9 Investing Lessons From Terry Smith
Terry Smith is one the best investors I know. He manages the Fundsmith equity fund that has a speculator return over the last decade. I enjoy reading his annual letters to get an idea on his investing mindset. Here are 9 lessons that I have taken away from him.
Wishing everyone a great 2022 ahead!
Wishing everyone a great 2022 ahead!
1. No investment strategy will outperform in every reporting period and every type of market condition. So, as much as we may not like it, we can expect some periods of underperformance.
For some of you who might be nursing your losses because of exposure to growth stocks, don't beat yourself with a year of bad performance. Look in decades not years. Time in the market is more important than timing the market.
2. In investment, as in life, you cannot have your cake and eat it, so it is difficult if not impossible to find companies which are resilient in a downturn but which also benefit fully from the subsequent recovery.
(If you are thinking to switch out from resilient companies)
In our view it would be a mistake to sell some of these good businesses in order to invest temporarily in companies which are much worse but which have greater recovery potential.
They have benefitted much just buy holding on to amazing companies such as $Microsoft(MSFT.US$ $Intuit(INTU.US$ $Novo-Nordisk A/S(NVO.US$ $Estee Lauder(EL.US$ $IDEXX Laboratories Inc(IDXX.US$
3. Someone once said that no one ever got poor by taking profits. This may be true but I doubt they got very rich by this approach.
I personally think buying to hold allows time for the company to grow (invest their retained earnings at a high rate of return). Think decades.
4. We sold our stakes in Intertek, Sage, Becton Dickinson, InterContinental Hotels and purchased a stake in $Amazon(AMZN.US$ and an as yet undisclosed position during the year.
They have previously refused to purchase AMZN. I truly respect them for changing when facts change.
5. We invest in companies not indices or countries and in our view the country where a company is listed is largely irrelevant.
I'm drawing this as a reference toward investing in China. Personally, I think valuation of amazing companies such as $BABA-SW(09988.HK$ $TENCENT(00700.HK$ has bottomed. Might be an opportunity (Hint from Munger)
6. We continue to apply a simple three steps investment strategy: Buy good companies, Don't overpay. Do nothing
Never underestimate these 3 points. 2022 might have been a rough start for many and I'm guessing most overpaid in 2021.
7. You may have heard a lot talked about the so-called 'rotation' from quality stocks of the sort we seek to own to so-called value stocks, which in many cases is simply taken as equating to lowly rated companies.
Reminder: Value Stocks =/= Cheap Bad Business
8. Inflation: It is a bit like trying to light a bonfire or a traditional BBQ on a damp day. If you put an accelerant like gasoline on it you can go from no fire to a loud ‘Whoosh!’ and find that you have also set fire to the garden fence.
Unfortunately, we can't control inflation.
9. The good news is that we do not invest on the basis of our ability to forecast inflation or any other macroeconomic factor. We invest in companies not countries, indices or macroeconomic forecasts.
Beautiful and wise words. May 2022 be of great success to you in your investment, health and personal life!
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Long Term Investor | #Metaverse Stocks
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