We Study Billionaires - The Investor’s Podcast Network TIP526: Quality Investing: Lessons from Terry Smith
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Feb 21, 2023 
Terry Smith, founder and CEO of Fundsmith, shares his wisdom on quality investing and long-term success, often hailed as the 'Warren Buffett of Great Britain.' He emphasizes the importance of owning high-quality companies and prudent valuation, drawing on a robust screening process to avoid poor investments. The conversation highlights challenges with stock-based compensation at firms like Unilever and PayPal, and why macroeconomic views should not sway those focused on quality. Smith's current top equity holdings offer a glimpse into his investment strategy.
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Power of Compounding
- Compounding returns have a significant effect over time.
- Higher returns matter even more over the long term.
Focus on Avoiding Bad Companies
- Terry Smith prioritizes avoiding bad companies over finding good ones.
- He believes few companies consistently earn above their cost of capital.
Smith's Investment Strategy
- Buy good companies, don't overpay, and do nothing.
- Analyze a company's return on capital employed, margins, and leverage.
