Yes, the reason he likes PYPL so much is that ROCE (the preferred measure) has oscillated between 30-40% for a few years whereas S&P average is the high teens. Also why LVMH makes the grade.

The stock drop I think it partly due to rich valuations, but that entire payments space is down quite a bit including both speculative names like SQ and traditional plays V and MA.

And the fact that the junkier end of tech (Zoom, Peloton, Teledoc) has imploded hasn't helped.

If anything, shows just show effective indexing can be.



Fully agreed. I'd be happy to take a deeper look at your shopping list for FS substitutes.

There is nothing too groundbreaking. IF (big if) I were to replace current thinking is I'd go for one of 3 options;

Heriot Global - 3 year returns the same/marginally better vs Fundsmith, lower risk than Fundsmith, and far less of a big bet on the US with a nice underweight (50% of the fund).

Blackrock Global Unconstrained - my big problem with this one is there is no information out there on the fund, strategy, etc. I like to know what I am buying, on this one it would be based on past performance and whatever the annual report 2 paragraph manager notes say. No webinars, no commentary, no nothing. That kind of means for me that if it was underperforming I wouldn't know why, which is a bit of an issue when it comes to buying and holding (for example when other funds have underperformed I've understood why as the strategy is clear and reasons are communicated, so I've bought more). That being said Alister Hibbert has a very good track record, and performance since launch is unquestionable (albeit as mentioned very much helped by having half the fund in cash during a 20% market drawdown).

Add to existing Mid Wynd and Threadneedle Global focus - Mid Wynd again is less concentrated than FS, outperformed over the last 3 years, and far more flexible mandate. Happy to buy cyclicals where appropriate, and sees buy and hold as risky. Threadneedle Global Focus has been very good so far, outperforming the Blue Whale Tech Fund, with far less tech, far less volatility and 20% odd exposure to Asia at times (slightly less now). I don't see TGF as being any more "risky" than FS (similar US exposure, similar valuation metrics, slightly less concentrated top 10) yet it has returned 5% p/annum more over the last 3 years. Both are 10% holdings for me, could just up to 15%.

I think if you look at any of the "old guard" quality funds - Ninety One Global Franchise, Morgan Stanley Global Brands, BNY Mellon Global Long term etc it's very difficult to find a reason for them above FS. They've had the same style/sector tailwind, same investable universe, etc and FS has smashed them over the long term, and outperformed them (to less of an extent but still by enough) over the short term.

Where it is interesting (I believe) is the newer funds in this space - Threadneedle, Blackrock, Carmignac Global Equity Compounders, Lazard Global Sustainable, BNY Mellon Global Leaders etc. They are going about it differently to Fundsmith but achieving good results. I guess some want the comfort of a 10 year track record, and FS's is beyond reproach - totally get that. Others want to identify the "next Fundsmith", something that you can tuck away and look back on in 10 years as a winner, and perhaps getting into something at £500mn AUM represents a better chance of achieving that compared to getting into something at £27bn.

Short chart as some are new funds, but given all are quality bias it's a good representation of how they've done in the same market conditions;

I have been making the point for some time that FS in recent years has been an expensive tracker. No one likes to be told this, but it is remarkable how over time people generally come round to my way of thinking.

Here you go,





BlackRock Unconstrained does look very interesting, but I second your view about lack of communication, poor manager visibility, portfolio reviews, publications, etc. The other problem is that the fund kicked off in Feb so as you said they were sitting on cash just went markets began puking, so a little bit of an unfair comparison. Still the performance has been remarkably good.

I'd make a similar comment about FP Carmignac and Lazard as they began in May and June completely missing the Feb/March selloff and launching into a rising market.

If you look at the time period of June 2020 (the time of Lazard's launch) to today, BNY Mellon, Carmignac, Threadneedle and Blue Whale would have all returned between 43-47%, BlackRock would have returned 55% and Fundsmith 35%. But that's against SWDA which would have netted you 40% for a princely fee of 20bps.

A roundabout way of saying that both 2020 and 2021 have been so unusual that I it's very hard to judge by only these last 18-24 months.

With that said, I do think that there are better quality options out there than FS as the data above shows (h/t to Stephen Yiu, there is no doubt that BW has delivered). I am getting tempted by Threadneedle to honest. I'm going to think on this one, but if I go ahead it will mean tapering (!) FS and ramping up into TGF and continuing with RGO as my other quality hold.

Great picks, smg8.

Apart from these quality picks - what are you eyeing for more high octane plays?

Though with a much different risk profile to most of the aforementioned. You'd have had to hold through a 30%+ drawdown to get there which not everyone wants to do.