IN THIS EPISODE, YOU’LL LEARN:

• Why Terry Smith only seeks to own high quality companies.
• How investors can go about determining the quality of a business.
• How Terry Smith compares the valuation of his portfolio against that of the S&P 500.
• Why investors must be cognizant of stock based compensation when valuing a company.
• Why macroeconomic views and opinions are irrelevant for investors in quality businesses.
• Why stocks are the best long-term investment relative to other asset classes.
• What Terry Smith’s top US equity holdings are today.

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:03] Clay Finck: Welcome to The Investor’s Podcast. I’m your host, Clay Finck, and on today’s episode, I’m going to be diving in to discuss the investment philosophy and framework of Terry Smith, who is the founder and CEO of Fundsmith, and also known as the Warren Buffett of Great Britain.

[00:00:19] He started his fund in 2010 and ever since has outperformed the market as he’s returned 478% to his investors versus his benchmark returning 256%. He did this by continuing to do three things really well, buying good companies, ensuring that he doesn’t overpay and doing nothing. I’ve really enjoyed researching Terry Smith because I love his writing style of being a straight shooter and telling it how it. He’s not afraid of calling people out when he sees wrongdoing and sticking to his strategy of buying and holding quality companies.

[00:00:53] I’m always on the hunt for the next great company to add to my own portfolio and understanding Terry Smith’s approach helped me take the next step of better understanding what to look for. And at the end of the episode, I took a look at Terry’s portfolio today, as well as more recent purchases. So be sure to stick around until the end of the episode.

[00:01:11] With that, let’s dive right in.

[00:01:16] Intro: You are listening to The Investor’s Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected.

[00:01:36] Clay Finck: To get this episode kicked off, many of you are probably like me in that you didn’t know who Terry Smith was prior to checking out this episode, and you’re in for a treat today because in my mind, this guy really gets it and he understands what it takes to outperform the market. To help illustrate why I say that, I wanted to share a short clip here of him chatting with Morningstar Europe all the way back in 2014. Here it is.

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BOOKS AND RESOURCES

• Terry Smith’s Shareholder Letters.
• Rebecca’s Article on Mean Reversion.
• Don’t miss our review of Four Wide Moat Stocks for 2023.
• Check out our takeaways from Warren Buffett’s Shareholder Letters.

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