Terry Smith's Investing Philosophy (Issue #41)
Terry Smith has some key ideologies of investing that have led to his success. First, he won’t invest in any company that requires leverage to make its returns. This does not mean he doesn’t invest in companies with leverage just that they cannot be essential to the business’s success. If a company does have debt he requires that it must have 4-5 times as much cash to easily cover that debt.
Next, Smith will not invest in new innovations/technology because he says he doesn’t understand them well enough to judge their potential future success or failure.
Finally, Smith’s favorite types of businesses do not make the majority of their money from manufacturing products, instead from the servicing of those products. For example, all elevator companies have exclusive contracts to service the elevators they install and make. These maintenance contracts have proven far more valuable than the elevators themselves.
Portfolio Update:
To view the full spreadsheet and the linked deep dives go here.
Meme Of The Week:
Insight Of The Week:
Until Thursday,
Soren