Chit Chat Stocks - The Best Investor In Britain? How Terry Smith Beats The Market With Quality Stocks

Starting point is 00:00:00 Okay, when I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivateWealth.com.

Starting point is 00:00:30 You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with a delicious Pret Organic Coffee? Starting at just $1 all day, every day, now until December 31st. You've got to try breakfast at A&W. At participating A&W locations in Ontario. Hey, Chit Chat listeners. Options trading is live on public.com. And if you activate by March 31st, you can earn a rebate of 18 cents on every contract traded. Simply sign up at public.com

Starting point is 00:01:11 and activate options to get a lifetime rebate. You don't even have to start trading right away. Meanwhile, if you want to switch from your current brokerage, public will reward you with up to $10,000. It only takes a few minutes to kickstart your transfer with a simple online process. Join the thousands of traders earning a rebate of 18 cents on every options contract traded, but hurry, you have to activate by March 31st only at public.com. This is paid for by public investing. Must activate options account by March 31st for revenue share. Options are not suitable for all investors and carry significant risk. Full disclosures are in the podcast description, U.S. members only. Welcome to Chit Chat Stocks. On this show, hosts Ryan Henderson and Brett

Starting point is 00:01:58 Schaefer analyze businesses and riff on the world of investing. As a quick reminder, Chit Chat Stocks is a CCM Media Group podcast. Anything discussed on Chit Chat Stocks by Ryan, Brett, or any other podcast guest is not formal advice or recommendation. Now, please enjoy this episode. Welcome in, everyone. This is Chit Chat Stocks. My name is Brett Schaefer. And as always, joined by Ryan Henderson, we are continuing our series of looking at some of the most famous investors in the world, some of the ones that have had the top performance over the long term and seeing what we can learn. We've covered Ray Dalio in the past. We've covered Norbert Liu. And for our third one, we are talking about, as the title says here, what may be the best

Starting point is 00:02:50 investor in Britain, question mark, right, as the title, as we're trying to tease some people in here. Hopefully, we have some nice UK audience joining us today. But the man is Terry Smith, running Fundsmith, and has done quite well since launching in 2010. So we're going to be studying that today. And Ryan, as we want to get right into it, no small talk as we try to do on this episode. What is one quality any investor can take from Terry Smith and Fundsmith's strategy?

Starting point is 00:03:32 I would, I mean, there's a couple, but I would say probably buy right and sit tight is kind of the overarching theme that I've taken away from here. And then maybe one that's a little more unique because I feel like everyone says that, the best investments you might already own. And he's kind of shown that time and time again with where he's really excelled at buying stuff he already had positions in and just he knew the business well and he saw an opportunity within his portfolio and he added to it. So we're going to talk through that a little bit here, but really, I would say he's done an exception. These are great businesses hiding in plain sight for the most part. We're going to talk through a lot of that portfolio, but it's nothing too crazy on the investment side. There's nothing that really stood out here in terms of the portfolio that was like, oh, I've never heard of that business. they're pretty large companies and he's just done a really good job buying them at the right time so uh buy right and sit tight would maybe be my overarching theme okay if i want to add in here one note as you mentioned you know nothing crazy uh from from his strategy it's something that

Starting point is 00:04:44 any investor can replicate as long as they have access to all the markets where he's buying these stocks but i'm sure most of them are in you know well-developed markets and i'd say my takeaway way from studying his writings as we did before recording this episode is, and this comes up time and time again for me, and I think is a tip I would go for anyone starting out is don't over diversify. Now they'll hold 20 stocks in their portfolio and obviously it's detrimental or extremely risky to own like one or three stocks in your portfolio. But you see a ton of investors out there that might own 50, 60, 70 stocks, all fairly equally weighted. And I think that's just a recipe for higher stress, confusion, and basically the hug of the index. And I think

Starting point is 00:05:33 that's a big lesson we're going to try to go through here in this episode as well. Before we get started, a few housekeeping items. We are studying some of the famous investors out there, trying to learn from them, from reading their writings. And any listeners who have one that you want us to cover, let us know, send us an email, send us a Twitter DM. We'll probably look into it. We're going to try to do maybe one per month, maybe a little less of a frequency there, maybe 10 per year, kind of TBD on what we go with our schedule. And for anyone that's looking for our stock analysis episodes, we're still doing those, but again, just on a little bit of a slower cadence. We've had an Elnett episode out recently, a Coupang one,

Starting point is 00:06:18 hims and hers. Ryan's coming out with one on home builders coming up soon. Should be quite fun. We're going to add those to the mix as well. If you enjoy these episodes, I would say give us a five-star review on Spotify and Apple. That is the best way to help us grow, help Chitchat Stocks grow, and make sure we can keep doing this. All right, let's get into the episode. Ryan, who is Terry Smith? And let's give some background here. And I will say this is perhaps one of the most british people i have ever met or not met uh listened to and and read his writings yeah he's a bit peculiar and i don't he's just we'll talk about this here in a second maybe a tad bit smug or maybe i'd say confident is the better word and we'll get into why that is

Starting point is 00:07:13 And that's not saying – Brett mentioned that he's a very British guy. That's not – these are two separate tangents. He's a bit of a confident guy, and he also seems very British. Those are not two in the same. But Terry Smith, some background here. He was born in England in 1953. He attended Stratford Grammar School and went on to study history at University College Cardiff, where he graduated in 1974. So a bit of an unorthodox background just in terms of financial career. There was nothing pointing to him getting interested in investing. This will maybe come up again, but he had a bit of a boxing background, so he was a boxer when he was a kid. Kind of random, not really that important, but I'll explain why it's kind of funny when we get into other stuff that happened later in his career. But after he graduated, he rejected an offer for a research fellowship and decided he wanted to pursue a career in business. So he joined Barclays Bank. Not sure what the motivation was here. I assume it's financial motivation. It seems to be the main reason. Maybe he had some curiosity around investing at the time, but it just seems like he wanted to pursue a career in business. So that's what he did. And he was at Barclays for a little over 10 years. And during that time,

Starting point is 00:08:35 he also became an associate of the Chartered Institute of Bankers. I had to look up what this was. And to be honest, there are a lot of British institutions that I didn't really understand from his background that I had to go back and kind of research over and over. This was the Chartered Institute of Bankers is a global professional education body for bankers based in the UK. It actually seems kind of like a group slash, not cults, but it's an organization where you get really good at studying banks and understanding banks. And that was part of his education as well as working at the bank. So during that time, that 10 years where he was at Barclays, he really seemed to get a pretty strong grasp of banking

Starting point is 00:09:27 in general. And he also picked up an interest in investing during that same time period. He switched departments a couple of times in Barclays. So he was the leader of one branch at one point and he ended up switching to the finance department of Barclays. So anyways, basically that was his informal education of the financial realm and particularly banks as a sector. And so in 1984, that's 10 years after he was at Barclays, actually 11, he joined a stock brokerage firm and was a broker, I believe, for six years. And during that time, he was considered the top-rated banking analyst in London. Ironically, with all that banking expertise, he ended up hating banks as investments, it seems like.

Starting point is 00:10:18 And he actually has this kind of funny quote. He says, Having spent the first decade of my career working in a bank and then becoming a top-rated bank analyst, I find that people often express surprise that I never invest in bank shares. But I think it is precisely because I understand banks that I never invest in their shares. Why? Firstly, I never invest in anything that requires leverage to make an adequate return. Banks have a very small amount of equity to support their balance sheet. He goes on about the potential downsides to investing in banking. And he really – we've talked about margin of safety on this show before. There's margin of safety on the valuation side and then there's margin of safety, I think, on the business side. And in terms of the business operations, banking, there isn't always that big of a margin of safety because there's always the risk of deposits kind of going out the door quickly.

Starting point is 00:11:12 So, yeah, chime in. I would say, yes, one of his, I'd say maybe his number one tenant is margin of safety from a business perspective. And then the other thing I would say here is if you read his writings, like any other quality investor, he likes to quote Buffett. No, that's nothing out of the ordinary there. But I would love to hear a conversation between Buffett and Smith around bank stocks, because as a lot of people that follow Buffett knows, he loves the sector. So someone, you know, I just think it would be interesting to hear their differing opinions, because clearly Buffett sees attractiveness in banks. And maybe this is just an American thing versus a United Kingdom thing. Who knows?

Starting point is 00:11:54 And then Smith basically swore him off and has never invested. Yeah. And this is part of one of the, I guess, issues with us studying a UK-based investor is we don't know all the rules and regulations around the banking sector in the UK and the nuances and differences between that and the US. because the US might have more of a federal backstop and maybe there's a little bit more margin of safety for the big banks because the government and the banks are so involved or intertwined. Anyways, let's keep going with his career. I found this next part pretty interesting. In 1989, 1990 timeframe, he joined UBS as the head of UK company research. However, In 1992, he was fired because he wrote an analyst circular called Accounting for Growth that dug into basically the – there were a couple of high-profile bankruptcies around that time and the companies were reporting healthy profits, but there was really misleading accounting and the cash flow looked pretty bad. And he basically wrote this post about how some of these companies were intentionally misleading shareholders with their accounting practices.

Starting point is 00:13:12 And some of them were like companies that were still operating at the time. And it was really well received. And a lot of the other analysts, people that read the article were like, you should publish this as a book. And so he said he was going to do it, decided to publish it as a book. A lot of those businesses that were included for having, quote unquote, intentionally misleading accounting were very frustrated. And I think they were either friends of people at UBS, higher ups, maybe even clients potentially in some way. they said you know let's not get this book published and ubs asked him hey let's not publish this book or we're gonna have to suspend you he said i'm publishing the book and so they fired him um that's kind of an example of when we started to see

Starting point is 00:14:01 maybe that's good on his morals or whatever you know like good for him sticking to his guns but But that confidence and that kind of cojones is maybe the right word that he was willing to say the truth despite any reparations or problems that could arise from it. So he lost his job and we'll go – we'll talk more about what happens after he lost his job. But as I'm looking into Smith's career, that was not the only colorful thing that happened in his past. So another example is Terry Smith was – this was actually prior to the book debacle. It was around the 80s. After he joined that brokerage firm, the firm was called BZW, the first week he wrote a sell suggestion on Barclays. The brokerage firm was owned by Barclays. It was a subsidiary by Barclays. So he wrote a sell suggestion on his own company after being hired

Starting point is 00:15:02 by them a week after. So that's another example of maybe, I don't want to say the arrogance because it might be the opposite. It might just be the fact that he's willing to say the truth no matter what. I think the word you're looking for here is provocative. He's not afraid to say things that might stir the pot. And another example, later in his career, he wrote time and time again about the struggles of IBM and how we thought it was a big mistake for Buffett to invest in them, which it ended up being. But at the time, going against Buffett, going against IBM probably sounded out of the ordinary. And there was probably a lot of people at IBM and some of these investment banks, given their earnings per share manipulations and stuff like that,

Starting point is 00:15:49 that didn't want those type of things written uh but now his track record is so good that i think people look at him in a different light of like okay now you're not the plucky confident cocky younger guy you're more experienced and you might still have this provocative nature but we're going to respect you a lot more yeah he's very outspoken uh uh and feisty provocative all that one last story before we get to the rest of his career apparently and this was i couldn't really find that many details on this story but apparently at a black tie client dinner there was a client who was irritating him and he reportedly head butted the client so kind of going back to those old boxing roots you know a feisty guy yeah the

Starting point is 00:16:38 european so he's like uh the soccer player right is that how you pronounce it yeah that's Is that accurate? Anyway, so he's had some kind of controversial moments in his career. He's always been outspoken, very provocative, and likes to tell things how he sees it. But I would say basically after those kind of big debacles, it kind of got cleaned up after that. there. He's still outspoken, but just not as much controversy. So in 1992, he joined a brokerage firm called Collins Stewart that went on to have a lot of success. It was a small brokerage at the time, but it grew. They acquired some companies. They went public, I believe. And he kind of worked his way up there and became the CEO. And he was the CEO there for quite a while and actually started the Fundsmith, the fund management company in 2010. He did not stop or he did not resign as CEO or step down until 2014. So for the first four years that he was running

Starting point is 00:17:44 Fundsmith, he was also the CEO of this brokerage firm. But in 2014, he did resign, step down, and he began focusing solely on Fundsmith. That brings it to today. He has, well, we're going to talk about this in a second, outperformed the market. He's done a good job running this fund management company. He's accumulated a lot of assets in the process and, or a lot of money from investors in the process. And in general, done a pretty good job buying high quality businesses and holding onto them. So with that said, let's get more into it. What is Fundsmith and what have the returns actually looked like? Because there's a little bit of controversy here. I've seen people say the performance isn't that good. Why don't we put the numbers out there

Starting point is 00:18:29 and talk about how well he's actually done? Yeah. And for their performance numbers, I am using what they give us. And I know sometimes people will convert currencies and stuff like that since they're based in the United Kingdom. So just fair warning on some of the stuff we did convert to the US dollars for like AUM, and that might change just based on the prevailing exchange rate, but some of the other stuff, it could change if you're not using the exchange and stuff like that, constant currency. So just know, if you run your own calculations, it might be slightly different, but I think all of this is directionally correct. So Fundsmith was founded on November 1st, 2010. So we're closing in on 15 years here shortly. It currently has $44.5 billion in USD

Starting point is 00:19:14 and AUM total, and then $32 billion, I think, in the flagship equity fund. I will admit, fund websites always confuse me, especially when there are multiple strategies. So apologies if anything is slightly off, but listeners should just know, I think the takeaway is that they are running one of the largest active funds in the world right now. Okay. So if we look at performance since November 1st, 2010 to the end of February 2024, Fundsmith returns net of fees are 596.3% or 15.7% annualized. So essentially 16% annualized returns. If we compare that to relative benchmarks from the same date, we have 392% for the S&P 500 ETF owners that just did the SPY. 253.7% for the MSCI World Index, and then 746.7% total return for the NASDAQ 100.

Starting point is 00:20:16 And I just used QQQ there. So again, these are all total return levels. And I think it's possible that their returns are in UK, British pounds, and some of these other returns are in US dollars. So part of that i don't know the exchange rates could help them or hurt them a little bit there but over time i don't think it's going to be too crazy it's not like it's the argentinian or turkish lira you know um if we look at performance yeah they've slightly underperformed qqq i think we can forgive them for that especially as we sit here recording in march of 2024 for. They've put up consistent results and they've had, on top of the outperformance, they've had positive returns every year except 2022, all without shorting or hedging,

Starting point is 00:21:10 which I think is quite impressive where people say that volatility can be your friend, but a lot of times it could be your foe psychologically. And if you have lower volatility stocks in your portfolio, I think, yes, it might be the same total return as some other stocks. And at the end of the day, you would, in say some sort of backtest, have maybe even slightly worse returns. But you never know how you're going to act in high stress environments. And I think with the, what do you call it? It eliminates that risk from occurring. So you're eliminating that even personally, like we all can act irrationally in times of stress in the markets. And I think Fundsmith tried to eliminate that. And, you know, they've had only one down year investing in some

Starting point is 00:22:04 of these, which I think is quite interesting. And they're still, you know, outperforming the indices. And as they talk about, they're not index huggers, which I think is impressive as well. Anything there, Ryan, before we go to the strategy? Now, I will say, I think he talks a little bit too much about his Sortino ratio and just bragging about the lack of volatility. Maybe it's just me being a young investor, but I don't think it's that big of a deal that you are really low volatility. Maybe if he's got a lot of older clients, it makes sense because they might have to access some of the capital on a regular basis. so. And my guess is that that is the case because he is an older gentleman himself. I think he's 70 years old now. And I would not be surprised if a lot of his big investors are people that he's met

Starting point is 00:22:59 over the years that are around his age. So maybe they care a lot about it. Isn't that nice that he started this after the age of 50? For all the listeners out there as well as ourselves, there's there's still time out there yeah plenty of time 30 years from now we could start something up again all right let's hit the strategy i think you have your notes here first ryan what is the fundsmith strategy and i think as a little tease for investors as we go kind of into the meat here you know as we look at it there's nothing here an individual investor can't replicate no it was kind of just very boilerplate stuff i mean he's saying a lot of the right things so in the most recent annual letter, he said, we continue to apply a simple three-step

Starting point is 00:23:45 investment strategy. Buy good companies, don't overpay, do nothing. That is the long-term investor's MO. That is what they always are trying to do. And as we look at a lot of his holdings, that actually seems to be the strategy that they've implemented. Most of his largest holdings today he's owned for several years and he has typically kept them pretty consistent continue to buy more shares now it obviously depends kind of for him how the flows of of money coming in out of the fund uh go because he'll have to you know sell shares or whatever but in terms of portfolio allocation he tends to actually raise the allocation when those companies consistently perform and hopefully as the multiple comes down a bit so here's a good example they increased i

Starting point is 00:24:40 want to make sure i get the exact right number here let's pull it up uh meta and he talked about this in the most recent uh shareholder letter so he increased his meta allocation from three percent to seven and a half percent over the last year and most of that happened in kind of q1 q2 he really bought a ton of meta shares when at the end of 2022 q4 2022 so i believe that's kind of around when all the capex related with reality labs was weighing on the stock price and so if you overlay the stock price in the start he did a really good job buying something that he owned for a long time and just did it at the right price anyways that just goes to say he buys the good companies, he waits. Then I think the secret sauce here for him and Fundsmith in general

Starting point is 00:25:33 is their portfolio management skills, being able to buy the companies and be patient with companies they already own. Because you look at the holdings, there's nothing unique about the strategy. Maybe it's unique in practice, but in terms of what people try to do, aim to do with their portfolios. Buy good companies, do it at a decent price and do nothing is kind of what everyone wants to be doing. So there's nothing that unique there. It's really just the fact that they're very patient and they are opportunistic with the companies that they already own. I agree. Yeah. The one thing that I would even note, and I think they would agree with this if we talk with them is they'd probably give him me a couple i think it's me a couple or

Starting point is 00:26:23 me a couple because in their earlier letters they they talked about dominoes being one of their top performers and it did quite well you know that it was one of their initial holdings and it outperformed but we look today and correct me if i'm wrong right i did not see it in the portfolio and i don't think they time the top and if we look at domino's total return um it's 1500 percent since they started the fund so it's if like i would say that their one mistake was that their or they would admit that they even need to improve on this strategy where in the past their mistakes still as someone who tries to purposely water the flowers trim the weeds right they would say they need to do that even more and i think it just shows it goes to

Starting point is 00:27:16 show that selling on valuation for a high quality business you better be right about how overpriced it is just tough here's a quote from their most recent annual meeting with i i think it happened either today or yesterday yeah really soon yeah as of this recording he says and some of this is like uk slang so i don't always it doesn't always make sense to me the way it's said but he says you make money with old friends if you've got something big like microsoft that you get right the likelihood is it's going to continue to be right i'm not a gardener but i'm told that you're supposed to what you're supposed to do is water the flowers and pull up the weeds an awful lot of people do it the other way around. They sell the things that worked and hang on to the things

Starting point is 00:28:03 which are not working in the hope they'll come right. Our strategy, and in my view, the correct way to do it is the opposite of that, to run our big winners. It feels like that's been the blueprint for the success. Do you want to dig into some of the stuff they're looking, more specifically, they lay out a couple of bullet points, what they're looking for in potential investments? Yeah. And I think for any new listeners, they can look at these criteria that they have and they say, okay, well, look for good companies, don't overpay, do nothing. And the last two are easy to understand. With the valuation, you go, okay, don't overpay, don't overpay for something that's lower growth, might be high quality

Starting point is 00:28:41 business, but it's trading at 50 times earnings, right? You don't want to pay for that. Do nothing, also easy. Buy and hold, don't be a super active trader. But what is a good company? and to them, they have a few criteria, some of which are quite popular, but I think some of which might be underrated. And I'm going to go through each and we can kind of look at maybe some examples of these in action. What do they actually mean by this? And any examples from outside or inside the Fundsmith portfolio. So the first one they have is high quality businesses that can sustain a high return on operating capital employed. Now, this one just means it's their version of return on invested capital. They use the ROCE, which I think they care a lot

Starting point is 00:29:25 about equity capital. The one thing, and look, this makes sense because you want someone that at the end of the day, the money that the business invests, you want it to be a good return. The one thing I think I would be concerned about is the definition of invested capital. And that's where i always come back to with these things where i think anchoring to a specific number where if you gave someone some company that has a lot of intangibles or something like that a 60 percent roic it actually might not be that high versus someone who has an overstated uh you know book value yeah i don't know so i i think the con like the concept there makes sense I guess the ones that are less intangible make a lot of sense from a, like, you can really quantify it much easier.

Starting point is 00:30:20 So anything from their portfolio that you see as someone that just earns high returns on, you know, high returns on invested capital. Okay, when I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center.

Starting point is 00:30:54 Find your advisor at IGPrivateWealth.com. try breakfast at a and w and what better way than with a delicious pret organic coffee starting with just one dollar all day every day now until december 31st at participating a and w locations in ontario yeah that makes sense what were some of the uh i think i might be skipping ahead here but what were some of the companies in the portfolio that surprised you oh okay um one that surprised me was nike just because he seems to worry about the china risk a lot and he worries about consumer goods that are trading at an expensive multiple and maybe nike's come down a bit i'm not sure

Starting point is 00:31:57 maybe they bought it at a different multiple right yeah but it's lower growth you know and there are they don't seem to have much exposure to apparel um so that surprised me a bit especially because it was a decently large position and something like apple was a smaller position for them i thought what was interesting is relative to today is that they talked about buying apple uh starting a little starter position in what would it have been like late 2022 early 2023 and then he was really he was kind of complaining in a joking manner where he said we foresaw that they'd have five bad quarters in a row and then they had these five bad quarters in a row and the stock's up by 50%. So what I thought was interesting was that one,

Starting point is 00:32:53 okay, like some of these Magnificent Seven stocks might be a bit, and not even just Magnificent Seven stocks, but large cap growth, mega cap companies, the larger end of the market might be a bit overextended at the moment. But besides that, it's interesting that they took a starter position with almost the prediction that the stock would keep falling. If you get what I mean. I thought that was an interesting way to go about it. Before we move on, we want to talk about our friends at FinChat.io. FinChat.io is the complete stock research platform for fundamental investors. Beyond having all the standard financial data for companies around the globe,

Starting point is 00:33:29 they also have company-specific segments and KPIs on over 1,500 stocks. So if you want to see Amazon's AWS revenue over the last 10 years, or you want to track match groups paying users, Maybe you're curious how many stores Sprouts Farmer's Market added last quarter. FinChat tracks all those KPIs and literally half a million more. We know that if you're a fundamental investor, you probably track this stuff yourself, but this saves so much time and it has all the data you already need. If you aren't sure where to go, you can also simply ask FinChat.

Starting point is 00:34:02 That is their conversational AI powered by FinChat's proprietary data. so that'll save you tons and tons of time researching they've got stock screening tool they've got fundamental charting that is best in class in terms of design i use finchat every day i absolutely love the platform brett does as well we both use it as our primary dashboard and the place where we do all our research so if you want to get 25 off any paid plan use our link finchat.io slash chitchat that is finchat.io slash chitchat the link will also be in our show notes that is interesting the i'm looking at the nike one right now they initiated this position in first quarter of 2020 so covid hey potentially not bad there i don't know what

Starting point is 00:34:52 the chart looks like but i would guess it was a pretty good time to buy apple yeah that is interesting that they're willing to buy a starting position knowing there's trouble ahead which i mean i guess kudos to him because if you're gonna do it it better be a starter position and it actually ended up working out for them in in terms of the stock price and the forecast ended up being right which i think is funny for me the one that i find kind of surprising is mccormick yeah i'm looking at the rest of these businesses and they all make sense to me there's a lot of economies of scale and i've just never really understood the mccormick thesis it doesn't feel like aside from acquiring more and more companies in the space i don't see how it's a

Starting point is 00:35:41 better value add to customer like i don't think they have that much pricing power it's maybe the way to say it and you look at i think competitively no but like spices probably do just because even if some stuff is like four or five bucks it's not that big of a chunk out of your grocery bill you're not going to notice it sure i just if i see spices two spices near each other i don't really care that much about the brand that's true yeah i'll probably go for the lower priced one. So that one kind of surprised me. In general, another anecdote I thought was funny is they, I think this was in the 2010, 2011 letter. They mentioned that the average year of founding of the companies in their portfolio was like it was in the 1800s. So he is buying

Starting point is 00:36:36 very old businesses that have been around for a long time, proven their durability. You know, he's not trying to find hidden gems or small caps that no one else or other people are overlooking. It's really kind of a very simple equity strategy and he's not doing new work. He's not finding quality where no one else has found it. A lot of these are companies where everyone knows it's a good business. He's just buying them at the right time and having a long term horizon. Okay. Let's go through the next bullet point. Businesses whose advantages are difficult to replicate. I'm actually going to skip this one because everyone talks about competitive advantages. I think that's just their note for that as well. We've talked ad nauseum on

Starting point is 00:37:22 the show, people around the world, Buffett, everyone talks about these. And I think that's nothing specific to them. They're looking for these types of businesses as well. But I think these other bullet points are more specific, kind of on the edges here that can help weed out potentially bad investments. So the third one they have are businesses which do not require significant leverage to generate returns. So essentially, they can run, they can grow, they can generate a lot of cash, they can reinvest without needing to take on a bunch of debt. What do you think about this one, Ryan? Sorry, I was on mute there. I'm a little more willing to accept leverage. I like the way this is worded though, because it's not he won't take

Starting point is 00:38:09 companies with leverage. It's he won't take companies that require leverage to generate significant returns. So that doesn't mean the companies in his portfolio won't have some debt on them. It's just that if you really need debt to choose returns like you need with banks. I mean, you really, really do in those cases. I appreciate that because it's just a higher risk strategy running any company that way. So I like it. Don't take that as they're completely averse to debt. It's well-worded. Yeah. And one thing within here that I think relates, it's not in these bullet points, but it's something they talk a lot about, which is a part of their criteria for a high quality

Starting point is 00:38:57 business is high cashflow conversion, where they, I think in 2023, it was a bit lower, but they expected just from timing issues to rebound to 100% or higher, where you're converting 100% or higher of your net profits to the actual cashflow that can be returned to shareholders or maybe reinvested. While the average company that's publicly traded is at maybe 80%. And that's a huge difference that I think not many investors talk about. So prioritizing really strong cashflow conversion, it's probably the same as not needing to take on leverage to reinvest for growth because you have that cash available and you have a lot of flexibility. But I think that's something any investor who's trying to improve can learn from.

Starting point is 00:39:42 Now let's go to the fourth one here. And this is one that is very popular and for good reason among a lot of quality investors out there. And it is businesses with a high degree of certainty of growth from reinvestment of their cash flows at high rates of return. This is a fancy way of saying long reinvestment runway at their current high return on invested capital. Thoughts here, Ryan, and any that pop out on the list here, I would say they have Microsoft as their top holding and a clear one is the cloud business, right? Where you can invest, there's just a giant runaway here and it's got the moat and long or good returns

Starting point is 00:40:24 on invested capital. Yeah, no, honestly, a lot of these bullet points, I've said it before, they're not reinventing the wheel. This is not new stuff. It seems like very boilerplate standard principles for what to look for in a good investment. We've talked about this a ton on this show, especially when we studied NVR and Norbert Liu.

Starting point is 00:40:49 It's not enough to just have high ROIC. You want to have the room for IC in ROIC matters. How much can they continue to plow capital into the business and obviously generate similar rates of return on that invested capital over time? Because if they're just continuing to invest capital, but it's at lower and lower rates, that's not good either. You could pretty much, I feel like you could pick out every company in their portfolio you could probably find a way to use the bullet points for. It feels kind of too general for me, some of these. Yeah, that's true.

Starting point is 00:41:32 but maybe this next one is more specific where i think a lot of retail investors ourselves may be included could be you know it could be helpful to maybe think about it more and this fifth one which the last one is valuation so this is really the last one uh and it is businesses that are resilient to change particularly technological innovation and if we look at a lot of their consumer goods companies i think that plays out here where if you're in a business that might look attractive good customer value proposition arguably high competitive advantage but it's in an industry that has been continuously disrupted i would say and yes apple is probably the exception here computing hardware is one that probably sits there it's been so innovative so disruptive

Starting point is 00:42:22 there's been so many new paradigms that yeah or maybe even chip making yeah let's go through This is maybe a good chance to go through his holdings because it, and I know I'm hopping around here, but a lot of these, they are either multi-product companies where they have, if one thing becomes obsolete, they're not screwed. You know, they can lean on a different part of the business or there's something that really never goes away. So for example, number one holding is actually Novo Nordisk, but they have a bunch of different bets. Second largest holding Microsoft, a bunch of different tech products in there that they're

Starting point is 00:43:07 not entirely reliant on a single one. Meta platforms, Facebook, Instagram, WhatsApp. I think there's basically three pillars in there. That might be the, of all the companies in their portfolio, I would say that is maybe the most at risk to technological disruption. Striker, I think that's like a big tech conglomerate, if I'm not mistaken. I think maybe. I think it's a medical device, but I honestly don't know much about it. Idex Laboratories, LVMH, L'Oreal, Philip Morris International, Pepsi. These businesses have been around for a long time, more than a century in most cases. And they're just really, really durable. And so I like that. It's kind of the Bezos thing, right? You want to find something

Starting point is 00:43:59 where it's not going to change and invest there because it's something that people are going to want. Yeah. Yeah. There are a few things out there that you have prediction on that people are still going to want in 10, 20, 30 years, even though a lot of, if a lot of the economy is different. All right. Well, he's had some various articles over there that I think are quite provocative. And we can go through some of these. There's one that was titled, do performance fees work? It's obviously a bit of a rhetorical question. I think people know the conclusion there. It was written in September, 2010. And I'm not going to read the full quote, but he basically says two and 20 is unsupportable, which is the standard fee formula for the hedge

Starting point is 00:44:43 fund industry. For anyone that doesn't know, that's basically 2% flat every year, and then 20% of any profits generated per year. And he goes on to talk about, if you invested with Warren Buffett 45 years ago, he's had a compound return of 20%. If you invested $1,000 when he began running Berkshire in 1965, in 2009, you would have $4.3 million. But if he charged two and 20 as Berkshire Hathaway, if it was a hedge fund in a different structure, then Buffett would take $4 million of that, and then only $300,000 would belong to you, the investor. Now, I think $1,000 to $300,000 is still quite good, right? But he comes to say that performance fees do not work. And essentially, these managers are taking, even if they're doing well, taking way more value

Starting point is 00:45:40 than they should be of what's fair. And what's interesting though, is he says performance fees do not work. And he goes and says like one in 10 wouldn't really even work over the longterm, but he's using Buffett here as an example. And Buffett himself used performance incentives when running his investment firm in the 50s and 60s. So what do you think of this kind of dichotomy do you agree with this article or or or what maybe i mean we there there is no perfect fee structure i think we experience that in a big way where performance fees could yes theoretically be the best of the worst where you're only getting paid, it depends on the performance fee, but let's say you're getting

Starting point is 00:46:40 paid on market outperformance. That's great, right? As an investor, you're not, you are not getting any money taken from you unless you outperform the market. However, one, it depends on the size of the fees, right? If someone's taking 50% of profits or 30% of profits or 20% of profits and 2% fixed, it's going to eat away at returns in a huge way. I don't know what would be better between a 1%, what do they call it? Just a 1% management fee. There's like a term that a lot of the ETFs use, but I can't remember what it's called. I don't know what would be better between a 1% management fee and a call it one in 30 structure. Well, I guess probably in that case it'd be the, it'd be the 1%, but let's say it was like half a percent and 30% of

Starting point is 00:47:37 performance fees. I don't know. I, I don't hate performance fees the way he does because it's a little bit of downside protection. He's talking about the best case scenario here where it's like, you would have had your returns eaten away if you invested in Berkshire. It's like, okay, true. But at least you wouldn't be paying somebody 1% of your money every year to be putting money in bonds or something like that. Right, right. Or just hugging the index. Yeah, exactly. And I think he has an obviously good idea here where a lot of funds are overcharging stuff. But I think it takes it a little far where, okay, one, no one's forcing anyone to invest in these things. So, right? It's not like they're, maybe they mislead and that's probably

Starting point is 00:48:29 bad. It definitely is bad if you kind of mislead the investors and don't really show them exactly what is the costs are going to be if you do well. But I think performance fees with a high water mark, as long as they're not really, really low benchmarks or something like that, by definition, are not going to be bad because you're not going to have that risk of, okay, five, six, seven, eight good years, and then you blow up by taking a ton of risk because then you can claw that back, I'd say. But like Ryan mentioned, there's so much nuance here, and it's probably a discussion for another episode that's really not that entertaining for a podcast, so let's move on to something

Starting point is 00:49:06 more fun. and this one I think is probably the most informative for anyone that's a newer listener and probably for any more experienced ones listening because he probably has done better than you, has done better than us. And these are the rules he follows. They seem simple, but here's the article. It's 10 rules for investors. It's from 2013. I think he still follows these today and I'm going to list them all and then we can talk about any thoughts and maybe any we disagree with. So let's go through the list. One, if you don't fully understand it, don't invest. Two, don't try to time the market. Three, minimize fees. Four,

Starting point is 00:49:44 deal as infrequently as possible. I would say three and four are actually highly related. Five, don't over diversify. Six, never invest just to avoid tax. Seven, never invest in poor quality companies. Eight, buy shares in a business which can be run by an idiot. Nine, don't engage in quote, greater fool theory. Ten, if you don't like what's happening to your shares, switch off the screen. I'm going to go first and say one I disagree with is never invest in poor quality companies because if someone can offer you a negative value on a company, right? Like if you're literally getting, paying $10 million for a balance sheet of a hundred million, like net cash yeah that can be given back to you of course do that so i think that's one i disagree

Starting point is 00:50:34 with but in general it's a good rule of thumb i think and especially with their strategy with larger mega mega cap you know large and mega cap companies yeah i like a lot of these like you the never invest in poor quality companies obviously if someone offers you a mediocre business that you know is worth 50 million dollars and they offer it to you for 10 million dollars you should take that but i think when you're playing with huge amounts of money like he does you probably don't there's probably not enough bad businesses at that size to really invest in um probably today too especially because maybe there wasn't like the 60s right but today yeah there's not and that could reappear but let's say probably far-fetched

Starting point is 00:51:29 yeah look at the rest of these here don't over diversify i i like that what's your favorite is that your favorite probably yeah probably maybe if you don't fully understand it don't invest yeah i i i think that's one that is probably the most useful i think if we could get every listener to get that ingrained into their brain the only thing i would say is that i always no matter what no matter how thorough my research is i learn more about the company over time after buying it and part of that is because you you know the future is is uncertain and things are going to change but i feel like i always get a little bit more of an intimate understanding the longer that i own something and so i don't mind

Starting point is 00:52:29 buying a starter position here and there if i think it's a pretty good idea but i don't have like the ultimate grasp on the company because the other problem here is if you can acquire an understanding of pretty much any business in the world if you spend enough time doing it that doesn't mean it makes it a better investment so yeah and i fall into that sunk cost of like oh i've done all the research now i gotta buy a position when really it's probably not the right thing to do sometimes it's as simple as this is a very valuable service trades at a reasonable price I'll buy a starter position and over time I'll own it and maybe it becomes an even better investment five years down the road. Yeah. He said at the annual meeting this year that he thinks

Starting point is 00:53:13 the best strategy would be to take essentially the one stock that they get most criticized for or complaints from investors in the year prior and make that the only buy that year for the next year because that one just crushes the market so they use meta as his example which very which makes sense way we were the we were part of that uh unfortunately i called meta uninvestable at the absolute bottom yeah i just say right you know right that that might have been one of your worst calls but you know that's okay we uh hey buffett bought ibm yeah that was a bigger mistake than that you know and that was like 10 billion dollars i bet um what was i gonna say oh yeah on the starter position thing so for example like ryan your portfolio could easily be 10 stocks could

Starting point is 00:54:02 be 90 of it but you might have a lot of tiny positions in there that are just a way to almost treat it as a watch list yeah um let's see anything else in here before we move on we talked about funsmith today let's go through some of the holdings let's just yeah let's do that Let's go through some of the holdings. I'll go through the top 10 here and we can talk about, I don't know, any surprises potentially. So top 10, you've got number one, Novo Nordisk, number two, Meta, or sorry, number two, Microsoft, number three, Meta, number four, Striker, or number four, L'Oreal, number five, Striker, number six, LVMH. sorry one second got to click through here number six lvmh number seven idex laboratories they sell like diagnostics equipment i believe for uh veterinary clinics um seven or is this a eight visa nine philip morris 10 automatic data processing also known as adp i'll probably just leave it there because we don't want to go through all of them but a lot of them are pretty

Starting point is 00:55:16 old companies and actually as you get into the 10s and 20s of his holdings which are much smaller positions they get older and older actually i'm looking at some of these businesses in the top 10 and they're fairly i don't want to say new because microsoft is whatever 70 years old almost now uh 40 years 40 years i thought microsoft was built in the 70s so what would that be uh yeah sorry 50 some years was it late 60s let's see let's let's let's do a little uh google googling right now april 4th 1975 albert in mexico 50 years i guess almost exactly okay the i mean meta is the youngest one here i believe unless i'm wrong about idex don't really know them that well But a lot of these are pretty old companies. If you're looking at 13F, the 13F doesn't encapsulate all their holdings because it's all US holdings. And there's some European ones in there. The biggest ones are Novo Nordisk, L'Oreal, and LVMH. Is there anything that you would have expected him to own that you didn't see in here?

Starting point is 00:56:29 well i think a lot of the people that own visa also essentially just on microsoft or excuse me mastercard equal weighted um and maybe that comes back to the fact that they try to be very disciplined on valuation and mastercard has not had has had very few times over the last few years or last decade where it's traded at a cheaper multiple and visas had a couple where it's generally been a little bit cheaper so maybe that's why or maybe they have a differentiated view on the two companies. So I was a bit surprised to see that because MasterCard is basically in their starter position. I believe it was a 0.1% allocation, so essentially a watch list. I was a bit surprised. Okay, so I wasn't surprised to see LVMH. I think that makes a lot of sense

Starting point is 00:57:15 for him. Traded at a reasonable price at a few times. They're able to buy trusting brands, good runway for reinvestment, great organic growth. ROICs are fantastic, pricing power, blah, blah, blah, high margins. But I was a little surprised to not see any other fashion and luxury in the portfolio. No Hermes, no Ferrari, no the other ones out there. uh what were your thoughts on that and maybe the quick answer is ferrari and hermes to trade at such a high valuation yeah that could definitely be part of it the other one is that i it doesn't seem like just looking at his portfolio nike being the exception that he loves companies where it's built around a single brand like you've got with hermes lvmh obviously it's a house of brands tons

Starting point is 00:58:11 of different ones, kind of diversifies the risk away from any sort of brand damage that comes over the years. Hermes and Ferrari are both not one product, but one brand companies. You look at companies like Pepsi, even Philip Morris, they have a lot of different cigarettes within their portfolio. LVMH, trying to think of some of the other conglomerates here, McCormick, they have a ton of different brands so it seems like he loves these house of brand style investments i don't honestly he owns a lot of stocks he owns like these tiny tracker positions like 40 companies he owns mastercard but it's tiny which yeah it's it's pretty much a watch list yeah so So, I mean, it seems like he loves big tech, ironically, because that's the only reason he hasn't outperformed the NASDAQ 100.

Starting point is 00:59:11 Why would – why wouldn't Amazon fit in there? You've got – it checks a lot of the boxes for me in terms of their watch list. Here's what's interesting. At the annual meeting, which I actually just watched this clip of it this morning, is he said they bought Amazon – um no no big deal right when we were buying it what it was getting cheap and you know that's something special there was a ton of people buying it we're we honestly were relying on some other high quality reports um i'd actually mention go check out our interview with ed chang did a great report on it that turned out basically completely right but besides the fact

Starting point is 00:59:50 they bought it i think when the valuation crept down 2022 2023 i forget the exact date but then they ended up selling and it was for a strange reason because maybe he's unaware of how hype how much amazon hypes up their conference calls because he basically said that the new ceo jassy was on the conference call hyping up how much they were going to invest in grocery delivery and he was like this sounds like a terrible idea i don't think it can work we're going to sell because the return on investment is going to be terrible and it was a bit of a strange reason to sell because that's you know even if it's a huge investment it's still a small part relatively of amazon's business so then he was like well they didn't end up doing that and i was like welcome

Starting point is 01:00:36 to the technology companies man because they like hyping up stuff and a lot of times they don't follow through um so i think that's why they sold and he was a little bit upset about that because you know they ended up being quite right about it yeah i mean it is tech companies especially these big conglomerates google microsoft amazon less so apple they love to hype up these small parts of their business that are kind of green shoot opportunities where there could be something big when in reality the things that drive the returns for those companies over like five to ten years are typically just their core business dominating and growing ever larger yeah and i think it's they're not really even though they're speaking to investors i think they're not speaking

Starting point is 01:01:27 to investors with those things they're trying to use that as free marketing to get new engineers for their r&d department or whatever type of worker you might want and basically get articles written about them in tech crunch so they can get free marketing in that way and then you know engineers read it they're like oh they're working on all this cool stuff i want to be a part of that and yeah we'll help you translate terry these these u.s companies they're a little different over here on the west coast i don't mind the grocery investment to be honest like yeah well walmart margins i think yeah walmart translated or transitioned it made a huge transition in the 21st century to grocery and it hasn't killed their business now

Starting point is 01:02:11 i have an anecdote here that i think was interesting in relation to his philip boris investment i read some of his earlier letters and they actually invested in swedish match in 2013 2014 2015 for reference oh my gosh you're kidding for reference they bought uh philip morris bought swedish match but wait 2013 2014 yeah so what's interesting about it is that they ended up selling Swedish Match because the company made some mistakes about the snus product and they were worried about,

Starting point is 01:02:46 and maybe it was a little later, but they were worried about the huge growth in vaping and how they were exposed with the snus products to vaping, which I think makes sense. And their management team really never inspired that much confidence, even though they kind of did some things extremely well. And it's a high quality business

Starting point is 01:03:01 with the chewing tobacco and snus products, the lower risk stuff. and it was right before they came out with the nicotine pouches which helped supercharge their growth so i think it was interesting where he was like man we sold that but then we're buying back philip moore's here maybe they own both um and i'd be curious to hear what his thoughts were on that subsidiary today um i would have loved i wonder if he has the same thoughts as uh john hempton on uh how they kind of got lucky a little bit yeah that was maybe the biggest one well it's certainly the biggest one that got away for us but it surprises me that there weren't more

Starting point is 01:03:41 activist investors willing to step in and stop that buyout from happening right especially you know if funsmith knows that business let's say they followed it after they sold i i think it checks all the boxes that he would have liked so why not step back in and do something about it and maybe i'm just griping here because i had my maybe he's a gold mine taken from me yeah maybe it's just phil moore's shareholder but i thought that was interesting and with the amazon thing i think they are not afraid to accidentally cut a position and be over worried about something because they see you know so much opportunity anywhere else there's plenty of companies out there where okay we may have sold amazon for the wrong reasons right

Starting point is 01:04:34 but there's a chance we were right and like as long as they feel the risk reward is higher in their existing portfolio it's not the end of the world if you get what i mean yeah that makes sense. Let's move to our last question here. What stands out about Funsmith and maybe Terry Smith and include him here as well. What stands out about Funsmith today? Do you think the strategy is replicable throughout all market environments? And then this one's more speculative question. Can the strategy outperform over the next two decades? You can go first. okay and i ask these type of questions because i think a lot of and look these are fair criticisms people can put out there i'm not saying like you're wrong to have these sort of questions

Starting point is 01:05:30 but when someone starts a high quality phone in 2010 i think there's a lot of people that just go and that was good timing you know had a time to well and they got lucky and the way i look at it is, I don't really think so. Because if you look at their growth, and I'll get through some of the numbers here where, yeah, you might not expect the multiple to expand that much, but all right. Well, let me just go through the first question. What stands out about Fundsmith? I think they are one of the few investors that truly holds for the long-term. You have Buffett, you have David Gardner, and kind of the other people in the Motley Fool tree. You have the Acre funds, you have Fundsmith here and others that I'm clearly missing. There's more than four, which they

Starting point is 01:06:16 actually do what their documents say. Unsurprisingly, they all seem to have done well over the long term and they have quite low portfolio turnover. Is the strategy replicable through all market environments? I think so. Look, they could even say that they're not heavy exposure to software, AI, they're not even that exposed to big tech, Magnificent Seven, stuff like that. And they're investing in a lot of lower volatility stocks. They're typically at around a market multiple. They're supposedly, you know,

Starting point is 01:06:51 obviously everyone has to do their own analysis, but high quality and higher growth. And they think they can outperform over the long haul. I mean, if you think that the businesses are of higher quality and they're trading at very close to the market multiple, which right now they're slightly above on a free cash flow yield, but they believe specifically their cash flow conversion was a little artificially low in 2023 and that that'll

Starting point is 01:07:13 re-invert. So it's like, you know what I mean? It's a little bit misleading from kind of their earnings multiple right now. And they're really disciplined on price and they're not afraid to sell something that's at an egregious multiple. And they are only going to buy stuff if they think it's a reasonable valuation, I don't really see how that stops working. As long as they can find stuff that becomes like meta in 2022, a high quality business that gets its market price dislocated. Now, what do you think about this? Hold on. What do you think about this? In 2010, the average free cash flow yield of fundsmith's portfolio was seven percent in 2023 the average free cash flow yield weighted average free cash flow yield was three percent it's essentially a

Starting point is 01:08:08 double yeah yeah it has i think they're paying higher multiples today than what they were paying in 2010 yeah and i'm pretty sure that tracks what the global one would probably be or maybe not global, maybe S&P. I'm sure that's similar to that. Yeah, that's true. It was kind of a good time to be starting a fund. It's good timing, but they still outperformed. Yeah, that's true. Okay, last one. Can this strategy outperform over the next two decades? And I think this is a big question I wanted to put in here because a lot of people would say like, okay, 2010 to 2024, yeah, you did great, but high quality is not going to work. Value factor is back, blah, blah, blah, blah, blah. I still think it can. I mean, if you expect 16% annual returns,

Starting point is 01:09:02 that might be a stretch because you probably still need multiple expansion. But I do think, given that they trade close to a market multiple, and like I mentioned, they have these high quality businesses, I think if you believe in their strategy and believe in their acumen and their discipline, that you should probably expect a few percentage points above the market each year going forward on average. I agree. Each year. Look, you're not going to get that much of a boost from multiple expansion. They get a big boost from multiple expansion, as almost every other investor did since 2010. Don't expect that going forward. I think they try to reiterate that as well.

Starting point is 01:09:42 Yeah. Something that really stood out to me is if you just showed me the holdings, you just showed me the whole portfolio, I would have guessed that it was pretty close to market performance because they own a lot of the big – they own a lot of the companies that are already in the major indices. They make up a huge chunk of the major indices. And outside of a couple of the tech companies that have really outperformed, you would have gotten pretty standard returns. However, they beat the market constantly. And part of that, I think a big reason, was because they were opportunistic about the companies already in their portfolio. So they got better returns than actually just holding it. they by buying when times were right for companies they owned they were able to juice their returns a little bit each year and i think if they can continue to do that and when you

Starting point is 01:10:42 really really know a business i think it becomes pretty easy to do that where you followed it for a long time you thought it was a good investment five years ago and now you think it's a really home run investment because the stock's down because of something that shouldn't really be weighing as heavily on the stock so anyways i just think they've done a really good job of that portfolio management side of things and i suspect they can continue can continue to do that the only thing is i just and i know this is kind of funny because i just said they could probably outperform the market but i just have a hard time believing that they're gonna wildly outperform when they own companies that actually make up a giant chunk of the actual index itself.

Starting point is 01:11:31 Okay. When I sell my business, I want the best tax and investment advice. I want to help my kids and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my head of office has a forever setting. An IG private wealth advisor creates the clarity you need with plans that harmonize your business, your family and your dreams get financial advice that puts you at the center find your advisor at igprivatewealth.com you gotta try breakfast and what better way than with a delicious pret organic coffee starting at just one dollar all day every day now until december 31st you gotta try breakfast at participating aw locations in

Starting point is 01:12:29 ontario yeah i think it comes back to what you just said is the portfolio management trusting that they'll change weightings and they'll be sensitive to price but the track record's there but i do agree where you know the valuations are stretched okay are you making basically the same bet as qqq slightly different slightly different of course of course but you know philosophy wise maybe but i mean the track record's been quite strong and this is you know maybe the best investor in britain i'd say although i don't know every investor in britain uh some people call him the british warren buffett i think but just because of the style like yeah track record's a little little shorter but he's got a few he's a couple decades behind question for you okay

Starting point is 01:13:25 do you like this strategy buying really high quality proven companies that have been around for a long time and just holding them or basically saying lindy effect good price or yeah or do you prefer trying to find hidden gems i like hidden gems more i think it comes back to well he's running a large fund for people with different styles and i'm someone in my 20s doesn't have that much money and it's more fun in my opinion looking for smaller companies or maybe faster growing companies and i think personally i'm very comfortable with volatility so what you know what i mean so it's not something to be upset yeah yeah i'm comfortable when it goes up fast but in all seriousness i don't really get too scared when something falls um so i don't know

Starting point is 01:14:28 that's just not a bulletproof investor by any means, but that's just something I know that I'm not scared of. And so I'm not really scared of investing something that I could go, okay, it falls 50%. No big deal. All right. Anything else,

Starting point is 01:14:42 Ryan, before we head out here, pretty much covers everything. Okay. Well, I like the guy. He does seem confident in himself. He seems to be a little more,

Starting point is 01:14:52 a little less outspoken than he used to be, but I like his investing style. for sure for sure i mean yeah great writer read some of the stuff annual meetings quite entertaining and you know he's a damn good investor the results speak for themselves all right housekeeping items subscribe to the newsletter links are in the show notes chit chat stocks over on substack follow us on twitter slash x keep updated with the show you can listen to these on youtube apple spotify wherever you prefer to listen to podcasts and on the youtube yes there is video although it's essentially just a zoom feed of ryan and i uh if

Starting point is 01:15:34 you enjoy this show give us an old five-star review on spotify or apple podcast we'd greatly appreciate it and if you want to essentially give back to these shows since they're free that is the best way to do it you can think of it as a little donation if you enjoy chit-chat stocks. Now, let me hit the disclosure. We are not financial advisors. Anything we say on the show is not formal advice or recommendation. Ryan, I, or any podcast guest may hold securities discussed in this podcast, may have held them in the past, and may buy, sell, or hold them in the future. Thank you, everyone, and we'll see you next time. Thank you.

Chit Chat Stocks - The Best Investor In Britain? How Terry Smith Beats The Market With Quality Stocks

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.