Two Notable Shares that "Britain's Warren Buffett," Terry Smith, Plans to Hold by 2025
Dive into the financial world and catch up on the buzzing quarter four data releases! The deadline for institutional investors with a minimum of $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission (SEC) just passed. This form offers a peek into the stocks that Wall Street's leading money managers are buying and selling. While these filings have their flaws, they provide priceless insights into the stocks and trends captivating top-tier asset managers, like none other than Warren Buffett and Terry Smith, often referred to as "Britain's Warren Buffett."
Buffett's Berkshire Hathaway 13F filing never fails to turn heads in the financial world. As for Smith, Fundsmith, led by the billionaire investor, closed the third quarter overseeing a whopping $25 billion in AUM spread across 40 stocks. The two standout investments from Fundsmith that have caught everyone's attention are:
Apple
Although Smith has trimmed down on many of his fund's holdings this year, one stock he has kept adding to steadily is tech titan Apple (AAPL -1.03%). Since the start of 2023, Smith has acquired a significant 224,004 shares, representing a 17% increase in nine months.
Apple's advantage lies in its unparalleled brand loyalty and innovative products that draw in consumers and encourage them to remain loyal to its ecosystem. Moreover, the company's strategic shift under CEO Tim Cook's leadership towards subscription services, rather than relying exclusively on hardware sales, could help mitigate revenue fluctuations and boost operational margins.
Apple's share repurchase program has also remained a compelling reason for funds like Fundsmith to invest in its stock. Since 2013, Apple has already repurchased $700.6 billion worth of its common shares and reduced its outstanding share count by over 42%.
However, Apple carries some risks, including its high valuation and dependence on China for production, which could be impacted by potential tariffs.
Texas Instruments
Fundsmith's other notable investment is Texas Instruments, an analog chipmaker and embedded processor company (TXN 0.49%). While Fundsmith didn't hold any Texas Instruments shares at the beginning of 2024, Smith now manages a substantial 1,700,630-share stake, positioning it as the 20th-largest holding based on market value.
Given the current state of the U.S. economy, Texas Instruments is an appealing option for value-centric investors like Terry Smith. With a robust capital return program in place, the company has been diligently increasing its dividends year after year. Additionally, Texas Instruments' 2.7% yield is more than double that of the S&P 500, making it a compelling choice for income-oriented investors.
Yet, there are a few potential drawbacks. Texas Instruments has been investing heavily in capital expenditures (capex) to boost chip production output, which has increased expenses and reduced free cash flow (FCF). This has put a strain on the company and its valuation, which currently stands at close to 35 times forward-year earnings.
Several other stocks in Smith's portfolio, such as Meta Platforms (META), Microsoft (MSFT), and Atlas Copco (ATCO A), also reflect his focus on quality companies with robust fundamentals, regardless of market performance.
The quarter four data releases have revealed that prominent institutional investors, including Buffett's Berkshire Hathaway and Terry Smith's Fundsmith, have been heavily investing in stocks like Apple and Texas Instruments.Buffett's Berkshire Hathaway shelled out a significant amount of money to increase its holdings in Apple, while Smith significantly boosted Fundsmith's stake in Texas Instruments, making it one of its largest holdings.
