Billionaire Terry Smith, "the English Warren Buffett," Has 31% of His Hedge Fund's Portfolio Invested in 3 Exceptional Stocks

Core Viewpoint - Fundsmith, led by Terry Smith, continues to hold strong positions in companies like Meta Platforms, Microsoft, and Stryker, showcasing a successful investment strategy focused on high-quality companies with robust financials and growth potential [1][2]. Group 1: Fundsmith Overview - Fundsmith's investment philosophy mirrors that of Warren Buffett, emphasizing the purchase and holding of great companies with strong market positions and profitability [2]. - Since its inception in 2010, Fundsmith has achieved a cumulative return of 607.3%, significantly outperforming its benchmark, the MSCI World Index, which returned 403.4% [2]. Group 2: Meta Platforms - Meta Platforms constitutes 11.25% of Fundsmith's portfolio, with a history of strong performance, contributing to the fund's success in four of the last seven years [4][5]. - The company reported a 16% revenue growth last quarter and expanded its operating margin to 41%, while generating over $10 billion in excess cash for shareholders for eight consecutive quarters [5][6]. - Meta's competitive advantages include its vast user base of over 3.4 billion and unparalleled advertising capabilities, bolstered by significant investments in AI [6][7][8]. - The stock's forward P/E ratio is 23, slightly above the S&P 500, but it offers higher-than-average long-term earnings growth potential [9]. Group 3: Microsoft - Microsoft also represents 11.25% of the portfolio, with a significant transformation into a cloud computing and AI leader since Smith's initial investment in 2011 [10][11]. - Azure revenue grew by 33% year-over-year last quarter, driven by AI services, which accounted for nearly half of Azure's growth [11][12]. - The company's Copilot solutions are widely adopted, with 230,000 organizations using them, including 90% of the Fortune 500, contributing to double-digit revenue growth in its enterprise software business [13]. - Despite a forward P/E of 32.3, Microsoft's strong free cash flow and share repurchase program provide good value for investors [14]. Group 4: Stryker - Stryker accounts for 8.5% of Fundsmith's portfolio and has been a significant contributor to the fund's performance, with a stock price increase of 666% since inception [15]. - Recent concerns about economic slowdown and potential Medicaid cuts have affected the stock, but management has guided for sales growth of 8.5% to 9.5% for the year [16]. - Stryker's diverse product portfolio and innovation capabilities provide a competitive advantage, with high switching costs protecting it from long-term declines [17]. - The stock trades at about 28.3 times forward earnings, considered a fair price for a company with strong competitive positioning and growth potential [18].