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
|London Stock Exchange||–||6.6||3.3|
|Automatic Data Processing||3.5||–||1.7|
|Johnson & Johnson||2.6||–||1.3|
|Japan Exchange Group||–||2.3||1.2|
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.
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|
|3. Philip Morris||3|
|4. Novo Nordisk||7|
|7. Estée Lauder||4|
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
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.
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.
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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