AI summary and analysis
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.
Key points
- 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.