Tracking Terry Smith's Fundsmith 13F Portfolio - Q3 2022 Update

ZoltanGabor

This article is part of a series that provides an ongoing analysis of the changes made to Fundsmith’s 13F portfolio on a quarterly basis. It is based on their regulatory 13F Form filed on 11/14/2022. Please visit our Tracking Terry Smith’s Fundsmith 13F Portfolio series to get an idea of their investment philosophy and our last update for the fund’s moves during Q2 2022.

This quarter, Fundsmith’s 13F portfolio value decreased ~10% from $23.45B to $21.07B. The number of holdings increased from 43 to 46. The top three holdings are at ~23% while the top five are close to ~35% of the 13F assets: Microsoft, Philip Morris International, Estee Lauder, Automatic Data Processing, and IDEXX Labs.

Note: Their flagship Fundsmith Equity Fund (2010 inception) has returned 15.5% annualized compared to 11.6% for the MSCI World Index through 11/30/2022. However, they have underperformed the index substantially this year: Negative 15.1% vs Negative 2.8% for the MSCI World Index.

New Stakes:

Otis Worldwide (OTIS): OTIS is a ~2% of the portfolio stake established this quarter at prices between ~$64 and ~$82 and the stock currently trades at $78.31.

Apple Inc. (AAPL), IDEX Corp (IEX), and Edwards Lifesciences (EW): These are very small (less than ~0.30% of the portfolio each) new stakes established during the quarter.

Stake Disposals:

Wingstop Inc. (WING): The minutely small 0.26% stake in WING was dropped this quarter.

Stake Increases:

Philip Morris International (PM): The 6.50% PM stake was established during the last decade through consistent buying every quarter. Pricing ranged between ~$60 and ~$120. Q1 2022 saw a ~20% selling at prices between ~$89 and ~$112. The stock is now at ~$101. Last two quarters have seen only minor adjustments.

Estee Lauder (EL): The top three 6.10% EL stake was established in 2016 at prices between ~$75 and ~$95. 2018 saw a two-thirds stake increase at prices between ~$125 and ~$158. Since then, the activity had been minor. There was a ~20% selling in Q1 2022 at prices between ~$250 and ~$372. The stock currently trades at ~$248. Last two quarters have seen minor increases.

Automatic Data Processing (ADP): The 2013-19 timeframe saw consistent buying in ADP at prices between ~$52 and ~$173. Q1 2020 saw a ~40% selling at prices between ~$112 and ~$181 while in the next quarter there was a ~70% increase at prices between ~$128 and ~$160. Since then, the activity had been minor. Q1 2022 saw a ~22% reduction at prices between ~$196 and ~$245. The stock is now at ~$239 and the stake is at ~6% of the portfolio. Last two quarters saw a marginal increase.

IDEXX Labs (IDXX): IDXX is a 5.60% of the portfolio position established during the 2015-16 timeframe at prices between ~$63 and ~$120. Since then, the position had remained relatively steady although adjustments were made in most quarters. There was a ~15% trimming in Q1 2022 at prices between ~$466 and ~$631. The stock currently trades at ~$408. There was a marginal increase in the last two quarters.

PepsiCo (PEP): The 5.54% PEP stake was built over the last decade through consistent buying during most quarters. The buying happened at prices between ~$65 and ~$170. There was a ~25% reduction in Q1 2022 at prices between ~$154 and ~$176. The stock is now at ~$181. Last quarter saw a ~9% trimming while this quarter there was a marginal increase.

McCormick & Company, Inc. (MKC): MKC is a large 5.25% of the portfolio position built during the 2018-19 timeframe at prices between ~$50 and ~$86. The time period since had also seen minor buying. There was a ~18% reduction in Q1 2022 at prices between ~$92 and ~$104. The stock currently trades at ~$83. Last two quarters saw a marginal increase.

Note: they have a ~6.2% ownership stake in the business.

Visa Inc. (V): Visa is a 4.75% of the portfolio position established over the last decade through consistent buying in most years. The build-up happened at prices between ~$30 and ~$245. Q1 2022 saw a ~18% selling at prices between ~$191 and ~$235. The stock currently trades at ~$208. Last two quarters saw a marginal increase.

Waters Corp (WAT): WAT is a 4.73% of the portfolio stake built during the 2015-2017 timeframe at prices between ~$115 and ~$200. Next two years also saw incremental buying. There was a ~23% selling in H1 2020 at prices between ~$175 and ~$240. Since then, the activity had been minor. There was a ~18% reduction in Q1 2022 at prices between ~$307 and ~$365. The stock currently trades at ~$343. There was a marginal increase in the last two quarters.

Note: they have a ~6% ownership stake in Waters Corp.

Brown-Forman (BF.B): BF.B is a 3.86% of the portfolio stake built in 2019 at prices between ~$45 and ~$68. 2021 saw a ~50% stake increase at prices between ~$67 and ~$81 while in Q1 2022 there was a ~28% selling at prices between ~$62 and ~$72. The stock is now at $65.68. There was a marginal increase in the last two quarters.

Amazon.com, Inc. (AMZN): The 3.64% AMZN stake was built in H2 2021 at prices between ~$160 and ~$186. Next quarter saw a ~20% selling at prices between ~$136 and ~$170. The stock is now at ~$84. There was a marginal increase in the las two quarters.

Meta Platforms (META): The 3.53% META stake was built in 2018 at prices between ~$125 and ~$210. The stake had remained steady since although adjustments were made in most quarters. There was a ~20% reduction in Q1 2022 at prices between ~$187 and ~$339. The stock currently trades at ~$120. Last two quarters saw a marginal increase.

Alphabet Inc. (GOOG) (GOOGL): GOOG is a 3.47% of the portfolio position purchased in Q4 2021 at prices between ~$133 and ~$151. There was a ~9% trimming next quarter. The stock currently trades well below their purchase price range at ~$88. Last two quarters saw a marginal increase.

Mettler-Toledo (MTD): The 2.89% MTD stake was purchased over the last two quarters at prices between ~$1098 and ~$1675 and the stock currently trades at ~$1445. This quarter saw a minor ~4% further increase.

Church & Dwight Co., Inc. (CHD): The 2.87% CHD position was built during the three quarters through Q2 2021 at prices between ~$72 and ~$93. There was a ~28% selling in Q1 2022 at prices between ~$95 and ~$104. The stock currently trades at $80.61. There was a marginal increase in the last two quarters.

Adobe Inc. (ADBE): ADBE is a 2.76% of the portfolio position purchased in Q1 2022 at prices between ~$412 and ~$564 and the stock currently trades below that range at ~$337. Last quarter saw a ~10% stake increase and that was followed with a marginal increase this quarter.

NIKE, Inc. (NKE): The 2.66% NKE stake was built in H1 2020 at prices between ~$67 and ~$105. There had been minor buying in most quarters since. Q1 2022 saw a ~23% reduction at prices between ~$118 and ~$166. The stock is now at ~$117. Last two quarters saw a marginal increase.

Cognex Corp (CGNX), Equifax Inc. (EFX), Fortinet, Inc. (FTNT), Home Depot (HD), IPG Photonics (IPGP), Masimo Corp (MASI), MSCI Inc. (MSCI), Johnson & Johnson (JNJ), Procter & Gamble (PG), Sabre Corp (SABR), Verisk Analytics (VRSK), VeriSign, Inc. (VRSN), and Zoetis Inc. (ZTS): These very small (less than ~0.60% of the portfolio each) positions were increased this quarter.

Note: they have a ~6% ownership stake in Sabre Corp.

Stake Decreases:

Microsoft Corp (MSFT): MSFT is currently the largest position at ~10% of the portfolio. The stake was built during the five-year period from 2013 to 2018 at prices between ~$27 and ~$115. Since then, the activity had been minor. There was a ~23% selling in Q1 2022 at prices between ~$276 and ~$335. The stock currently trades at ~$240. This quarter saw a ~7% trimming.

Stryker Corp (SYK): SYK is a 5.13% of the portfolio position purchased during the last decade through consistent buying every quarter at prices between ~$50 and ~$275. There was a ~20% reduction in Q1 2022 at prices between ~$245 and ~$278. The stock currently trades at ~$245. Last quarter saw a minor ~4% increase while this quarter there was similar trimming.

Intuit Inc. (INTU): INTU is a ~3% of the portfolio stake built during the 2017-18 timeframe at prices between ~$115 and ~$225. Since then, the position had remained relatively steady although adjustments were made in most quarters. Last four quarters have seen a ~63% reduction at prices between ~$353 and ~$692. The stock currently trades at ~$389.

PayPal Holdings (PYPL): The bulk of the 2.29% PYPL position was built in the 2015-16 timeframe at prices between ~$32 and ~$44. The next two years saw incremental buying and since then the position had been kept relatively steady. There was a ~57% reduction in the last three quarters at prices between ~$70 and ~$195. The stock currently trades at ~$71.

ANSYS, Inc. (ANSS), Paycom Software (PAYC), Qualys, Inc. (QLYS), and Rollins, Inc. (ROL): These very small (less than ~0.50% of the portfolio each) positions were decreased this quarter.

Kept Steady:

Genpact Ltd. (G), MercadoLibre (MELI), Taiwan Semi (TSM), WNS Holdings (WNS), and XP Class A: These minutely small (less than ~0.10% of the portfolio each) positions were kept steady this quarter.

The spreadsheet below highlights changes to Fundsmith’s 13F holdings in Q3 2022: