저자: 미상 · 외국인
요약 보기
펀드스미스 2016년 주주서한 해설. 2016년 T클래스 총수익 +28.2%로 MSCI World와 동일, FTSE100(+19.2%) 상회. 거시 예측을 배제하고 '좋은 기업을 사고, 비싸게 사지 말고, 아무것도 하지 않는다'는 철학 강조. 고ROCE·높은 현금전환율·낮은 레버리지 등 품질 지표와 FCF수익률 약 4.4%의 합리적 밸류에이션 제시. 도미노피자 매도 사례로 밸류에이션 판단의 어려움도 언급.
다듬은 글
Welcome to a new deep dive. Today we're uh unpacking the fascinating world of investment funds. Yeah. And we're doing it through a really interesting lens. Exactly. We're looking at a shareholder letter from January 2017. Right. From the Fundsmith Equity Fund covering their 2016. We've got key excerpts.
And this letter, well, it doesn't just review performance. It lays out a really distinctive investment philosophy. So, our mission is to kind of distill the key takeaways, understand their strategy, and you know, pull out some valuable insights for you, the listener, trying to cut through all the financial noise.
And what's particularly compelling, I think, is seeing how a fund navigates a year like 2016. I mean, it was complex, right? Definitely huge global events. Yeah. But they held firm to this um consistent long-term strategy. So we'll connect the dots between their results, their core beliefs, and what it all means for how you might think about investing.
Exactly. Okay. So let's unpack this 2016 performance. Then the Fundsmith Equity Funds T-class accumulation shares, that's a specific class that reinvests income. They saw a total return of plus 28.2%. Pretty remarkable. Yeah, that's impressive. And interesting that it exactly matched the Msei World Index for the year, which is, you know, a big global benchmark.
Mhm. But if we zoom out a bit, look at the Footsie 100, the UK index. Yeah, that was up what, plus 19.2%. Right. So, Fundsmith beat that by a full 9%. Which is significant. And it kind of begs the question, doesn't it? Why would a UK investor see such a difference, especially that year? Well, here's where it gets really interesting.
The letter actually calls 2016 a game of two halves for their relative performance. Oh, okay. So, first half up to June 30th, the fund up plus 16.4%. Right. MCI World up plus 11.0%. Oh, so outperforming nicely there. Yeah. And part of that they acknowledge was helped by the pound falling sharply after the Brexit referendum.
Ah, because most of their holdings are US listed. Exactly. So weaker pound, those dollar assets look better in sterling terms. Makes sense. Okay. So that's the first half. What about the second? Well, the second half saw this um sector rotation as the letter calls it, right? A shift in market preference.
Yeah. Those stable quality companies, fundsmith likes fell out of favor a bit and money flowed into more cyclical stocks, banks. You got it. Especially after the US presidential election in November, there were these big expectations of US growth, new policies. So that rotation really kicked in then.
It did. And the letter is quite candid. They say, "Look, we don't know if this rotation will continue." And nobody else really does either, right? Pretty much that's what they imply. It leads into their whole philosophy, doesn't it? This avoidance of macro predictions. Oh, absolutely. Terry Smith, the author, he makes a very strong point about it.
Says he spends little, maybe no time worrying about the big trends like Brexit, China, interest rates. You list them out. It's quite a list. Brexit, China, Indian demonetization, French elections, German elections, interest rates, Korea, President Trump, ECB, quantitative easing, Syria, the oil price.
Wow. He's basically saying all that stuff everyone's talking about, not my focus. Pretty much. It's almost defiant. So why why ignore what everyone else obsesses over? Well, he calls markets a second order system. Give meaning. Meaning, even if you could predict the big event, say Brexit's outcome, you'd still need to predict how everyone else would react to it.
Exactly. It's that second layer of guessing. And he points out, look how often the polls and media got things like Brexit or the US election wrong. Right. Yet those same people then claim to know exactly what the effects of new policies will be. Yeah, it's a fair point. There's a certain uh inconsistency there.
So, what's the alternative for their strategy? Focus on what you can control, which is owning good companies, being really disciplined about the price you pay, which brings us straight to their core philosophy. Buy good companies, don't overpay, do nothing. That's the mantra. Okay, let's dig into that first part then.
What makes a good company for Fundsmith? It's not just a feeling, right? No, not at all. They back it up with data. The letter has this fascinating look through analysis comparing their portfolio sort of averaged out against the Footsie 100 and S&P 500. Exactly. And the numbers are striking. Look at return on capital employed ROCE.
Okay. How efficient the company is with its capital. Right. Their portfolio 26.7%. And the indices Footsie 100 13.5%. S&P 500 14.7%. Wow. So nearly double the efficiency pretty much. and better profit margins, too. Gross margin 61.9% versus like 40% for the Footsie. And they turn profits into actual cash.
Amazingly well. 99.4% cash conversion. And crucially, they do this with much less debt, lower leverage. Leverage is down at 37.7%. Yeah. And higher interest cover, meaning they can easily pay their debt costs. It's a very different financial profile. And this isn't just a one-year blip, is it? No. They emphasize the consistency.
These results have been stable for years. And get this, the average founding year of the companies in their portfolio. When were they founded? 1912. Wow. So established, resilient businesses. Seems so. But beyond just the strong financials, they need growth. That's key. And did they get it in 2016? Cuz it was a sluggish year globally.
They did. Their weighted average free cash flow grew by just over 11%. Which is remarkable when earnings for the big indices were actually falling that year. It really stands out. So, okay, these companies are clearly highquality, growing nicely. You'd think they'd be expensive, right? How do they manage the don't overpay part?
That's the crucial bit. Let's look at valuation. The portfolio's free cash flow yield at the end of 2016 was 4.4%. Okay, so that's like the cash return you get for your investment. How does that compare? Well, it was pretty similar to the S&P 500, which averaged 4.3%. And the Footsie 100, a little higher, 4.7%.
So wait, the companies are fundamentally much better at growing faster. Y but their valuation based on free cash flow is only comparable or maybe slightly higher than the average. Exactly. That suggests they're finding quality without paying nosebleleed prices. That's the skill finding that intersection.
Okay, that makes sense. Now the third leg, do nothing. This sounds easy, but it's probably the hardest. Oh, definitely. It means minimizing portfolio turnover, not constantly chopping and changing. And their turnover in 2016 was actually negative. Negative 15.6%. Yeah. Meaning on balance they were adding to positions, not selling out.
And they've held what 14 stocks since the fund even started. Incredible loyalty to their picks. Well, it reflects this core belief that trading costs money and often in hidden ways, right? The letter mentions the standard charges AMC, OCF. Yeah. The ones everyone focuses on. But they often miss dealing costs like commission, the bid offer spread, stamp duty in the UK, all those friction costs.
So Fundsmith calculates their own measure, the total cost of investment or TCI. And for the T-class shares in 2016, that was 1.11%. Compared to an OCF of 1.06%. So slightly higher, but they argue it's a truer picture of the total cost drag. And they believe keeping that TCI low is vital for investors.
Absolutely. Every basis point saved compounds over time. And they even include this uh cautionary tale about not doing nothing or rather about the difficulty of deviating. Ah the Domino's pizza story. Yeah. They sold it in 2015 not because it stopped being a good company but because the valuation looked too stretched right too high for its growth rate.
Exactly. So they made the valuation call sold it with as they say regret and trepidation. And what happened in 2016? The share price went up another 45%. Ouch. That's got to sting. It really highlights how hard market timing is even for them and why they're so reluctant to sell great companies even if they look a bit expensive sometimes.
It's a lesson in humility really. Definitely. Okay, let's look at some of the specific portfolio names that drove performance in 2016. Right. The top contributors top was IDA XX Laboratories, the vet testing company added plus 3.1%. That was a newer one for them bought in 2015. Yeah. Then Striker Medical Tech plus 2.54%.
CRB, another medical device firm, plus 2.06%. Both long-term holdings, right, since inception. Yep. Then Intercontinental Tails plus 1.71% and Johnson Johnson plus 1.68%. J&J also held since day one. So, a mix of newer picks and Old Faithfuls driving returns. What about the Lagards? Interesting list.
Bottom five included Estee Lauder down slightly. Proctor and Gamble also down slightly. Both consumer giant. Then Novo Nordisk barely positive. Colgate Palm Olive just slightly positive and imperial brands also just up a bit. So four out of five are consumer stocks and several of those are often called bond proxies.
Exactly. Which the letter points out is kind of ironic. How so? Well, they note people accuse them of benefiting from these bond proxy stocks being popular. But in reality, those very stocks were among their worst performers that year. Precisely. It sort of undermines that narrative which leads to this whole discussion about bond proxies, these stable companies people supposedly bought instead of bonds when yields were low, right?
And the prediction was these stocks would get hammered when interest rates went up. But the letter pushes back on that. Yeah, strongly. They point out the US Fed only raised rates by half a percent in all of 2016. Hardly a massive hike. Not really. So the premise that rising rates were crushing these stocks seemed well overblown to them at the time.
Okay. So if they're not buying the bond proxy collapse story and they saw cyclicals like banks rallying, did they consider switching? They addressed that. They consider switching into banks or other cyclicals that did well late in the year. But they decided against it. Yes. Because fundamentally they argue those kinds of companies often don't create long-term value.
Their returns struggle to beat their cost of capital over a cycle. So buying them would just be a short-term trade. Exactly. A bet based on greater fool theory hoping someone else buys it from you at a higher price later. Not because of its intrinsic value. Right. And they explicitly say we don't do that.
Sticking to their quality focus. It's a very consistent. One last thing they mentioned something that's more about communication. Okay. It actually benefits the investor directly. the UK regulator, the FCA, Financial Conduct Authority, right? They reviewed investor communications and basically said those half-yearly short form reports funds had to send out, the ones that are often quite dense.
Yeah. They concluded they were ineffective, hard to understand, and fundsmith's reaction. They welcomed the FCA's decision to scrap the requirement. Ah, interesting. So, they agreed it wasn't useful. Totally. saves them costs obviously, but more importantly, it reduces the sheer volume of paperwork investors get hit with, which can be overwhelming.
Definitely. They believe their annual letter, shareholder meetings, monthly fact sheets, the investment statements, those are much better ways to communicate. Makes sense. Less noise, more signal. Exactly. So, wrapping this all up, what does this deep dive mean for you, the learner? Well, we've seen how a fund with a really clear long-term philosophy navigated a pretty wild year.
Yeah. Focusing on what they feel they can control, right? The quality of the companies, the price they pay, and tuning out a lot of that macro prediction noise. And this 2016 letter, it just really underscores the discipline behind that buy good companies, don't overpay, do nothing approach, sticking to your knitting, even when the market seems to be doing something completely different short term.
Exactly. and the insights. We talked about how they define quality with numbers, understanding the real costs of investing beyond just the headline fees, and that humility, too. Acknowledging when things don't go perfectly, like the domino sale. Yeah. That offers a really powerful perspective. I think it cuts through a lot of the usual financial chatter.
It does. Which leaves us with maybe a final thought for you to consider. Okay. In this world where we're just bombarded with financial news, 247 market predictions, how much of that constant noise are you letting shape or maybe even derail your own long-term view of value and how you invest? That's a really good question to reflect on. How much is noise and how much is signal?
Comments 0