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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Fundsmith is adapting to a momentum-dominated market by increasing portfolio activity while maintaining its quality focus. The fund executed significant portfolio changes in H1 2026, exiting underperformers and initiating positions in companies with strong fundamental momentum across data center infrastructure, payments, streaming, and AI-driven advertising."
Fundsmith Equity Fund returned -2.9% in H1 2026, underperforming the MSCI World Index by 14.1 percentage points as the market became dominated by momentum and passive investing rather than fundamental factors. With momentum at a 30-year high and index funds controlling over 60% of AUM, the manager is adapting strategy to be more active, taking greater account of momentum while maintaining focus on quality companies. Portfolio turnover reached 51% as the fund exited positions including LVMH, Novo Nordisk, Nike, and Unilever due to weak fundamental momentum, mismanagement, or valuation concerns. New positions were initiated in companies benefiting from structural trends including GE Vernova, Legrand, and Nextpower (data center power infrastructure), Mastercard (payments digitization), Netflix (streaming consolidation), AppLovin (AI-driven advertising), TSMC (semiconductor demand), Uber (network effects), Veeva Systems (pharma software), TJX (off-price retail), and Yum! Brands (franchise expansion). The resulting portfolio maintains strong fundamentals with 31% ROCE, 4.3% FCF yield, and estimated 14% annual cash flow growth. The manager warns that extreme daily volatility and the passive investing feedback loop create significant risks, but expects quality companies at reasonable valuations to deliver superior long-term returns, particularly when accounting for volatility.
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