Fundsmith Emerging Equit... Share Discussion Threads

[essentialinvestor] 15/3/2022 19:55

Might be for the best, China with a mammoth task navigating omicron
with little prior immunity (due to a zero covid strategy) and arguably less effective vaccines.

[spectoacc] 15/3/2022 18:01

Good luck @EI - sold my long-held (best part of a decade) AAIF when it became clear Putin really was going to invade, & want the discount wider before I think about buying back. That, and the Taiwan holdings - Russia uninvestable, but is China? And since everyone knows "something" will happen with Taiwan one day, are Taiwanese stocks too risky too? Nearly 9% in the otherwise excellent Taiwan Semi.

Perhaps it's a niche view, but sold last of RAVP at 106p when the writing was on the wall, & pretty sure we won't get the same kind of warning if/when Taiwan goes.

FEET seems to have those problems less. But still too many problems, mainly the inability to shoot fish in a barrel.

[essentialinvestor] 15/3/2022 16:38

Spec, FEET tends to take a big hit on falling markets and often reverses quickly
on bounce backs. Now most will not want to faff about trading in/out,
but realistically the only context where it may come in a bit useful given
longer term underperformance.

I added a small amount of AAIF and SOI this afternoon, not sure if a good idea !.

[spectoacc] 15/3/2022 16:02

"Buy good companies - Don't overpay - Do nothing". The Terry Smith mantra.

Has Fundsmith forgotten the middle of those?

Or 1 & 2?

They seem to be OK with no.3.

I'd still like to understand the Top 10 holdings a little more, but nothing suggests FEET is worth a long IMO. Down over most time periods, whilst charging 1.25% pa.

[essentialinvestor] 15/3/2022 13:31

Deceptively easy as an armchair critic applying hindsight, however some
of their portfolio management decisions lead to head scratching.

Take Foshan Haitian, which at peak valuation sold on approx 100 x FY 2022 and
80 x FY 2023 earnings. Price topped out near 180 CNY, now under 87.

To my knowledge the position was not trimmed at any point.


Reading the 2021 Interim Report the Manger mentions a recent purchase, Yihai.
That stock is now down 80% over 12 months!. Position size not disclosed but would guess FEET may have allocated 2%. Wow.

[m_kerr] 15/3/2022 11:13

unlikely. the board are very close to fundsmith (one of them even hosted fundsmith's AGM a few years back) and will be conflicted. the buyback is the more likely option and at the very least is highly accretive to NAV per share, whilst also allowing fundsmith to get their management fees.

[donald pond] 15/3/2022 10:25

I think it's time to either have a big buyback programme here or even to wind the trust up

[spectoacc] 15/3/2022 07:25

MercadoLibre Inc
Foshan Haitian Flavouring
Asian Paints
Info Edge India
Viatasoy Int
Havells India
Marico
Metropolis Healthcare
Aven Supermarts
Tencent


Beyond Tencent, know very little about the holdings, but surprised the India ones haven't done better - Indian market been on a tear & very fully valued now.

[essentialinvestor] 14/3/2022 22:57

mk, tend to dip in and out of this (besides keeping a small holding) so it's sometime since last watching an
AGM presentation.

Shocker YTD.

[m_kerr] 14/3/2022 22:36

EI - has it ever been asked of the fund managers to explain?

from what i've seen over the years, performance has been below par, and their solution to try and close the languishing discount has not been to buy back shares (because it would reduce fundsmith's fee), but pay for 'research' (promotion) from edison.

[red army] 14/3/2022 21:39

All the while the US dollar goes up this will go down.

[essentialinvestor] 14/3/2022 20:56

That question has been asked many times!.

[m_kerr] 14/3/2022 20:22

trading at a 16% discount now. i sold out beginning of january, but at this lower price it looks a bit more interesting...........

fundamentally i can't get my head why after almost a decade now (time flies), a portfolio generating 40% ROCE and 15% free cash flow growth has produced a 3% compound growth in NAV since inception.

[essentialinvestor] 11/3/2022 13:16

Thought this overdue a mini bounce at least which we've now got,
whether that proves transitory ..

[essentialinvestor] 09/3/2022 16:11

Added a small amount, still very cautious on wider markets so may not prove
a great decision.

[essentialinvestor] 09/3/2022 14:24

Well I made a wild guess on JEFI also recently and it's happening.


Thought they mentioned previously IF the NAV discount exceeded 10% in a particular
time frame a wind up would be considered?, mistaken on that?.


To answer your question directly, a guess, FEET arguably something of an embarrassment, also a potential factor.

[spooky] 09/3/2022 14:20

Are you basing that suggestion on anything or just a wild guess?

[essentialinvestor] 09/3/2022 10:24

Potential wind up play here?.

[spectoacc] 20/1/2022 13:14

Again, FEET have underperformed even a tracker, over almost all time periods, in almost all market conditions.

[muzerewa] 20/1/2022 09:19

The truth is we're in something of a bear market / correction territory, call it what you will. Emerging market indexes havent's done great over the last year either.

Technology stocks generally seem to have fallen out of favor, although that's been masked by the relative strength of Apple, Amazons and the other tech titans. FEET pivoted to the tech sector a couple of years ago which was the right long term call I think, but it certainly had adverse affect on recent share performance.

Some interesting commentary on FEET's largest holding MercadoLibre. seekingalpha.com/article/4480076-mercadolibre-stock-undervalued-growth-powerhouse

So the investment thesis doesn't seem to have changed much but the price has fallen, savagely so. I expect the MercadoLibre story is replicated elsewhere in the portfolio.

So what should FEET do now, sell MercadoLibre? I think not. Better I think to hang on in there, and I'm planning to do likewise with FEET and will probably buy more over time.

[essentialinvestor] 19/1/2022 17:42

Muz, their strategy sounds good, unfortunately reality is based on results
and in this case the outcome so far is poor, may be give it 10 years rather than 5!.

Why it has not worked is perhaps the more interesting question and not one
I can fully explain.

Perhaps to do with the earnings multiples paid for some of holdings?.

But even allowing for this, if the selections were good enough that should
iron out over time.

[spectoacc] 14/1/2022 14:34

If they've underperformed a tracker for so long (which they have), I'm not sure they're worth sticking with, at least in absence of going to a wide discount, and finding the value that way.

Underperforming in certain discreet periods when their strategy is out of favour, fair enough (eg when growth in vogue, or China going gangbusters, or China doing badly). FEET seem to manage it in all scenarios.

[muzerewa] 14/1/2022 14:17

Hi
I've been investing in FEET for several years, and quite heavily especially in the last 12 months.

Nursing overall losses so I certainly share the pain, and don't have any easy answers. I suppose the question to put one's finger on, what is the underlying concern?

Is any aspect of the methology set out in the "Owners manual" unwise in and of itself? Or simply unworkable in the emerging markets context? Or has the methodology been badly implemented by FEET?

We aim to invest in high quality businesses
We try not to overpay for shares when investing
We aim to buy and hold
We do not attempt market timing
Corporate governance - we will select investments the same way porcupines make
love – carefully
Currencies - no hedging as a general policy

Personally I'm still inclined to hang in there. I still find the methodology compelling and am inclined to keep faith in management's ability to execute it.

I hope the savage % falls mean that the holdings are better value now than they were before, which of course doesn't justify selling them.

As you say it's about the long term, and I do sense the portfolio has defensive qualities which will make it a relative safe haven during times of market volatilty.

All best to you

[essentialinvestor] 14/1/2022 11:19

Beginning to question my sanity in continuing to hold this.

Increasingly difficult to justify.

It's not just stock selection, it's arguably also portfolio management.
Looks to be some savage % falls among their large holding positions on a 12 month basis.

Yes appreciate it's about the long term etc.