Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Terry Smith

Posted by Muthu on October 31, 2016

Terry Smith and Nick Train are two UK based fund managers who invest in quality companies for long run. There are years when they make zero changes to their portfolio. I’ve been reading about these 2 fund managers for a year or so. Neil Woodford looks like another UK fund manager with similar approach. I’ve recently started reading about him as well.Why I track them is that my own stock picking approach from 2013-14 has been to invest predominantly in quality companies and efficient capital allocators for a long run.

Though you are mutual fund investors, I thought I’ll share with you some of the points Terry smith mentioned on completion of 5 years for his fund. They are good pointers and worth knowing.

“1) One thing I have observed is the obsession of market commentators, investors and advisers with macroeconomics, interest rates, quantitative easing, asset allocation, regional geographic allocation, currencies, developed markets versus emerging markets — whereas they almost never talk about investing in good companies.

2) I am not suggesting that there is no other way of making money other than to invest in good companies, but investing in poor or even average companies presents problems. One is that over time they tend to destroy rather than create value for shareholders, so a long-term buy and hold strategy is not going to work for them.

3) Another obsession I have been surprised about is that with “cheap” shares. I have been asked whether a share is cheap many more times than I have been asked whether the company is a good business.

4) People often assume that for an investment to make a high return it must be esoteric, obscure, difficult to understand and undiscovered by other investors. On the contrary — the best investments are often the most obvious.

5) Run your winners. Too often investors talk about “taking a profit”. If you have a profit on an investment it might be an indication that you own a share in a business which is worth holding on to. Conversely, we are all prone to run our losers, hoping they will get back to what we paid for them. Gardeners nurture flowers and pull up weeds, not the other way around.”

You can read more at https://www.fundsmith.co.uk/

One Response to “Terry Smith”

  1. Madikeri Abu said

    “the best investments are often the most obvious”… Well said Muthu. Investment in well known product producing companies are more rewarding than unknown, unseen and unheard of companies. Investment in companies like Britannia, Asian Paints, Nestle are a few companies that comes to mind.

    “Gardeners nurture flowers and pull up weeds, not the other way around”… Again well said. Eicher motors and MRF are just two example.

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