10 investeringsprinsipper av Terry Smith

Terry Smith er grunnleggeren av Fundsmith. Siden 2010 har Fundsmith oppnådd en årlig gjennomsnittlig avkastning på 18,2%. I boken Investing For Growth deler han 10 investeringsprinsipper.

Kilde: Investing For Growth av Terry Smith

If you don’t understand a company, don’t invest.

“I’m often asked why I won’t invest in bank shares given that I was once a top-rated banking analyst in the City. The answer is that having an understanding of banks would make anyone more wary of investing in them. One of my basic tenets is never to invest in a business which requires leverage of borrowing to make adequate returns on investing.”

Be cautious of jargon

“At Fundsmith, we keep a banned word count for the companies we analyze, because we think they provide an insight into their management … but when we do listen to management, the straight talkers get our vote and our money.”

Have a watch list.

“You might only get to invest in really good businesses at a cheap rating when they have a problem.”

Get comfortable with selling a company.

“Domino’s shares rose in price by 113% during the year and had reached a point at which they no longer represent good value. Domino’s also has refinancing of debt due by 2014. There is nothing in the performance of Domino’s which causes us the slightest concern about this, but there is plenty wrong with a banking system, which will be required to provide the refinancing. As a result we hope to have the opportunity to become investors in Domino’s again.”

Question share buybacks.

“Share buybacks only create value if the shares repurchased are trading below intrinsic value and there is no better use for the cash which would generate a higher return.”

Don’t overpay.

“If you are going to own a portfolio of good companies with high returns, which compound in value over time, you can’t play ‘greater fool theory’, in which you knowingly overpay for the shares, hoping that a greater fool will buy them off you at an even egregious valuation, as you intend to hold on to them.”

Stop trying to predict the economy and market.

“I am amazed by how much time and effort people waste trying to guess what will happen to known unknowns . Brexit, China, commodities, interest rates, oil price, quantitative easing, and the US presidential election are all known unknowns.”

Wait it out.

“Rather than seeking superior portfolio performance by chasing high-risk stocks (“return-free risk”), investors should seek out “boring” quality companies, which have predictable returns and superior financial performance and that advantage of their persistent undervaluation relative to those returns to buy and hold them.”

Be cautious of shareholder activism.

“All very exciting, but not much use to long-term shareholders like us, who are left with holdings in fragmented businesses, often with new management teams and strained management teams. Then, their accountants and others, followed by financial statements that contain so many adjustments that they border incomprehensible.”

“However, whilst we question the motivation and methods of activists, and how companies respond to them, we do not always disagree with them.”

Admit when you are wrong.

“Domino’s proved us comprehensively wrong. Not only did it manage to refinance, but it did so on terms which enabled it to pay a $3 per share special dividend. So, I did what you should always do when you get it wrong (but which all of us rarely manage to):

 

  1. Admit this (most importantly to yourself)
  2. Reverse the decision

So Dominos was repurchased”

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