Fundsmith Equity has developed a considerable fan club of investors and it is not difficult to see why. The fund has returned 266 per cent in a little over seven years. By Myron Jobson For Thisismoney. Mortgages are at their most affordable in four years – but could rates drop why do investors require higher returns for some investments further?
Fundsmith has developed a considerable fan club of investors and it is not difficult to see why. Terry Smith, topped the bestseller lists of both the Bestinvest and AJ Bell DIY investment platforms last year and has returned a whopping 266 per cent in a little over seven years since it was launched. 2,061 over the same period. The idea was to deliver a fund that offered a clearly defined and simple investment philosophy, investing in companies around the world that had the power to turn cash into consistent profits. 30million in notional profits from his investment in the past year alone.
Will the bull market run out of steam? Is it too late to cash in on the great oil rush? Should you join the bond rush? Are stock markets about to crash?
So what does Fundsmith do? When it comes to selecting shares, Smith adopts a Warren Buffett-esque investment approach of buying and holding a small number of quality companies that can withstand the test of time. He says that he also aims to keep costs to a minimum by trading only when it is absolutely essential. This is highlighted by the very small gap between its ongoing charges figure of 1. 05 per cent and its actual cost of ownership including transaction costs of 1.
One of the key things that Smith uses to evaluate such companies is a measure called return on capital employed, or ROCE, which looks at a company’s profitability compared to how much capital is invested in the business. This is measured by profits divided by a company’s net assets. A high double-digit figure usually signals that a company has a competitive advantage over its rivals, as it can make more money from putting the same amount to work. The latter of the three shares epitomises Smith’s investment philosophy. 90 on 17 January 2017. Its share price has managed to maintain an upward trend throughout a turbulent time for some in the consumer products sector during the period. In search of the best stocks, Smith and his researchers are reported to trawl through a plethora of research notes, annual reports and industry publications – from Tissue World magazine to the Petfood Forum – to uncover every last detail about a company.