Whts happened to Fundsmith

itwasntme001

Thrugelmir wrote: »

I'm just an old cynic having seen too much with my own eyes in my working life. Never take anything at face value is my mantra.

Share buybacks that enhance EPS (and as a consequence the share price), but load companies with debt are going to be an interesting challenge for many US companies in the years to come. Financial engineering tends not to be for the benefit of ordinary shareholders. More for the executives with their share based incentive schemes.

I like your approach. Share buybacks suggest that companies do not have confidence to invest in expanding their business. If they think the return on buying their own stock at close to record highs is better - that is very telling of the economy. Add to that that they are using debt to do this and you could see problems brewing in the corporate sector - perhaps a liquidity crisis in bonds spilling over to the general stock market and then the economy? We saw something similar in autos back in 2002.

bostonerimus

Thrugelmir wrote: »

Share buybacks that enhance EPS (and as a consequence the share price), but load companies with debt are going to be an interesting challenge for many US companies in the years to come. Financial engineering tends not to be for the benefit of ordinary shareholders. More for the executives with their share based incentive schemes.

Yep companies will fall and others will take their place. I'm always going to be lagging these moves which is ok with me.

mrodent

... and the answers are:



1) closely examine the strategy used by an active fund before you invest, not just the graph of spectacular free money.



2) have you got something that you want or must do fairly soon with lots of your money? Money can be used for much more enjoyable purposes than putting into stocks, and some of these enjoyable purposes can also be good investments. In the long run we're all dead.



3) try and understand the causes if any of a downturn - in this case the receding threat of No Deal in 2019 (although there might be one in Dec. 2020, but that's too far for most market traders to bother with). Nothing like the reasons for Woodford's demise, that's certain.



4) (perhaps) remember how blase' you were when the thing was leaping up month after month, year after year? This is what it means when it says "shares can go down as well as up". I've "lost" about £20k in Fundsmith alone this year. I positively love losing money this way.

itwasntme001

Presumably Fundsmith would have thought about the impact on currency movements on the profitability of the companies he buys and so if you think Fundsmith makes good decisions (you do if you bought), then currency movements would not matter to you. Many of the names he bought initially were bought at higher levels of GBP (note this does not mean to say you personally woul dhave bought at those levels too as it depends when you first started invested in Fundsmith) so unless Fundsmith decided to punt of FX via stocks, there's no reason to be alarmed by the drop which is mainly due to FX.

Thrugelmir

bostonerimus wrote: »

Yep companies will fall and others will take their place. I'm always going to be lagging these moves which is ok with me.

Number of listed companies is declining. As the ability to raise finance through other channels has increased. Many listed companies are likewise taken into private ownership. PLC I worked for delisted in 1997. A main stock exchange listing wasn't worth the expense.

Fewer companies listed will result in less choice for investors.

Thrugelmir

itwasntme001 wrote: »

Presumably Fundsmith would have thought about the impact on currency movements on the profitability of the companies he buys and so if you think Fundsmith makes good decisions (you do if you bought), then currency movements would not matter to you.

Times change. Active strategies cannot work indefinately from an individuals perspective. The investors objectives aren't going to align with the Fund Managers.

itwasntme001

Thrugelmir wrote: »

Number of listed companies is declining. As the ability to raise finance through other channels has increased. Many listed companies are likewise taken into private ownership. PLC I worked for delisted in 1997. A main stock exchange listing wasn't worth the expense.

Fewer companies listed will result in less choice for investors.

There is an argument that if you think your business will be so valuable in the future, you will never list it. You would just own 100% of the company. Finance it by debt or private equity. So the public market is left with a lot of not so good investments.

itwasntme001

Maybe there is good reason why high net worth individuals have only about 40% of their net worth in public equity on average. Real assets, private equity etc provides for more control and potentially higher returns.

Thrugelmir

itwasntme001 wrote: »

There is an argument that if you think your business will be so valuable in the future, you will never list it. You would just own 100% of the company. Finance it by debt or private equity. So the public market is left with a lot of not so good investments.

Private equity dilutes one personal holding. Early stage private equity investors will be looking for an exit route. Trade sale or listing after 5 years or so. That's how their investors make a return. Likewise only 1 in 20 make it to the big time. Majority will fail. A few will be profitable but never gain real traction.

Sailtheworld

Thrugelmir wrote: »

Private equity dilutes one personal holding. Early stage private equity investors will be looking for an exit route. Trade sale or listing after 5 years or so. That's how their investors make a return. Likewise only 1 in 20 make it to the big time. Majority will fail. A few will be profitable but never gain real traction.

You don't like trackers, active funds, companies with debt, companies that buy shares back, listed companies, unlisted companies or private equity.

What do you invest in?