Teaching: The Terry Smith Portfolio Style
1. What Kind of Portfolio Is This?
This is a “quality growth” portfolio. Terry Smith (CEO of Fundsmith) is well-known for a simple but disciplined philosophy:
“Buy good companies. Don’t overpay. Do nothing.”
The companies in this portfolio are mostly:
• Large-cap global leaders (e.g., Microsoft, Meta, Visa, Procter & Gamble).
• Businesses with strong competitive advantages (brand power, scale, network effects).
• Consistent cash flow generators (many are dividend payers too).
• Industries with long-term demand (tech, healthcare, consumer staples, payments).
2. Why Investors May Want to Consider This Portfolio Style
a. Diversification with Strength
• The portfolio spreads across tech, healthcare, consumer staples, industrials, and finance, reducing reliance on one sector.
• Example: Microsoft + Google for growth, Procter & Gamble + Nestlé-type stocks for stability.
b. Resilience in Market Cycles
• Consumer staples (P&G, PM) and healthcare (Zoetis, Stryker, Dexcom) provide defensiveness during downturns.
• Tech giants (Microsoft, Meta, Google) fuel growth during upswings.
c. Global Exposure
• These companies operate worldwide, so you’re indirectly investing in global economic growth without needing to pick individual foreign markets.
d. Cash Flow & Compounding
• Many of these firms generate strong free cash flow.
• Dividends + buybacks + reinvested earnings = powerful long-term compounding.
e. Simplicity
• You don’t need to own 50–100 stocks. A concentrated portfolio of 20–30 high-quality companies is enough to mirror global growth.
3. Key Portfolio Highlights (Why These Stocks?)
• Microsoft (10.7%) → Software, cloud, AI leadership.
• Meta (11.4%) → Social media dominance + metaverse/AI potential.
• Visa (6%) → Global payments leader, benefits from cashless society.
• Procter & Gamble (3.2%) → Everyday consumer goods, steady dividends.
• Zoetis (animal health), Stryker (medical devices), Dexcom (diabetes tech) → Healthcare innovation with long-term demand.
• Fortinet (cybersecurity) → Digital defense as the world goes online.
• Marriott (5%) → Global travel and hospitality play.
• Otis (elevators/escalators), ADP (payroll), Water utilities → Infrastructure + essential services = stability.
4. Why This May Appeal to Investors
• ✅ Long-term investors who prefer steady compounding over short-term speculation.
• ✅ Risk-conscious investors who want growth and protection in downturns.
• ✅ Busy professionals who don’t have time to pick many stocks but want peace of mind with global leaders.
• ✅ Dividend growth seekers — many of these firms steadily raise dividends.
5. Takeaway Lesson
A Terry Smith-style portfolio is not about chasing hot trends.
It’s about:
• Owning great companies with durable advantages.
• Holding them long enough for compounding to work.
• Ignoring short-term noise while benefiting from global growth.
In essence, it’s like planting a garden of strong trees and letting them grow, rather than chasing quick crops.
1. What Kind of Portfolio Is This?
This is a “quality growth” portfolio. Terry Smith (CEO of Fundsmith) is well-known for a simple but disciplined philosophy:
“Buy good companies. Don’t overpay. Do nothing.”
The companies in this portfolio are mostly:
• Large-cap global leaders (e.g., Microsoft, Meta, Visa, Procter & Gamble).
• Businesses with strong competitive advantages (brand power, scale, network effects).
• Consistent cash flow generators (many are dividend payers too).
• Industries with long-term demand (tech, healthcare, consumer staples, payments).
2. Why Investors May Want to Consider This Portfolio Style
a. Diversification with Strength
• The portfolio spreads across tech, healthcare, consumer staples, industrials, and finance, reducing reliance on one sector.
• Example: Microsoft + Google for growth, Procter & Gamble + Nestlé-type stocks for stability.
b. Resilience in Market Cycles
• Consumer staples (P&G, PM) and healthcare (Zoetis, Stryker, Dexcom) provide defensiveness during downturns.
• Tech giants (Microsoft, Meta, Google) fuel growth during upswings.
c. Global Exposure
• These companies operate worldwide, so you’re indirectly investing in global economic growth without needing to pick individual foreign markets.
d. Cash Flow & Compounding
• Many of these firms generate strong free cash flow.
• Dividends + buybacks + reinvested earnings = powerful long-term compounding.
e. Simplicity
• You don’t need to own 50–100 stocks. A concentrated portfolio of 20–30 high-quality companies is enough to mirror global growth.
3. Key Portfolio Highlights (Why These Stocks?)
• Microsoft (10.7%) → Software, cloud, AI leadership.
• Meta (11.4%) → Social media dominance + metaverse/AI potential.
• Visa (6%) → Global payments leader, benefits from cashless society.
• Procter & Gamble (3.2%) → Everyday consumer goods, steady dividends.
• Zoetis (animal health), Stryker (medical devices), Dexcom (diabetes tech) → Healthcare innovation with long-term demand.
• Fortinet (cybersecurity) → Digital defense as the world goes online.
• Marriott (5%) → Global travel and hospitality play.
• Otis (elevators/escalators), ADP (payroll), Water utilities → Infrastructure + essential services = stability.
4. Why This May Appeal to Investors
• ✅ Long-term investors who prefer steady compounding over short-term speculation.
• ✅ Risk-conscious investors who want growth and protection in downturns.
• ✅ Busy professionals who don’t have time to pick many stocks but want peace of mind with global leaders.
• ✅ Dividend growth seekers — many of these firms steadily raise dividends.
5. Takeaway Lesson
A Terry Smith-style portfolio is not about chasing hot trends.
It’s about:
• Owning great companies with durable advantages.
• Holding them long enough for compounding to work.
• Ignoring short-term noise while benefiting from global growth.
In essence, it’s like planting a garden of strong trees and letting them grow, rather than chasing quick crops.