Terry Smith - Fundsmith Portfolio Q2’2025: Top Holdings & Recent Changes
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Terry Smith, founder and CEO of Fundsmith, continues to exemplify his “buy good companies, don’t overpay, do nothing” philosophy, but Q2’2025 brought a series of notable trims across major tech and healthcare holdings. His Q2’2025 portfolio stands at $23.0 billion, spread across 39 positions, with a remarkable 71% concentrated in the top ten names—underscoring Smith’s enduring focus on quality and conviction, yet signaling a more cautious stance as valuations stretch.
Portfolio Overview: Quality at the Core, Prudent Trimming
Portfolio Highlights (Q2’2025): - Market Value: $23.0B - Top 10 Holdings: 71.0% - Portfolio Size: 39 +1 - Average Holding Period: 19 quarters - Turnover: 12.8%
Fundsmith’s portfolio remains a masterclass in concentration, with over 70% of assets in just ten stocks. This reflects Smith’s unwavering commitment to owning a select group of high-quality, resilient businesses. The average holding period of 19 quarters (nearly five years) further highlights his long-term orientation, resisting the temptation to chase short-term trends.
Despite this discipline, Q2’2025 saw a notable uptick in portfolio turnover 12.8%, driven by reductions in several core positions. Smith’s willingness to trim, rather than exit, signals a nuanced approach: he remains bullish on the underlying businesses but is mindful of valuation risk and sector rotation. The addition of one new position suggests ongoing research and selective expansion, but the overall strategy remains focused and deliberate.
Top Holdings Analysis: Trims Across Tech and Healthcare, Core Convictions Hold
The portfolio’s backbone continues to be large-cap, global leaders, but Q2’2025 was marked by significant reductions in several top holdings. Meta Platforms, Inc. remains the largest position at 11.4%, though Smith trimmed the stake by 8.11%. Microsoft Corporation 10.7% also saw a 7.98% reduction, reflecting caution as tech valuations remain elevated.
Healthcare exposure was similarly adjusted: Stryker Corporation 8.0% was reduced by 7.74%, while IDEXX Laboratories, Inc. 6.2% and Waters Corporation 5.5% saw modest trims of 0.34% and 0.13%, respectively. Philip Morris International Inc. 7.2% was cut by 16.03%, the largest single reduction, possibly reflecting regulatory or macro concerns.
Financials and payments remain core, but even here, Smith exercised caution: Visa Inc. 5.9% was trimmed by 6.84%, and Automatic Data Processing, Inc. 5.8% by 3.36%. Alphabet Inc. 5.2% saw a minor reduction of 0.58%, while Marriott International, Inc. 5.0% was trimmed by 0.35%.
These moves suggest Smith is not rotating out of his core convictions but is actively managing position sizes to balance risk and opportunity. The portfolio’s top 10, rounded out by these names, continues to anchor Fundsmith’s returns, but the trims indicate a more defensive posture as market conditions evolve.
What the Portfolio Reveals About Current Strategy
- Quality Over Growth: Smith’s focus remains on companies with durable competitive advantages, high returns on capital, and strong cash generation. Even as he trims, he retains significant exposure to proven winners.
- Sector Diversification: The portfolio is weighted toward technology, healthcare, and consumer staples, with measured exposure to financials and industrials. This mix provides resilience against sector-specific shocks.
- Geographic Breadth: Holdings are predominantly global, with a tilt toward U.S. and multinational firms, reflecting Smith’s preference for companies with broad market reach.
- Dividend Discipline: Several top holdings are consistent dividend payers, supporting Fundsmith’s income strategy and providing ballast during market volatility.
- Risk Management: The recent trims across multiple sectors suggest a proactive approach to managing valuation risk, rather than wholesale exits or speculative bets.
Portfolio Concentration Analysis
| Position | Value | % of Portfolio | Recent Change |
|---|---|---|---|
| Meta Platforms, Inc. (META) | $2,634.1M | 11.4% | Reduce 8.11% |
| Microsoft Corporation (MSFT) | $2,458.0M | 10.7% | Reduce 7.98% |
| Stryker Corporation (SYK) | $1,850.4M | 8.0% | Reduce 7.74% |
| Philip Morris International Inc. (PM) | $1,652.7M | 7.2% | Reduce 16.03% |
| IDEXX Laboratories, Inc. (IDXX) | $1,415.6M | 6.2% | Reduce 0.34% |
| Visa Inc. (V) | $1,368.4M | 5.9% | Reduce 6.84% |
| Automatic Data Processing, Inc. (ADP) | $1,345.3M | 5.8% | Reduce 3.36% |
| Waters Corporation (WAT) | $1,259.5M | 5.5% | Reduce 0.13% |
| Alphabet Inc. (GOOGL) | $1,199.0M | 5.2% | Reduce 0.58% |
| Marriott International, Inc. (MAR) | $1,157.5M | 5.0% | Reduce 0.35% |
Fundsmith’s top ten positions account for 71% of total assets, underscoring Smith’s conviction in a select group of businesses. The table reveals a pattern of modest to significant trims, especially in Philip Morris 16.03% and Meta 8.11%, suggesting a careful recalibration rather than a wholesale shift. This level of concentration amplifies both upside and downside, but Smith’s track record demonstrates that disciplined position management can mitigate risk while capturing long-term compounding.
Investment Lessons from Terry Smith
- Concentration Drives Returns: Smith’s willingness to allocate over 70% to ten stocks shows that deep understanding and conviction can justify outsized bets.
- Long Holding Periods Matter: With an average holding period of 19 quarters, Fundsmith’s returns are built on patience and compounding, not frequent trading.
- Quality Businesses Justify Premiums: Smith consistently pays up for companies with high returns on capital and resilient business models.
- Active Risk Management: Trimming positions, rather than selling outright, allows for dynamic risk control without abandoning core convictions.
- Sector and Geographic Balance: Diversification across sectors and geographies provides resilience, but the focus remains on business quality above all.
Looking Ahead: What Comes Next?
With $23.0B under management and a portfolio that’s both concentrated and diversified, Fundsmith is well-positioned for continued compounding. The recent trims suggest Smith is preparing for potential volatility or valuation resets, rather than chasing momentum. Investors should watch for: - Cash Deployment: The addition of one new position hints at ongoing research and selective buying. - Potential New Entrants: Smith may continue to add high-quality names if valuations become attractive. - Market Conditions: Defensive trims indicate caution, but the core portfolio remains robust for long-term growth. - Sector Rotation: Watch for further adjustments in tech and healthcare as macro trends evolve.
FAQ about Terry Smith’s Fundsmith Portfolio
Q: Why did Terry Smith trim major positions like Meta and Microsoft this quarter?
Smith reduced stakes in Meta and Microsoft to manage valuation risk and rebalance the portfolio as tech stocks reached elevated levels.
Q: How concentrated is Fundsmith’s portfolio compared to other superinvestors?
Fundsmith’s top ten holdings make up 71% of assets, reflecting a high-conviction, focused strategy that stands out among global fund managers.
Q: What is Terry Smith’s approach to risk management?
Smith prefers trimming positions rather than selling outright, allowing for dynamic risk control while maintaining exposure to core businesses.
Q: Which sectors dominate Fundsmith’s portfolio?
Technology, healthcare, and consumer staples are the largest sectors, with significant allocations to payments, industrials, and select financials.
Q: How can investors track Terry Smith’s moves in real time?
Use ValueSense’s Fundsmith portfolio tracker for up-to-date analysis. Remember, 13F filings have a 45-day reporting lag, so always check for the latest updates.
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