Terry Smith, manager of Fundsmith Equity, shares his expertise on navigating today's challenging stock market landscape. He discusses the significant influence of tech heavyweights and the rise of passive investing. Terry reveals his recent stock purchases while explaining why he sold Diageo and opted against Nvidia. He challenges conventional views on dividends, advocating for a focus on total returns over income. Additionally, he provides insights into the UK stock market and cautions against the pitfalls of mistaking low prices for true value.
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insights INSIGHT
Performance Headwinds
Fundsmith Equity's recent underperformance is partly due to being underweight in the "Magnificent Seven" tech stocks.
However, rising interest rates and the tech boom also created headwinds for their quality-focused strategy.
insights INSIGHT
Index Funds and Market Concentration
The increasing concentration of stock market returns in a few companies makes it harder for active funds to outperform.
Index funds, being market-cap weighted, exacerbate this trend, creating a momentum effect.
question_answer ANECDOTE
Why Fundsmith Doesn't Own Nvidia
Terry Smith explains why Fundsmith doesn't own Nvidia, despite its success.
He cites concerns about its unpredictable business model pivots and its position in a capital spending cycle.
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To mark our 100th episode Kyle interviewed Terry Smith, manager of Fundsmith Equity. Among the topics discussed are whether it has become harder for active funds to outperform the index due to the strong performance of the ‘Magnificent Seven’ tech stocks. Terry also runs through the rationales behind the two stocks he has bought this year. He explains why Diageo was recently sold, and why he hasn’t bought Nvidia. Kyle also asksTerry for his view on the UK stock market, and to explain why he thinks “no one should invest in equities for income”.
On The Money is an interactive investor (ii) podcast. For more investment news and ideas, visit www.ii.co.uk/stock-market-news.
Kyle Caldwell is Collectives Editor at interactive investor.
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