Investor wiki

Terry Smith

Born 1953, British, founder and CEO of Fundsmith LLP (2010)

Buy good companies, do not overpay, then do nothing. The architect of the modern compounder framework and the most successful UK-based equity fund manager of the past fifteen years.

Biography

Terence Smith was born on 8 May 1953 in Stratford, East London, the son of a lorry driver. He attended Stratford Grammar School and went on to University College Cardiff, where he read history. He subsequently took an MBA at The Henley Business School. His early career was at Barclays Bank in the 1970s, but he moved into investment-banking equity research in the 1980s, eventually becoming head of research at UBS Phillips & Drew.

Smith published Accounting for Growth in 1992 while still at UBS. The book exposed accounting practices used by major UK companies (Polly Peck, Robert Maxwell's Mirror Group, several leading retailers) to inflate reported earnings during the late 1980s. The book embarrassed several large issuers and led to Smith's dismissal from UBS, but established him as one of the most authoritative voices on quality-of-earnings analysis in the UK market. The reputation compounded over the subsequent two decades through his work at Collins Stewart, where he became CEO in 2000.

Smith launched Fundsmith LLP in November 2010 with the explicit intention of building a long-duration, low-turnover, quality-focused equity fund following the framework he had developed across his prior career. The Fundsmith Equity Fund, the firm's flagship product, grew from a few hundred million pounds at launch to over 25 billion pounds in assets under management within a decade. The firm's emphasis on long-form annual letters, public Investor Days, and pedagogical transparency is a deliberate echo of the Berkshire Hathaway model.

Smith relocated to Mauritius in 2017 for personal-tax reasons while continuing to run Fundsmith with the firm's headquarters and core investment team in London. He returns to London regularly for the firm's annual Investor Day in February and for board and team meetings. He published Investing for Growth in 2020, compiling his Fundsmith annual letters, Sunday Telegraph columns, and Financial Times pieces into a single thematic volume with new framing essays. He continues to serve as CEO and lead portfolio manager of Fundsmith in 2026 and has not announced any succession plan beyond the firm's existing senior investment team.

Investment philosophy in seven principles

Each principle is documented in Smith's published canon (Accounting for Growth 1992, Investing for Growth 2020) and in the annual Fundsmith Equity Fund letters from 2010 onward.

1. Buy good companies, do not overpay, do nothing

Smith's framework reduces to three rules, repeated in every Fundsmith annual letter since 2010 and inscribed on the firm's website as the operating mantra. Buy good companies means owning businesses whose underlying economics are structurally superior: high returns on operating capital, sustained over many years, financed primarily from retained earnings rather than external capital, with growth that is organic rather than acquisition-driven. Do not overpay means having a valuation discipline that rejects names trading at multiples that imply heroic future assumptions, even when the underlying business is otherwise attractive. Do nothing means running the portfolio with an annual turnover rate of around 10 percent or less, which is roughly an order of magnitude below the typical mutual-fund average. The compactness of the three-rule framework is itself part of the methodology. Smith argues that complex investment rules invite cognitive overrides and behavioural failures, while simple rules consistently applied compound advantage. The Fundsmith Equity Fund's twelve-year returns from 2010 to 2022 (roughly 14 percent annualised in GBP versus 9 percent for the MSCI World) are presented in the annual letters as the empirical case that simplicity, properly applied, outperforms complexity.

2. Return on operating capital is the master metric

Smith's quantitative gateway is sustained high return on operating capital employed, with operating capital defined as net working capital plus net property, plant, and equipment, excluding goodwill from past acquisitions. The exclusion of goodwill matters because goodwill measures the premium past acquirers paid, not the productivity of the current operating asset base; including goodwill in the denominator penalises companies whose acquisitions have already been integrated and whose current operations may be highly productive. Fundsmith's published target for portfolio holdings is sustained ROOCE above 25 percent over a fifteen-year window, which is materially above the global equity-market average of roughly 12 percent. The thesis is that a business compounding at 25 percent on retained capital produces vastly more shareholder value over decades than one compounding at the market average, even if the higher-quality business trades at a higher entry multiple. The 2018 Fundsmith annual letter illustrates the arithmetic in detail with three hypothetical companies at 8, 15, and 25 percent ROOCE, showing the terminal value gap after twenty years. invest-like's Smith-Fit Score uses sustained ROOCE as the primary quality screen.

3. Organic growth, not acquisition growth

Smith distinguishes sharply between growth that arises from the natural expansion of an existing business (organic) and growth that arises from acquiring other businesses (inorganic). Organic growth is, in Smith's framework, almost always preferable because it reflects the underlying customer-economics of the business: the existing operations are gaining share, raising prices, or expanding into adjacent products at high incremental returns. Inorganic growth is, in his framework, treated with scepticism because the acquirer must pay a control premium that consumes a portion of the prospective return, integration risk is material and frequently underestimated, and the acquired entity often turns out to be lower quality than the acquirer's existing operations. The Fundsmith portfolio is consequently skewed toward companies whose growth history has been substantially organic over fifteen-plus-year windows: Microsoft, L'Oreal, Visa, PepsiCo, McDonald's, Estee Lauder. Companies whose recent growth has been driven by serial acquisitions are typically passed regardless of current valuation. The discipline is not absolute; selective bolt-on acquisitions that genuinely extend an existing operating capability are accepted. The rejection is of serial-acquirer business models built on continuous M&A as the primary growth engine.

4. Cash conversion above all

Reported earnings are an accounting construct; cash flow is what the business actually generates. Smith's framework places cash-flow analysis at the centre of due diligence, with particular attention to the ratio of operating cash flow to reported net income (cash conversion). A high-quality business converts close to 100 percent of reported earnings into operating cash flow over a multi-year window. A business whose cash conversion is structurally below 80 percent is either capital-intensive (large maintenance capex required), or has working-capital growth absorbing the earnings, or is using accounting choices to inflate reported earnings beyond underlying cash generation. The Fundsmith annual letters contain extensive analysis of cash conversion across the portfolio, with explicit comparisons of reported EPS to free cash flow per share. The discipline is closely related to Buffett's owner-earnings concept introduced in the 1986 Berkshire letter, but Smith's articulation is more procedural: a specific multi-year ratio with a specific threshold, applied consistently across the portfolio rather than as a qualitative check. invest-like's Smith-Fit Score includes cash conversion as a primary pillar, with consistent breaches of the 80 percent threshold treated as a near-deal-breaker.

5. Low capital intensity

Smith's portfolio is heavily skewed toward businesses that produce their growth without consuming large amounts of incremental capital. The test is the ratio of capital expenditure to revenue over a multi-year window. A capital-light business (consumer brands, software, payment networks, asset-light franchise models) typically runs capex at 2 to 5 percent of revenue; a capital-heavy business (airlines, telecoms, capital-intensive industrials) runs capex at 15 to 30 percent of revenue. Smith's framework prefers the former because the cash that does not get consumed by mandatory reinvestment can instead be returned to shareholders, redeployed into share repurchases, or used to fund organic expansion of high-return product lines. Over multi-decade compounding windows, the difference between a 4 percent and a 20 percent capex-to-revenue business is enormous. The Fundsmith portfolio's overwhelming consumer-brand and software bias reflects this discipline. The framework does occasionally make exceptions for capital-heavy businesses with exceptionally durable customer relationships (industrial-test equipment, certain medical-device franchises), but the default is capital-light.

6. Avoid leverage as a substitute for performance

Smith is sharply critical of businesses that use financial leverage to enhance reported return on equity, masking what is actually mediocre operating performance. The framework's preferred metric (ROOCE) deliberately uses operating capital rather than equity, precisely because dividing by equity rewards highly leveraged business models that pass the looks-good-on-paper test but whose underlying operating economics are not actually superior. The 2014 Fundsmith annual letter discusses leverage in detail and argues that high financial leverage is incompatible with the durability that Smith's framework requires; a recession or industry downturn can force the levered business into emergency capital raises at dilutive terms that destroy the shareholder. Banks and other financial-services businesses are excluded from the Fundsmith portfolio for related reasons: the regulated leverage structure makes the underlying return on assets very difficult to interpret, and the systemic-risk profile is incompatible with the buy-and-hold-for-decades horizon. invest-like's Smith-Fit Score follows the same exclusion: banks and insurers are graded under the Buffett, Graham, or Greenblatt frameworks rather than the Smith one, because the framework's quality definition is specifically incompatible with leveraged financial-services business models.

7. Annual letters as primary communication

Smith has written the Fundsmith annual letter to shareholders every year since the fund's 2010 launch. The letters are deliberately long (typically 8,000 to 12,000 words), substantive, and pedagogical. They explain not only the year's portfolio performance but the analytical principles being applied, with worked examples drawn from current and prior holdings. The deliberate echo of Berkshire Hathaway's shareholder-letter tradition is part of the framework: long-term capital is best retained by giving it a clear, evidence-based reason to stay, and the annual letter is the primary mechanism. The letters are publicly available on fundsmith.co.uk and have become a standard reference text for the modern compounder-investing tradition in Europe. The 2015 letter on the limitations of dividend yield as a screen, the 2018 letter on ROOCE arithmetic, and the 2020 letter on the COVID-period portfolio performance are the most frequently cited. invest-like's Smith-Fit Score does not score communication quality directly, but the platform's broader Management pillar across all frameworks credits long-form, candid annual reports of this style.

Famous picks

Ten documented Fundsmith Equity Fund holdings drawn from the publicly disclosed top-ten in the firm's monthly fact sheets and the worked examples in the annual letters.

Microsoft (MSFT)

A long-standing Fundsmith holding from the early years of the fund. Smith has discussed Microsoft repeatedly in the annual letters as a textbook compounder: high ROOCE, sustained organic growth (especially post-Satya Nadella cloud pivot), low capital intensity in the software business, and excellent cash conversion. One of the largest weights in the portfolio for over a decade.

L'Oreal

The French cosmetics group, held by Fundsmith for most of the fund's life. Cited repeatedly in the annual letters as an exemplar of consumer-brand-driven compounding: high ROOCE, organic growth, strong cash conversion, multi-decade brand-portfolio durability.

Visa (V)

Documented Fundsmith holding from the early years. The classic payment-network moat: high ROOCE, low capital intensity, near-100 percent cash conversion, and structural growth in cashless payments globally.

PepsiCo (PEP)

A long-running Fundsmith position. Smith has discussed Pepsi as an example of the diversified consumer-staples compounder with strong cash flow, consistent dividend policy, and durable brand portfolio across both snacks and beverages.

Estee Lauder (EL)

Held by Fundsmith for many years. Estee Lauder's prestige-beauty-brand portfolio fits Smith's preference for consumer franchises with pricing power, organic-growth runway in Asia, and capital-light operating model.

Stryker Corporation (SYK)

The medical-devices manufacturer, held by Fundsmith for an extended period. Cited in the annual letters as an example of a medical-device franchise where customer relationships (orthopaedic surgeons, hospital systems) create switching-cost moats that justify the relatively higher capex-to-revenue compared to pure consumer brands.

IDEXX Laboratories (IDXX)

Animal-diagnostics company, held by Fundsmith. The veterinary-diagnostics business meets Smith's tests for sustained high ROOCE, organic growth (pet-ownership secular trend), and durable customer relationships (installed-base of diagnostic instruments).

Diageo (DGE)

The UK-listed global drinks company, held by Fundsmith for much of its life. Diageo's portfolio of premium spirits brands (Johnnie Walker, Smirnoff, Guinness) fits the consumer-staples compounder pattern, though it was eventually trimmed when the valuation multiple compressed the prospective return.

Philip Morris International (PMI)

Held by Fundsmith despite the ethical sensitivities around tobacco. Smith has defended the position in the annual letters on the basis that tobacco companies' addictive-product-driven cash generation, high ROOCE, and pricing power passed the framework's quantitative tests; subsequently exited in later years as the valuation and regulatory profile shifted.

Automatic Data Processing (ADP)

The payroll-processing company, held by Fundsmith. ADP's switching-cost moat in payroll and HR-services outsourcing fits the framework's preference for customer-lock-in driven recurring revenue models.

How invest-like scores the Smith framework

invest-like applies a Smith-Fit Score with pillars for sustained return on operating capital (ROOCE), organic-growth share, capital-intensity ratio (capex over revenue), cash conversion (operating cash flow over net income), and valuation discipline. Stocks are graded A+ through D with reasoning per pillar. Banks, insurers, and other regulated-leverage businesses are excluded by deal-breaker following Smith's own portfolio policy. Read the live cohort at /fit/smith/ and the methodology at /methodology/.

Famous quotes

Sixteen widely cited Smith quotes attributed to the canonical published sources: Investing for Growth, Accounting for Growth, the Fundsmith annual letters, and the firm's Investor Day transcripts.

Buy good companies, do not overpay, do nothing.

Fundsmith operating mantra, repeated in every annual letter since 2010

The single most important thing is that the business you invest in must be a good one.

Investing for Growth (2020), Introduction

The most common questions I am asked by investors are about what stocks I am buying or selling and what I think the market is going to do. To them, the most surprising answer is usually nothing.

Fundsmith annual letter, 2014

We seek to invest in resilient, well-financed businesses with sustainable growth.

Fundsmith investment philosophy statement

There are no good or bad companies. There are only companies with good or bad returns on capital employed.

Investing for Growth (2020)

The point of accounting is not to find out what a business is worth. The point of accounting is to find out whether the business is honestly reporting what it has actually earned.

Accounting for Growth (1992), Introduction

Owner Earnings is one of the most important and least-cited concepts in the canonical writing on value investing.

Investing for Growth (2020), Chapter on cash conversion

If you don't think you can hold a stock for ten years, you shouldn't hold it for ten minutes.

Echoing Buffett, recurring across Fundsmith communications

The trouble with the index is that it includes a great many bad businesses.

Fundsmith annual letter, 2015

Inactivity is the friend of the long-term investor.

Fundsmith annual letter, 2017

The compounding effect of high returns on capital, sustained over time, is the single most powerful force in long-term investment outcomes.

Fundsmith annual letter, 2018

What you pay for an asset matters, but what you own matters far more.

Investing for Growth (2020)

We are not in the business of predicting the future. We are in the business of owning companies whose products customers will still want in fifteen years.

Fundsmith annual letter, 2019

If you can identify a company whose return on capital employed is materially above its cost of capital, sustained over the long term, and you do not overpay for it, you have done most of the work.

Investing for Growth (2020)

Diversification is a substitute for knowledge.

Fundsmith annual letter, 2016

We do not predict, we do not time, we do not trade.

Fundsmith investment philosophy statement

Books by Terry Smith

Smith's published canon, plus the annual letters and Investor Day transcripts that function as ongoing primary sources.

Accounting for Growth

1992

Smith's first book, published while he was head of research at UBS Phillips & Drew. The book exposed accounting practices used by major UK companies to inflate reported earnings, embarrassing several large issuers and ultimately costing Smith his UBS position. It is one of the most influential accounting-forensics books of the 1990s and a foundational text on quality-of-earnings analysis.

ISBN 978-0712655062

Investing for Growth

2020

Smith's second and most read book. Compiles his Fundsmith annual letters, Sunday Telegraph columns, and Financial Times pieces from 2010 to 2020 into a single thematic volume with new framing essays. The most accessible single-volume introduction to the modern compounder framework. Roughly 350 pages.

ISBN 978-0857199010 (Harriman House, 2020)

Fundsmith Equity Fund annual letters

Annual since 2010

Smith's annual shareholder letters are the primary published source on his framework's evolution. The letters are freely available on fundsmith.co.uk and are deliberately long-form (8,000 to 12,000 words each), with worked examples drawn from current and prior holdings. The 2015 letter on dividend-yield limitations, the 2018 letter on ROOCE arithmetic, and the 2020 letter on COVID-period performance are the most cited.

No ISBN; freely published online

Sunday Telegraph and Financial Times columns

Regular through the 2010s and 2020s

Smith's regular columns in the UK financial press are collected in Investing for Growth but also referenced individually in financial journalism. The columns address topical questions (market valuations, sector trends, accounting controversies) through the same framework lens applied in the annual letters.

Various; collected partially in Investing for Growth

Fundsmith Investor Day presentations (annual)

Annual from 2011 onward

The transcripts and slide decks from the annual Fundsmith Investor Day (held in London each February) are made publicly available on the firm's website and YouTube channel. The events provide the most extensive single-event content per year from Smith on portfolio holdings, framework evolution, and broader market context.

No ISBN; freely published online

Common misconceptions

Misconception: Terry Smith just runs a quality growth fund.

Correction. He runs a quality-quantity framework with explicit valuation discipline. The Fundsmith annual letters repeatedly emphasise the do-not-overpay rule, and the fund has passed on many high-quality businesses whose multiples did not meet the valuation threshold. Framing Smith as pure growth misses the second of his three rules.

Misconception: Smith's framework is just Buffett with a British accent.

Correction. The frameworks share the quality emphasis and the long holding period, but the specific quantitative gates differ. Smith places more weight on cash-conversion ratio, organic-versus-acquisition growth, and capital intensity than Buffett's letters discuss explicitly. Buffett's framework places more weight on management quality and brand-narrative durability. The frameworks are cousins, not identical twins.

Misconception: Fundsmith owns only US large-caps.

Correction. The portfolio is global, with roughly 60 to 70 percent typical US weight reflecting the global distribution of compounder-quality businesses rather than a US bias per se. European holdings include L'Oreal, Diageo (until trimmed), Stryker, and others. UK holdings have been intentionally limited because most UK-listed large-caps fail the framework's ROOCE and growth tests. Emerging-market exposure has been minimal but selectively present.

Misconception: Fundsmith's performance was a 2010s-bull-market accident.

Correction. The fund's 2010 to 2020 returns benefited from generally rising equity markets, but the outperformance versus the MSCI World over the same window (roughly 5 percentage points annualised in GBP) cannot be explained by beta alone. The 2022 drawdown (the fund fell more than the index for the first time) tested the framework and led to a 2023 annual letter discussing what had and had not worked; the fund recovered in 2023 to 2024 without changing the underlying methodology.

Misconception: Smith never sells.

Correction. The annual turnover target is around 10 percent, meaning roughly two to three position changes per year in a thirty-name portfolio. Holdings have been exited when the underlying business deteriorated (Philip Morris International was eventually sold), when the valuation multiple exceeded the prospective return (selective exits during the 2020 to 2021 multiple expansion), or when management quality changed. Inactivity is the default, not an absolute commitment.

Misconception: Accounting for Growth is just a historical curiosity.

Correction. The specific UK accounting practices it critiqued in 1992 have largely been reformed by subsequent IFRS standards, but the underlying analytical framework (test reported earnings against cash flow, scrutinise capitalised expenses, watch for off-balance-sheet financing) is still the cornerstone of modern quality-of-earnings work. The book is required reading in many UK and European value-investing curricula three decades after publication.

Today's top stocks passing the Smith framework

invest-like grades 21,000+ stocks across 68 countries (roughly half listed outside the US) against the Smith-Fit framework daily. The live top-ten cohort, ranked by composite score with sustained ROOCE, organic growth, capital intensity, and cash conversion visible per name, lives at /fit/smith/. The page refreshes daily as fundamentals update.

Frequently asked questions

Who is Terry Smith?

Terry Smith is the founder and CEO of Fundsmith LLP, a London-based asset manager he launched in 2010. The Fundsmith Equity Fund grew to over 25 billion pounds in assets under management within a decade. Smith is the author of Accounting for Growth (1992) and Investing for Growth (2020) and is one of the most-followed voices in modern UK value investing.

What is Terry Smith's investment philosophy?

Three rules: buy good companies, do not overpay, do nothing. Operationally this means owning a concentrated portfolio of 25 to 35 global businesses with sustained returns on operating capital above 25 percent, organic growth, low capital intensity, and excellent cash conversion. Annual portfolio turnover is targeted around 10 percent.

How has Fundsmith performed?

From its 2010 launch through 2022, the Fundsmith Equity Fund compounded at roughly 14 percent annually in GBP, against the MSCI World's roughly 9 percent over the same window. The fund had its first material drawdown in 2022 (falling more than the index) and recovered in 2023 to 2024 without changing the underlying methodology. Recent performance is published in the fund's monthly factsheets at fundsmith.co.uk.

What does Fundsmith own?

The portfolio is concentrated in roughly 25 to 35 global compounder-quality businesses, weighted toward consumer brands (L'Oreal, PepsiCo, Estee Lauder), software (Microsoft), payments (Visa), medical devices (Stryker), and selected specialty industrials and consumer healthcare names. The full top-ten holdings are disclosed monthly; the fact sheet on fundsmith.co.uk is the authoritative source.

What is Accounting for Growth?

Smith's 1992 book exposing accounting practices used by major UK companies to inflate reported earnings during the late 1980s. The book embarrassed several large issuers and ultimately cost Smith his head-of-research position at UBS Phillips & Drew. It is one of the most influential accounting-forensics books of the 1990s and a foundational text on quality-of-earnings analysis.

What is the difference between Terry Smith and Warren Buffett?

Both apply quality-quantity frameworks with long holding periods. Smith places more explicit emphasis on cash conversion ratios, organic-versus-acquisition growth, and capital intensity than Buffett's letters discuss. Buffett places more emphasis on management quality and brand narrative. Smith excludes financial-services businesses entirely; Buffett holds them. The frameworks are closely related but operationally distinct.

How does invest-like score the Smith framework?

invest-like applies a Smith-Fit Score with pillars for sustained return on operating capital (ROOCE), organic growth share, capital intensity, cash conversion, and valuation discipline. Stocks are graded A+ through D with reasoning per pillar. Banks, insurers, and other regulated-leverage businesses are excluded by deal-breaker following Smith's own portfolio policy. The live cohort is at /fit/smith/ and the methodology at /methodology/.

How old is Terry Smith?

Smith was born on 8 May 1953 in Stratford, East London. As of 2026 he is in his early seventies and continues to serve as CEO and lead portfolio manager of Fundsmith LLP. He divides his time between London and Mauritius, where he is a tax resident.

Where does Terry Smith live?

Smith is a tax resident of Mauritius, where he relocated in 2017 for personal-tax reasons, while continuing to run Fundsmith with the firm's headquarters and core investment team in London. He returns to London regularly for the firm's annual Investor Day and for board and team meetings.

Warren Buffett

Read the wiki

Benjamin Graham

Read the wiki

Philip Fisher

Read the wiki

Peter Lynch

Read the wiki

Joel Greenblatt

Read the wiki

Charlie Munger

Read the wiki

Methodology

Pillar weights and deal-breakers

Working papers

DOI-anchored methodology

Track record

Live 30-stock model portfolio

Editorial and educational only. Quotes and picks are drawn from primary sources (Accounting for Growth 1992, Investing for Growth 2020, the Fundsmith Equity Fund annual letters 2010 onward, the firm's Investor Day transcripts) and the fund's monthly published fact sheets. invest-like has no commercial relationship with Fundsmith LLP, Terry Smith, or any company mentioned. Nothing on this page constitutes investment advice. Past performance does not predict future results.

Investor wiki

Terry Smith

Born 1953, British, founder and CEO of Fundsmith LLP (2010)

Buy good companies, do not overpay, then do nothing. The architect of the modern compounder framework and the most successful UK-based equity fund manager of the past fifteen years.

Biography

Investment philosophy in seven principles

Each principle is documented in Smith's published canon (Accounting for Growth 1992, Investing for Growth 2020) and in the annual Fundsmith Equity Fund letters from 2010 onward.

1. Buy good companies, do not overpay, do nothing

2. Return on operating capital is the master metric

3. Organic growth, not acquisition growth

4. Cash conversion above all

5. Low capital intensity

6. Avoid leverage as a substitute for performance

7. Annual letters as primary communication

Famous picks

Ten documented Fundsmith Equity Fund holdings drawn from the publicly disclosed top-ten in the firm's monthly fact sheets and the worked examples in the annual letters.

Microsoft (MSFT)

L'Oreal

Visa (V)

PepsiCo (PEP)

Estee Lauder (EL)

Stryker Corporation (SYK)

IDEXX Laboratories (IDXX)

Diageo (DGE)

Philip Morris International (PMI)

Automatic Data Processing (ADP)

How invest-like scores the Smith framework

Famous quotes

Sixteen widely cited Smith quotes attributed to the canonical published sources: Investing for Growth, Accounting for Growth, the Fundsmith annual letters, and the firm's Investor Day transcripts.

Buy good companies, do not overpay, do nothing.

Fundsmith operating mantra, repeated in every annual letter since 2010

The single most important thing is that the business you invest in must be a good one.

Investing for Growth (2020), Introduction

The most common questions I am asked by investors are about what stocks I am buying or selling and what I think the market is going to do. To them, the most surprising answer is usually nothing.

Fundsmith annual letter, 2014

We seek to invest in resilient, well-financed businesses with sustainable growth.

Fundsmith investment philosophy statement

There are no good or bad companies. There are only companies with good or bad returns on capital employed.

Investing for Growth (2020)

The point of accounting is not to find out what a business is worth. The point of accounting is to find out whether the business is honestly reporting what it has actually earned.

Accounting for Growth (1992), Introduction

Owner Earnings is one of the most important and least-cited concepts in the canonical writing on value investing.

Investing for Growth (2020), Chapter on cash conversion

If you don't think you can hold a stock for ten years, you shouldn't hold it for ten minutes.

Echoing Buffett, recurring across Fundsmith communications

The trouble with the index is that it includes a great many bad businesses.

Fundsmith annual letter, 2015

Inactivity is the friend of the long-term investor.

Fundsmith annual letter, 2017

The compounding effect of high returns on capital, sustained over time, is the single most powerful force in long-term investment outcomes.

Fundsmith annual letter, 2018

What you pay for an asset matters, but what you own matters far more.

Investing for Growth (2020)

We are not in the business of predicting the future. We are in the business of owning companies whose products customers will still want in fifteen years.

Fundsmith annual letter, 2019

If you can identify a company whose return on capital employed is materially above its cost of capital, sustained over the long term, and you do not overpay for it, you have done most of the work.

Investing for Growth (2020)

Diversification is a substitute for knowledge.

Fundsmith annual letter, 2016

We do not predict, we do not time, we do not trade.

Fundsmith investment philosophy statement

Books by Terry Smith

Smith's published canon, plus the annual letters and Investor Day transcripts that function as ongoing primary sources.

Accounting for Growth

1992

ISBN 978-0712655062

Investing for Growth

2020

ISBN 978-0857199010 (Harriman House, 2020)

Fundsmith Equity Fund annual letters

Annual since 2010

No ISBN; freely published online

Sunday Telegraph and Financial Times columns

Regular through the 2010s and 2020s

Various; collected partially in Investing for Growth

Fundsmith Investor Day presentations (annual)

Annual from 2011 onward

No ISBN; freely published online

Common misconceptions

Misconception: Terry Smith just runs a quality growth fund.

Misconception: Smith's framework is just Buffett with a British accent.

Misconception: Fundsmith owns only US large-caps.

Misconception: Fundsmith's performance was a 2010s-bull-market accident.

Misconception: Smith never sells.

Misconception: Accounting for Growth is just a historical curiosity.

Today's top stocks passing the Smith framework

Frequently asked questions

Who is Terry Smith?

What is Terry Smith's investment philosophy?

How has Fundsmith performed?

What does Fundsmith own?

What is Accounting for Growth?

What is the difference between Terry Smith and Warren Buffett?

How does invest-like score the Smith framework?

How old is Terry Smith?

Where does Terry Smith live?

Warren Buffett

Read the wiki

Benjamin Graham

Read the wiki

Philip Fisher

Read the wiki

Peter Lynch

Read the wiki

Joel Greenblatt

Read the wiki

Charlie Munger

Read the wiki

Methodology

Pillar weights and deal-breakers

Working papers

DOI-anchored methodology

Track record

Live 30-stock model portfolio

Terry Smith

Biography

Investment philosophy in seven principles

1. Buy good companies, do not overpay, do nothing

2. Return on operating capital is the master metric

3. Organic growth, not acquisition growth

4. Cash conversion above all

5. Low capital intensity

6. Avoid leverage as a substitute for performance

7. Annual letters as primary communication

Famous picks

How invest-like scores the Smith framework

Famous quotes

Books by Terry Smith

Common misconceptions

Today's top stocks passing the Smith framework

Frequently asked questions

Related

Terry Smith

Biography

Investment philosophy in seven principles

1. Buy good companies, do not overpay, do nothing

2. Return on operating capital is the master metric

3. Organic growth, not acquisition growth

4. Cash conversion above all

5. Low capital intensity

6. Avoid leverage as a substitute for performance

7. Annual letters as primary communication

Famous picks

How invest-like scores the Smith framework

Famous quotes

Books by Terry Smith

Common misconceptions

Today's top stocks passing the Smith framework

Frequently asked questions

Related