In this Fundsmith presentation, Terry Smith explains his Groucho Marx style of investment. Here’s an excerpt from the presentation:
Ok last point on this. We’re the Groucho Marx of investment. We don’t invest… Groucho Marx famously would never join any club that would not have him as a member.
We would never invest in any company that needs our money. We don’t like companies that are quoted because they need to keep raising capital.
Call us old-fashioned but our view of an investment is something that gives us cash through the dividend, not we keep giving them cash, and these companies that we own are not quoted because they need access to capital, their cash flow is so wonderful they don’t need any more money.
They are only quoted because they were once family-owned and as we know families as they become more dispersed and ownership is dispersed eventually have to have a realization event.
People don’t want to work in the family business anymore. People lose money. They have to realize. So companies become public in these sectors because of those events.
As a result we’re interested in sectors where there’s at least one major company that’s not quoted because it tells us that companies in that sector can survive without ever coming to the stock market.
You can watch the entire presentation here:
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