From Morningstar: 2024-03-26 09:02:00

Morningstar downgrades UK’s largest fund, Fundsmith Equity, from Gold to Silver rating. Manager Daniel Haydon cites Terry Smith’s sell discipline missteps, selling some positions too late and others too early. Fund performance still strong compared to category, but free cash flow yield is now lower, impacting future potential. Still maintains Silver rating.

Morningstar metrics for Fundsmith Equity show a Silver rating, categorized as Global Large-Cap Growth Equity, with trailing returns of 8.91% YTD and 11.32% over 5 years. Terry Smith’s sell discipline involves selling when stocks are overvalued, management disappoints, or admitting mistakes made.

Fundsmith Equity’s process rating has changed from High to Above Average, impacting its overall Morningstar rating. Top two positions each close to 10% of the fund, a change from earlier years. Fund compares well against broad growth category, with reassuring performance from companies like Meta. Maintains Silver rating despite uncertainty.

Long-term investors in Fundsmith Equity have been rewarded with stellar performance, but recent changes in process and performance led to the downgrade in Morningstar’s rating from Gold to Silver. Daniel Haydon explains Terry Smith’s sell discipline and highlights the fund’s strong returns compared to its category.



Read more at Morningstar: Morningstar Downgrades Fundsmith Equity from Gold…