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Money Maze Podcast

125: Is Active Management Worth Paying For? With Terry Smith (CEO, CIO & Founder of Fundsmith)

Jan 25, 2024
Terry Smith, referred to as 'the English Warren Buffett', discusses his investing style and success. He explains the genesis of Fundsmith, its mission, and what he looks for in companies. He also discusses the decline of research standards, the problem with management presentations, and his passion for military history.
54:33

Episode guests

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Quick takeaways

  • High return on capital is crucial for assessing a company's performance and creating long-term value.
  • Thoroughly analyze company accounts instead of relying on management presentations and guidance.

Deep dives

The Importance of Companies' Return on Capital

A key aspect of good companies is their ability to generate a high return on capital. This measure, often overlooked, is crucial in assessing a company's performance and creating long-term value. Companies with high returns on capital can compound their value over time, making them a desirable investment. Additionally, companies should have a source of growth, such as consumerization in developing countries or secular trends in healthcare and aging. Furthermore, it is important for companies to have a means of fending off competition, such as strong brands, control of distribution networks, or patents.

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