Fundsmith....New Holding

[simoan]

"Meta" is not having a good day, neither.

In fact a world record no company would ever want - biggest one day loss of value ever recorded. Down $220 billion, around a quarter of the company value.

Oh dear.

And yet still double where it was just over 3 years ago.

But of course that is not when Smith bought it.

This week must be the worst ever for Fundsmith? PayPal and Meta, both savaged in the market. I wouldn't mind being a fly on the wall when Smith is on Zoom or Teams discussing this with the rest of Fundsmith LLP in the morning.

And yet results from Alphabet and Amazon have been great. The latter is up 16% after hours. You win some, you lose some…

[BullDog]

"Meta" is not having a good day, neither.

In fact a world record no company would ever want - biggest one day loss of value ever recorded. Down $220 billion, around a quarter of the company value.

Oh dear.

And yet still double where it was just over 3 years ago.

But of course that is not when Smith bought it.

This week must be the worst ever for Fundsmith? PayPal and Meta, both savaged in the market. I wouldn't mind being a fly on the wall when Smith is on Zoom or Teams discussing this with the rest of Fundsmith LLP in the morning.

And yet results from Alphabet and Amazon have been great. The latter is up 16% after hours. You win some, you lose some…

Indeed you do

[doug2500]

"Meta" is not having a good day, neither.

In fact a world record no company would ever want - biggest one day loss of value ever recorded. Down $220 billion, around a quarter of the company value.

Oh dear.

I think I read somewhere Meta had lost a whole Macdonalds

[BullDog]

"Meta" is not having a good day, neither.

In fact a world record no company would ever want - biggest one day loss of value ever recorded. Down $220 billion, around a quarter of the company value.

Oh dear.

I think I read somewhere Meta had lost a whole Macdonalds

Or approximately 1.5 Shells

[swill453]

And Zuckerberg personally lost the GDP of Estonia.

Scott.

[simoan]

"Meta" is not having a good day, neither.

In fact a world record no company would ever want - biggest one day loss of value ever recorded. Down $220 billion, around a quarter of the company value.

Oh dear.

I think I read somewhere Meta had lost a whole Macdonalds

Or approximately 1.5 Shells

Yet more evidence of the human psyche feeling pain of loss more than the buzz of a gain. I’m sure Apple or Microsoft went up more than Meta declined recently, and yet not a dicky bird. We mustn’t let stupid headlines reinforce our troublesome inbuilt biases. Shares decline all the time by 25%. It’s part and parcel of investing.

[doug2500]

I agree, but it does give some perspective on how large these FAANGs are.

[simoan]

I agree, but it does give some perspective on how large these FAANGs are.

Yes but there are more impressive stats which are less newsworthy that illustrate this better e.g. daily US trading in Apple stock alone being more than that of the entire LSE. That’s what you call liquidity!

[simoan]

"Meta" is not having a good day, neither.

In fact a world record no company would ever want - biggest one day loss of value ever recorded. Down $220 billion, around a quarter of the company value.

Oh dear.

I think I read somewhere Meta had lost a whole Macdonalds

I've just been checking the updated numbers for Meta. I have to say it's starting to look interesting.

FY22 PER = 18
EV/EBITDA = 15.7
FY21 FCF Yield = 5.9%
Net Cash = $34B
Gross Margin = 81%
EBIT Margin = 40%
ROE = 31%

I'll let others get distracted by BBC headlines. Meta looks potentially interesting IMO but I'll let the blood letting continue a bit before making any decisions NB I'm a contrarian by nature. 5% of market cap in cash. It wouldn't surprise me if Fundsmith are buying more either.

All the best, Si

[BullDog]

"Meta" is not having a good day, neither.

In fact a world record no company would ever want - biggest one day loss of value ever recorded. Down $220 billion, around a quarter of the company value.

Oh dear.

I think I read somewhere Meta had lost a whole Macdonalds

I've just been checking the updated numbers for Meta. I have to say it's starting to look interesting.

FY22 PER = 18
EV/EBITDA = 15.7
FY21 FCF Yield = 5.9%
Net Cash = $34B
Gross Margin = 81%
EBIT Margin = 40%
ROE = 31%

I'll let others get distracted by BBC headlines. Meta looks potentially interesting IMO but I'll let the blood letting continue a bit before making any decisions. It wouldn't surprise me if Fundsmith are buying more either.

All the best, Si

I think you are right on all counts. It's more or less what Smith said when he started buying it. He focused on it's duopoly (with Alphabet) in advertising revenue. Comparing it to tobacco companies. However, the shine has come off this aspect somewhat, I understand.

[Investor]

Received Stephen Yiu's Blue Whale Capital newsletter this morning and he states that he sold out of both Meta and PayPal in January, before they plummeted in value:

"Both PayPal and Meta had been holdings in the portfolio since inception in September 2017. However, in light of recent news relating to acquisitions and increased competition in the sector, we sold out of PayPal in January, prior to the c.25% share slump following the release of their Q4 2021 earnings at the start of February. We sold Meta because of the perceived deterioration of its business quality (ROIC profile) on its significant, yet questionable, investment in the metaverse. Again, this sale was transacted prior to the c.$250bn drop in market cap following its latest earnings update."

These two companies have continued to be held by FundSmith.

I very much understand the philosophy Terry Smith's "do nothing" strategy, but I sure wish he had exited from PayPal and Meta like Stephen Yiu had.

Hopefully they will eventually bounce back.

But it's been a very painful few weeks for FundSmith holders and the future is looking uncertain.

[Tigger]

Worth noting that Blue Whale is down around 13% year to date, even after selling out of those two, while Fundsmith is down 'just' 10.5%. However, Blue Whale is still some 10% ahead of Fundsmith since the former launched in late 2017.

[simoan]

Received Stephen Yiu's Blue Whale Capital newsletter this morning and he states that he sold out of both Meta and PayPal in January, before they plummeted in value:

"Both PayPal and Meta had been holdings in the portfolio since inception in September 2017. However, in light of recent news relating to acquisitions and increased competition in the sector, we sold out of PayPal in January, prior to the c.25% share slump following the release of their Q4 2021 earnings at the start of February. We sold Meta because of the perceived deterioration of its business quality (ROIC profile) on its significant, yet questionable, investment in the metaverse. Again, this sale was transacted prior to the c.$250bn drop in market cap following its latest earnings update."

These two companies have continued to be held by FundSmith.

I very much understand the philosophy Terry Smith's "do nothing" strategy, but I sure wish he had exited from PayPal and Meta like Stephen Yiu had.

Hopefully they will eventually bounce back.

But it's been a very painful few weeks for FundSmith holders and the future is looking uncertain.

A few weeks or months of underperformance here or there is nothing really, is it? I personally don't like the quotes from the newsletter, which you have to remember is marketing material - they want to appear clever so you invest more because that's how they get paid. If they are claiming some kind of market timing ability then it is even worse because we all know that is not possible, and such buy or sell results are a combination of foresight and good fortune. They should always recognise the good fortune with respect to the timing but I see no sign of that from the quote you posted. Hopefully, next time they buy something the day before it issues a profit warning or sell something the day before a killer 50% premium is offered for the company, they'll be only too happy to put it in their newsletter.

[BullDog]

Received Stephen Yiu's Blue Whale Capital newsletter this morning and he states that he sold out of both Meta and PayPal in January, before they plummeted in value:

"Both PayPal and Meta had been holdings in the portfolio since inception in September 2017. However, in light of recent news relating to acquisitions and increased competition in the sector, we sold out of PayPal in January, prior to the c.25% share slump following the release of their Q4 2021 earnings at the start of February. We sold Meta because of the perceived deterioration of its business quality (ROIC profile) on its significant, yet questionable, investment in the metaverse. Again, this sale was transacted prior to the c.$250bn drop in market cap following its latest earnings update."

These two companies have continued to be held by FundSmith.

I very much understand the philosophy Terry Smith's "do nothing" strategy, but I sure wish he had exited from PayPal and Meta like Stephen Yiu had.

Hopefully they will eventually bounce back.

But it's been a very painful few weeks for FundSmith holders and the future is looking uncertain.

A few weeks or months of underperformance here or there is nothing really, is it? I personally don't like the quotes from the newsletter, which you have to remember is marketing material - they want to appear clever so you invest more because that's how they get paid. If they are claiming some kind of market timing ability then it is even worse because we all know that is not possible, and such buy or sell results are a combination of foresight and good fortune. They should always recognise the good fortune with respect to the timing but I see no sign of that from the quote you posted. Hopefully, next time they buy something the day before it issues a profit warning or sell something the day before a killer 50% premium is offered for the company, they'll be only too happy to put it in their newsletter.

Very clear that Yiu called Meta and PayPal extremely well. Luck? Quite possibly. Yiu does seem to be more active than Smith generally. It seems Yiu has a very good valuation model though not very much has ever been said about it. That helps?****

Yiu sold Amazon just before Smith bought it.

Amazon has appreciated since Smith bought it.

So, Yiu 2 : Smith 1.

Worth noting too that Yiu sold Unilever a while ago. Smith still holds. Call that a draw.


**** Until it doesn't. Like Artemis used to shout a lot about the returns of their "SmartGARP" model. Until it stopped working.

[simoan]

Very clear that Yiu called Meta and PayPal extremely well. Luck? Quite possibly. Yiu does seem to be more active than Smith generally. It seems Yiu has a very good valuation model though not very much has ever been said about it. That helps?****

Yiu sold Amazon just before Smith bought it.

Amazon has appreciated since Smith bought it.

So, Yiu 2 : Smith 1.

Worth noting too that Yiu sold Unilever a while ago. Smith still holds. Call that a draw.


**** Until it doesn't. Like Artemis used to shout a lot about the returns of their "SmartGARP" model. Until it stopped working.

I guess the point I was trying to make is that it is all noise in the long run. Everything could look very different this time next year. So there's not really much point keeping scores. They're both massively underperforming me over the past few months and Fundsmith accounts for over 50% of my portfolio loss YTD. Not that that tells us anything at all, although I could claim to be a genius outperforming Yiu and Smith in my latest fund newsletter

[BullDog]

Very clear that Yiu called Meta and PayPal extremely well. Luck? Quite possibly. Yiu does seem to be more active than Smith generally. It seems Yiu has a very good valuation model though not very much has ever been said about it. That helps?****

Yiu sold Amazon just before Smith bought it.

Amazon has appreciated since Smith bought it.

So, Yiu 2 : Smith 1.

Worth noting too that Yiu sold Unilever a while ago. Smith still holds. Call that a draw.


**** Until it doesn't. Like Artemis used to shout a lot about the returns of their "SmartGARP" model. Until it stopped working.

I guess the point I was trying to make is that it is all noise in the long run. Everything could look very different this time next year. So there's not really much point keeping scores. They're both massively underperforming me over the past few months and Fundsmith accounts for over 50% of my portfolio loss YTD. Not that that tells us anything at all, although I could claim to be a genius outperforming Yiu and Smith in my latest fund newsletter

Indeed, you are right.

Given that Fundsmith and Blue Whale are in the growthy half of my portfolio, I believe I have trounced Smith and Yiu myself in more recent times

That's the yieldy half of the portfolio of a few shares and investment trusts that have done far better in the short term.

I suppose that's why I have a portfolio of two halves. Hopefully one half will do better when the other half struggles.