	Minor reduction	2025-06-30 Filed 2025-08-14	4,941,509	5,370,162	-8.0%	+$442.1M
META	Minor reduction	2025-06-30 Filed 2025-08-14	3,568,752	3,883,796	-8.1%	+$395.6M
BF.B	Sold out	2025-06-30 Filed 2025-08-14	0	9,637,881	-100.0%	-$327.1M
IDXX	Minor reduction	2025-06-30 Filed 2025-08-14	2,639,289	2,648,331	-0.3%	+$303.4M
INTU	Major increase	2025-06-30 Filed 2025-08-14	368,540	181,628	102.9%	+$178.8M
MAR	Minor reduction	2025-06-30 Filed 2025-08-14	4,236,599	4,251,560	-0.4%	+$144.8M
GOOGL	Minor reduction	2025-06-30 Filed 2025-08-14	6,803,454	6,843,213	-0.6%	+$140.7M
CHD	Minor reduction	2025-06-30 Filed 2025-08-14	6,824,289	6,847,486	-0.3%	-$98.0M
VRT	New	2025-06-30 Filed 2025-08-14	724,923	0	-	+$93.1M
V	Minor reduction	2025-06-30 Filed 2025-08-14	3,854,071	4,137,024	-6.8%	-$81.5M
TXN	Minor reduction	2025-06-30 Filed 2025-08-14	2,720,290	2,725,812	-0.2%	+$75.0M
WAT	Minor reduction	2025-06-30 Filed 2025-08-14	3,608,407	3,613,197	-0.1%	-$72.2M
FTNT	Minor reduction	2025-06-30 Filed 2025-08-14	8,418,362	8,523,040	-1.2%	+$69.6M
VRSN	Major reduction	2025-06-30 Filed 2025-08-14	270,634	570,035	-52.5%	-$66.6M
PM	Major reduction	2025-06-30 Filed 2025-08-14	9,074,195	10,805,892	-16.0%	-$62.5M
PG	Minor reduction	2025-06-30 Filed 2025-08-14	4,572,280	4,620,406	-1.0%	-$59.0M
EFX	Sold out	2025-06-30 Filed 2025-08-14	0	235,505	-100.0%	-$57.4M
MANH	New	2025-06-30 Filed 2025-08-14	288,332	0	-	+$56.9M
NKE	Minor reduction	2025-06-30 Filed 2025-08-14	6,129,483	6,135,629	-0.1%	+$45.9M
VRSK	Major reduction	2025-06-30 Filed 2025-08-14	176,195	330,624	-46.7%	-$43.5M
ODD	Minor reduction	2025-06-30 Filed 2025-08-14	1,416,956	1,615,158	-12.3%	+$37.1M
SYK	Minor reduction	2025-06-30 Filed 2025-08-14	4,677,007	5,069,187	-7.7%	-$36.6M
ADP	Minor reduction	2025-06-30 Filed 2025-08-14	4,362,099	4,513,899	-3.4%	-$33.9M
ZTS	Minor increase	2025-06-30 Filed 2025-08-14	2,884,831	2,546,487	13.3%	+$30.6M
OTIS	Minor reduction	2025-06-30 Filed 2025-08-14	5,819,151	5,866,737	-0.8%	-$29.2M
NSSC	New	2025-06-30 Filed 2025-08-14	954,912	0	-	+$28.4M
GGG	Major reduction	2025-06-30 Filed 2025-08-14	900,545	1,139,641	-21.0%	-$17.8M
DOCS	Minor increase	2025-06-30 Filed 2025-08-14	1,355,944	1,189,882	14.0%	+$14.1M
EXPO	Minor reduction	2025-06-30 Filed 2025-08-14	746,820	836,477	-10.7%	-$12.0M
MA	Major reduction	2025-06-30 Filed 2025-08-14	27,663	49,454	-44.1%	-$11.6M
HD	Major reduction	2025-06-30 Filed 2025-08-14	83,367	114,736	-27.3%	-$11.5M
CPRX	Major increase	2025-06-30 Filed 2025-08-14	2,709,086	2,151,274	25.9%	+$6.6M
MTD	Minor reduction	2025-06-30 Filed 2025-08-14	590,037	590,838	-0.1%	-$4.6M
ROL	Minor reduction	2025-06-30 Filed 2025-08-14	1,478,629	1,597,513	-7.4%	-$2.9M

Public video / Interview / Shareholder letter / Public Q&A

Latest 10 + classics

2026-01-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2025 Annual Letter

Terry Smith explains why Fundsmith will continue to underperform MSCI World in 2025, focusing on index concentration, passive fund momentum, AI leader valuations, dollar weakness and persistence in not chasing index weights.

Fundsmith's 2025 positive returns are low, and rather than packaging it as short-term noise, Smith acknowledges the large relative gap between indexes and funds.
He puts market concentration at its core: a small number of large technology stocks and AI-benefit stocks contribute too much to index returns, and active portfolios will come under significant pressure if they are not held according to index weights.
Smith believes that market cap-weighted index funds are not truly "passive" and that capital inflows will continue to buy companies that have grown in size, forming momentum feedback.
He used the cost of capital and historical bubble framework to remind investors that AI capital expenditures and high valuations may not automatically translate into future shareholder returns.
This letter is suitable for explaining Fundsmith's consumer positioning: it would rather suffer a period of lag than buy assets that do not meet the quality, valuation and portfolio risk requirements in order to be close to the index.

2025-07-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2025 Semi-Annual Letter

2025 semi-annual letter disclosed Fundsmith’s first half portfolio adjustments: began to accumulate Zoetis, Intuit, EssilorLuxottica, and sold PepsiCo and Brown-Forman.

This semi-annual letter is closer to a portfolio move than an annual letter, with a direct look at Fundsmith's trade-offs between consumer, software, animal health and eyewear faucets.
Buying Zoetis shows that Smith still prefers high-quality businesses with high gross margins, strong repurchase attributes, and low correlation with the economic cycle.
Rebuying or accumulating Intuit signals Fundsmith's willingness to return to familiar companies when software asset valuations and business quality realign.
The sales of PepsiCo and Brown-Forman were part of a reassessment of portfolio quality and growth, not a simple switch from consumer staples to technology.
The letter goes on to disclose low turnover and total holding costs, helping to determine whether Fundsmith is truly "buy good companies, don't overpay, do nothing".

2025-01-01 Shareholder letter / fund letter Classic

Fundsmith Equity Fund Owner's Manual

The Fundsmith Owner's Manual is the foundational document for understanding Terry Smith's methodology, systematically explaining fund objectives, investment criteria, fees, trading disciplines and how shareholders should evaluate Fundsmith.

The manual puts Fundsmith's approach into rules that consumers can understand: buy good companies, don't pay too much, and do nothing.
A “good company” is defined as a business with high returns on capital, sustainable growth, predictable cash flows, low leverage, and resistance to competition, rather than a hot topic.
The manual explains why low turnover and few transactions are important: costs, taxes, error rates, and behavioral noise all erode long-term compounding.
It puts investor expectation management first, emphasizing that any strategy will have an underperformance stage, and shareholders must understand what they are holding.
This is Fundsmith's most stable framework and is more representative of Terry Smith than a single year's performance.

2025-01-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2024 Annual Letter

The 2024 letter revolves around AI, Nvidia, index concentration and passive funds, explaining why Fundsmith owns some large tech companies but is unwilling to turn the portfolio into a Magnificent Seven weight replication.

Smith acknowledged that a handful of technology stocks will contribute significantly to the index in 2024, with Nvidia being a particularly prominent contributor to S&P 500 returns.
He distinguishes between AI and the dot-com bubble: Companies like Nvidia are indeed profitable, but AI capital expenditures, customer concentration, and valuation risks still need to be assessed separately.
The letter links the growth of passive funds to market concentration, noting that index funds reinforce the feedback that winners continue to rise.
Fundsmith goes on to emphasize that the real risk is not share price volatility per se, but whether business fundamentals, valuations and capital allocation deteriorate.
This letter helps understand why Fundsmith, which has exposure to technologies such as Microsoft and Meta, still refuses to become an AI-themed fund.

2024-07-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2024 Semi-Annual Letter

The 2024 half-year letter disclosed low turnover and new buys in Texas Instruments, and stated that during the half-year period Fundsmith placed more emphasis on long-term free cash flow than short-term price action.

The letter disclosed that the portfolio turnover rate in the first half of the year was only 3.7%, indicating that Fundsmith still insists on few transactions and long-term holdings.
Buying Texas Instruments reflects Smith's focus on long-term demand for analog and embedded semiconductors, capital discipline and manufacturing capabilities.
He did not force a full portfolio valuation at the semi-annual stage because free cash flow is seasonal and short-term data can be misleading.
This letter is suitable to be read together with the 2024 annual letter: actions will be given first in the semi-annual period, and AI, indexes and market structures will be explained in the annual period.
At its core, it puts Fundsmith's style into action: not standing still at all, but slowly accumulating as quality and price rematch.

2024-01-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2023 Annual Letter

The 2023 annual letter discusses contributions from Meta, Microsoft, Novo Nordisk and others, and re-elaborates Fundsmith's three-step strategy: buy good companies, don't pay too much, and do nothing.

Meta and Microsoft emerge as significant contributors, illustrating how quickly positions criticized in the previous year can change portfolio performance once business and valuations repair.
Novo Nordisk's contribution is viewed in a long-term holding context, with Smith stressing that Fundsmith was not a temporary buy in response to the diet pill craze.
The letter once again stated the three-step strategy to facilitate a quick understanding of Fundsmith's investment process, rather than just looking at annual returns.
Quality judgments are made by combining a company's gross margin, return on capital, free cash flow and growth, rather than relying on macro forecasts.
This letter is key to Fundsmith's recovery narrative from the 2022 pullback, explaining the need to patiently hold quality companies.

2023-07-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2023 Semi-Annual Letter

2023 semi-annual letter explains portfolio valuation, low turnover, selling Amazon, and why Fundsmith still prioritizes long-term free cash flow compounding.

The letter disclosed that the portfolio free cash flow yield fell from the level at the end of 2022, indicating that the valuation safety margin has become thinner after the stock price rebounded.
Selling Amazon was the most significant portfolio move, reflecting Fundsmith's reassessment of capital expenditures, business quality, and opportunity costs.
Smith split the semi-annual fluctuations into two parts: fundamentals and valuation, reminding investors not to use stock prices alone to judge the quality of positions.
Portfolio turnover is still low, indicating that selling Amazon is not the beginning of a frequent trading style, but a change in the logic of individual positions.
This letter is suitable for stock pages associated with Amazon: it gives long-term investors public reasons to exit a high-quality but complex company.

2023-01-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2022 Annual Letter

The 2022 annual letter puts Fundsmith's pullback into the context of inflation, rising interest rates, the end of easy money, and the revaluation of highly valued growth stocks.

Smith acknowledged that Fundsmith fell and underperformed in 2022, with one reason being compression of long-dated equity valuations following the end of the low-rate era.
He criticized long-term easy money for causing misallocation of capital, believing that rising inflation and interest rates had exposed the fragility of many previously highly valued assets.
The letter discusses drags on Meta, PayPal, Microsoft, Amazon, etc., distinguishing between business issues and valuation issues.
He still emphasizes the combination of company fundamentals and free cash flow quality, and does not switch to low-quality cyclical assets just because of a one-year retracement.
This letter is suitable for explaining Fundsmith's stress-resilience framework: the real test is whether the company can continue to generate cash despite high interest rates and recessionary pressures.

2022-07-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2022 Semi-Annual Letter

The 2022 semi-annual letter focuses on explaining the impact of inflation, gross margin, free cash flow yield and rising interest rates on high-quality growth portfolios.

Smith uses gross profit margin to explain the ability to resist inflation: companies with high gross margins can more easily protect profits when costs rise.
He acknowledged that highly valued equity interests would come under greater pressure when interest rates rose, but this was not the same thing as permanent damage to the business.
The letter treats Meta as an open case of low free cash flow yields or a value trap, suitable for investors to understand controversial positions.
He did not change his style just because energy and low-valuation cyclical stocks were leading the stage, but emphasized the ability of quality companies to ride through cycles.
This letter directly answers the question of "Can quality growth be maintained in a high-inflation environment? "

2022-01-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2021 Annual Letter

The 2021 annual letter reviews post-pandemic markets, portfolio quality, and long-term compounding, discussing high valuations, business fundamentals, and investor temptations toward short-term style rotations.

This letter comes at the end of an environment of low interest rates and high valuations, and is appropriate to read in conjunction with the 2022 annual letter, observing how Smith moves from prosperity to a stressed environment.
Fundsmith goes on to illustrate why portfolio companies are good companies using gross margins, return on capital, and free cash flow.
Smith cautions investors not to turn long-term strategies into market timing just because short-term value or recovery stocks perform well.
The disclosure of portfolio costs and changes of hands in the letter continues Fundsmith's transparency into whether style drift has been seen.
This piece of material helps understand that Fundsmith remains committed to long-term compounding in 2021, rather than anticipating the 2022 interest rate shock in advance.

2021-07-01 Shareholder letter / fund letter

Fundsmith Equity Fund 2021 Semi-Annual Letter

The 2021 semi-annual letter discusses the rebound in value stocks in the pandemic recovery, the resilience of quality portfolios, and why bad companies don't automatically become good investments just because they are cheap.

Smith admitted that recovery and value stocks performed better in phases, but emphasized that whether long-term value creation still depends on the quality of the company.
He pointed out that low valuations or cyclical recovery alone cannot repair a bad business, and cheap does not mean safe.
The semi-annual letter continues to disclose portfolio costs and turnover rates, allowing comparisons to be made on whether Fundsmith maintains long-term low turnover.
Post-epidemic disruptions in consumption, travel and offline channels will still affect some positions, but Smith is more concerned about whether these impacts are temporary.
This letter lends itself as Fundsmith-style educational material: good companies, reasonable prices, and long-term holdings are more important than predicting the path to recovery.

2020-03-01 Shareholder letter / fund letter Classic

Fundsmith March 2020 Letter to Shareholders

In a special letter at the beginning of the epidemic impact, Smith used a very short form to remind shareholders to focus on corporate resilience, cash flow and long-term holdings, rather than trying to predict the market bottom.

The significance of this letter lies in its timing: when the market fell sharply in March 2020, Fundsmith publicly explained its principles to shareholders.
Smith did not claim to be able to predict the epidemic or market lows, but instead returned the focus to whether portfolio companies could withstand demand shocks and continue to generate cash.
It reflects Fundsmith's behavioral discipline of checking the quality of the business first in a stressful environment rather than selling on emotion.
Special letters are shorter than annual letters, but are suitable as a classic crisis communication sample, showing how fund managers communicate with shareholders during panic periods.
For the average investor, the value of this information is to learn the process under pressure rather than to find short-term views on a certain stock.

2011-01-10 Shareholder letter / fund letter Classic

Fundsmith Equity Fund 2010 Annual Letter

Fundsmith's first annual letter, documenting the fund's early goals, investment discipline and how to explain long-term quality investing to shareholders.

This letter is the starting point for Fundsmith's approach and can be compared with the 2025 Owner's Manual to see if the core principles continue.
Early letters have focused on business quality, reasonable valuations and reducing deadweight transactions rather than short-term market forecasts.
It helps investors judge whether Terry Smith's long-term style is consistent: many of the later recurring language and indicators have taken shape in the early days.
As the first annual letter, it is more representative than ordinary historical materials and is suitable to be placed in the classic area to establish the starting point of the timeline.
This classic piece of information explains that Fundsmith is not a brand that was formed in recent years, but has been operating around clear rules from the beginning.