Many UK investors own either one or both of Fundsmith Equity and Lindsell Train Global Equity. There’s some overlap in their holdings, but how do their portfolios look if you put them together?
I own both funds and due to their similar investing styles, I tend to think of them as one giant position within my portfolio.
Both these funds own a relatively small number of companies (typically between 20-30).
They both favour companies with strong cash flow and high return of capital employed figures.
And they buy and sell their underlying holdings relatively infrequently.
They were launched within a few months of each other as well. Fundsmith Equity started up in November 2010 and Lindsell Train Global in March 2011, so neither can boast a 10-year track record yet.
If you’re yet to watch one, Fundsmith’s AGM presentations are well worth checking out although I’m always slightly amused that Lindsell Train Global never makes it onto Terry Smith’s list of comparable global funds!
The combined portfolio
I’m using holdings data as of 31 December 2019 for this exercise, taken from their long-form annual reports. Fundsmith’s was published just over a month ago but Lindsell Train’s has only just been released.
Although things have, er, moved on since the end of 2019, this should still provide a pretty good idea of how both funds look today.
Companies held by both Fundsmith Equity and Lindsell Train Global are marked in a snazzy blue.
Portfolios as of 31 December 2019
| Company | Fundsmith Equity % | Lindsell Train Global % | Both funds combined % |
|---|---|---|---|
| Unilever | 2.8 | 7.8 | 5.3 |
| PayPal | 5.5 | 4.9 | 5.2 |
| Diageo | 2.2 | 7.6 | 4.9 |
| Intuit | 4.0 | 4.8 | 4.4 |
| PepsiCo | 3.8 | 4.8 | 4.3 |
| Heineken | – | 7.3 | 3.7 |
| London Stock Exchange | – | 6.6 | 3.3 |
| Microsoft | 6.4 | – | 3.2 |
| Nintendo | – | 5.3 | 2.7 |
| Walt Disney | – | 5.1 | 2.5 |
| RELX | – | 5.0 | 2.5 |
| Mondelez | – | 5.0 | 2.5 |
| Kao | – | 4.9 | 2.5 |
| Shiseido | – | 4.9 | 2.4 |
| Philip Morris | 4.7 | – | 2.4 |
| Estée Lauder | 4.6 | – | 2.3 |
| 4.5 | – | 2.2 | |
| Amadeus IT | 4.2 | – | 2.1 |
| Novo Nordisk | 4.2 | – | 2.1 |
| Stryker | 4.1 | – | 2.1 |
| McCormick | 4.0 | – | 2.0 |
| Hargreaves Lansdown | – | 4.0 | 2.0 |
| WWE | – | 4.0 | 2.0 |
| Waters | 3.9 | – | 2.0 |
| IDEXX Laboratories | 3.9 | – | 2.0 |
| Visa | 3.9 | – | 1.9 |
| Reckitt Benckiser | 3.8 | – | 1.9 |
| Automatic Data Processing | 3.5 | – | 1.7 |
| Becton Dickinson | 3.5 | – | 1.7 |
| Pearson | – | 3.3 | 1.7 |
| Brown-Forman | 2.1 | 1.2 | 1.7 |
| L’Oreal | 3.2 | – | 1.6 |
| InterContinental Hotels | 3.1 | – | 1.5 |
| eBay | – | 2.9 | 1.4 |
| Sage | 2.8 | – | 1.4 |
| Kone | 2.8 | – | 1.4 |
| Intertek | 2.8 | – | 1.4 |
| Johnson & Johnson | 2.6 | – | 1.3 |
| Astellas Pharma | – | 2.5 | 1.2 |
| Japan Exchange Group | – | 2.3 | 1.2 |
| Coloplast | 2.3 | – | 1.1 |
| Prada | – | 2.2 | 1.1 |
| Juventus | – | 1.7 | 0.9 |
| Ito En | – | 0.6 | 0.3 |
| Clorox | 0.6 | – | 0.3 |
| Canon | – | 0.2 | 0.1 |
| Celtic | – | 0.1 | 0.1 |
| Meiko Network | – | 0.1 | 0.0 |
| Cash | 0.3 | 0.9 | 0.6 |
| Total | 100.0 | 100.0 | 100.0 |
Fundsmith Equity said it added two new holdings in March 2020. It hasn’t yet disclosed their names as it is still building up its position but Dan Grote at Citywire reckons they are Nike and Starbucks.
Fundsmith’s April factsheet has just been released and revealed that Clorox has been sold after a strong price performance since being bought a few months ago.
Lindsell Train Global sold two of its smallest positions — Canon and Meiko — in February but hasn’t said anything yet about any new purchases in 2020.
Concentrated goodness
Both funds’ portfolios are very concentrated by normal standards.
The transactions made since the end of 2019 have reduced Lindsell Train Global’s number of holdings to 24 while Fundsmith has risen to 29.
All of Fundsmith’s positions are now greater than 2% while Lindsell Train, even after its recent clear-out, has four below this level.
Fundsmith’s top 15 holdings account for 66% of its portfolio while it’s 82% in the case of Lindsell Train.
But when you put the two funds together, I think things look a lot more balanced. There are around 50 positions with just two holdings over 5%.
There’s quite a long tail of positions less than 2% but arguably only three of those are too small to have a meaningful impact, namely Ito En, Clorox (now sold anyway), and Celtic.
The joint holdings
There are six positions held by both funds, accounting for 26% of the combined portfolio.
Unilever, Diageo, PayPal, Intuit, and PepsiCo are the main five joint holdings, with Brown-Forman (the maker of Jack Daniels) some way behind.
Brown-Forman is the smallest of the jointly held positions in terms of company size, valued at a mere $30 billion. Fundsmith bought it in late 2019 but it’s been owned by Lindsell Train for several years I believe.
What’s changed in 2020?
Although these funds rarely trade, the share prices of their underlying holdings have shifted around a lot since the end of 2019. So let’s check the latest available top 10 for each fund.
Fundsmith just lists the order of its largest 10 holdings in its monthly factsheets so we can’t see the exact percentages.
Fundsmith Equity Top 10
| End of Apr 2020 | End of Dec 2019 |
|---|---|
| 1. Microsoft | 1 |
| 2. PayPal | 2 |
| 3. Philip Morris | 3 |
| 4. Novo Nordisk | 7 |
| 5. Facebook | 5 |
| 6. Intuit | 10 |
| 7. Estée Lauder | 4 |
| 8. Idexx | 12 |
| 9. Stryker | 8 |
| 10. McCormick | 9 |
Amadeus IT has dropped out of the top 10 and has been replaced by IDEXX while Intuit and Novo Nordisk have moved up the ranks. Estée Lauder is a notable faller.
Lindsell Train gives percentages for its top 10 each month, so we can see a little more detail.
Lindsell Train Global Top 10
| Company | As of Mar 2020 | As of Dec 2019 |
|---|---|---|
| 1. Unilever | 8.2% | 7.8% |
| 2. Diageo | 7.5% | 7.6% |
| 3. Heineken | 7.2% | 7.3% |
| 4. LSE | 7.2% | 6.6% |
| 5. Nintendo | 6.3% | 5.3% |
| 6. Mondelez | 5.0% | 5.0% |
| 7. PepsiCo | 4.9% | 4.8% |
| 8. RELX | 4.9% | 5.0% |
| 9. Kao | 4.7% | 4.9% |
| 10. Disney | 4.7% | 5.1% |
A lot of Lindsell Train’s positions are around the 5% mark, so it doesn’t take much share price volatility to re-order the bottom reaches of its top 10.
PepsiCo has taken the place of PayPal in its latest top 10 while the position sizes of the LSE and Nintendo have increased significantly.
Disney seems to have seen the largest reduction in position size. While its streaming service, Disney+, has got off to a flying start, delays to cinema release dates and the closure of its theme parks, seem to have dragged it down.
Summing up
Not a great deal has changed in the holdings of these funds since I first looked at them, but that’s not particularly surprising given their style of investing.
Both love their consumer-good companies (food, drink, and cosmetics). Fundsmith also tends to favour big IT stocks and healthcare while Lindsell Train has a soft spot for media, financials, and Japanese companies.
Fundsmith is by far the larger of the two. At £16.7 billion as of 31 March 2020, it was 2.5 times the size of Lindsell Train’s £6.7 billion.
Over longer timeframes, their performances have been very similar although it’s fairly common for their annual return figures to be several percentage points apart.
Lindsell Train was up 149% from January 2015 to December 2019 and down 4% in the first four months of 2020. Fundsmith’s figures are up 133% and flat.
However, since Lindsell Train Global was launched in March 2011, Fundsmith has a pretty decent lead (up 359% versus 294% to the end of April 2020).
While some folks think the good run of form these funds enjoyed in the 2010s must come to an end soon, they definitely seem to be proving their worth in the tough market of 2020.
Disclaimer
Please note that I may own some of the investments mentioned above -- you can see my current holdings on my portfolio page.
Nothing on this website should be regarded as a buy or sell recommendation as I'm just a random person writing a blog in his spare time and I am not authorised to give financial advice. Always do your own research and seek financial advice if necessary!
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Nice article…blue whale fund comparison would be interesting!
Thanks Geraint. Blue Whale seems to trade more actively than both Fundsmith and LT Global so I suspect its holdings information could date rather quickly but I may see if I can get something on it.
They seem to give even less info than Fundsmith when it comes to the monthly factsheet so although they do list the top 10 they just give them in alphabetical order rather than position size.
Thanks – nice article
Buying these two investment trusts – and only these two trusts – would be both simple and give a nice portfolio of diversified companies.
Investors could do worse
They are funds not trusts!!
Thanks db. And just to clarify, as Clive has already said in his comment above, these are both open-ended funds rather than investment trusts.
Although I do focus on investment trusts on this blog, I also cover funds and ETFs at times, usually either ones that I own or am interested in.
Thanks for another comprehensive piece.
To try and look at the ‘silver lining’ of 2020 – it’s been another chance to see how these two funds perform when things head down (as we’ve long seen how they do when things go up).
Traditionally the theory was that funds could outperform either in a bull or bear market, but not both. So far, these two funds suggest that they may be very rare exceptions.
Given how ‘fashionable’ tech and healthcare are at present, it’s not a surprise that Fundsmith has pulled ahead of Lindsell recently.
Blue Whale continues to intrigue – I just don’t know how I’ll reach a high conviction in Mr Yiu and team. The appeal with Fundsmith and Lindsell is that they have very clearly articulated their investment philosophy (Lindsell have done it much better with all their papers). I don’t feel Blue Whale have quite achieved that yet.
Currently I see it as a useful ‘tool’ for obtaining more quality US tech exposure, but I am still not sure whether it’s simpler to buy a NASDAQ 100 ETF instead. Let’s not forget the US indices are incredibly hard to beat.
I wish I could find something ‘cleverer’ to do for my exposure to the US and Europe, but at present, the blend of Fundsmith and Lindsell seems eminently sensible, bolstered with some Blue Whale and Smithson.
The ‘watchlist’ I suppose would be the BG USA trust and Manchester & London, but the former I think has too many variables (I think the likes of Tesla and Shopify could easily either be heroes OR zeroes) and the latter remains in the ‘too hard’ pile.
Finally you might like the CQS Global fund if you don’t know it, very much in the style of Fundsmith.
https://cqsnewcityequity.com/fund-centre/global-equity-fund/
Another good post ITinvestor! I’m a fan of both funds but would probably give the edge to Fundsmith given they seem quicker to cut losers (and even short term successes like Clorox) and are more proactive in finding new opportunities; LT seem resolute in sticking with their companies through thick and thin, regardless if the investment case has changed e.g. Pearson.
I think the reason Terry Smith doesn’t include LT Global Equity in his comparison of other big UK funds is that the LTGE fund is registered in Dublin. From memory he usually includes LT UK Equity though.
@tom_grlla
Thanks Tom! Yes, it’s been pleasing to see how well they’ve held up relative to world market indices. It’s been a slightly unusual bear market, though, so there may be a limited read across to who does well in the next few, but who really knows!
Blue Whale does seem to be playing its cards closer to its chest even though they do plenty of general PR. That may change over time I guess. For those of us that like to see the underlying holdings and get a feel for the amount of portfolio turnover, it’s definitely more of a black box at this stage. It may get a bit more coverage when it hits the 3-year mark later this year.
I must admit that I try to fight the urge to do anything too clever when it comes my own portfolio these days as that’s when I’ve come unstuck in the past! But it is hard to beat the S&P/NASDAQ when the biggest tech companies are driving it forward. I don’t think that will continue indefinitely, hence my plan to add stuff like Murray International into the mix.
BGUS and MNL seem like decent back-up options and I might even get a small stake in the latter to help me understand it better.
Don’t know too much about CQS Global but will try and check it out — thanks for the suggestion.
@GT
Thanks! Yes, Fundsmith seems to be marginally more active and I know LT’s perservance with Pearson has put off a few folks. I tend to be a little more naive/forgiving on the basis that in any portfolio there will always be a few choices you don’t agree with or fully understand.
You might be right about the comparison — it seems to be the largest UK equity/total return funds but I suspect the comparison was first chosen on the basis that it was likely to make them look pretty good.
Lindsell Train Global’s April update has just been published. Still no new buys or sells…
“We have neither initiated any new holding, nor disposed of any existing holding since the start of the crisis. This is the case not just for your Fund, but across all of Lindsell Train Limited’s Global, UK and Japanese equity portfolio.”
I presume they’re still nibbling away at the newer ones i.e. Prada, Fevertree and PZ Cussons.