Fundsmith Q1 2026: Terry Smith's 'Do Nothing' Book Sells

Terry Smith built Fundsmith on a famously simple mantra: buy good companies, don't overpay, and do nothing. So a quarter in which Fundsmith trimmed every single one of its top holdings is, on its face, deeply out of character. In the first quarter of 2026, the firm's U.S. 13F shows reductions across the board — Marriott down 15%, Stryker down 17%, IDEXX down 22%, Visa down 12%, Alphabet down 16% — as its reported value fell 25.1% to $12.83 billion. The "do nothing" manager did quite a lot of selling.

The explanation is almost certainly not a change of philosophy but a change in flows. Fundsmith's reported book has fallen from roughly $24.5 billion to $12.83 billion over two years, a decline consistent with sustained investor redemptions. When money leaves a concentrated fund, even a buy-and-hold manager must sell across its holdings to fund withdrawals — and that produces exactly the uniform trimming this filing shows.

Trimming the quality core

What is notable is what got trimmed: not low-conviction names, but the high-quality compounders that define the strategy. Marriott remains the largest holding at $1.10 billion (8.59%) despite a 15% cut, with Stryker ($1.01 billion, down 17%) and Waters ($956.6 million, down 10%) close behind.

These are precisely the kinds of businesses Fundsmith is known for — high-return, capital-light, durable franchises in payments, medical devices, and consumer brands. Trimming Visa (down 12%), Alphabet (down 16%), Philip Morris (down 17%), and IDEXX (down 22%) in the same quarter is not a verdict on those companies; it is the mechanical consequence of raising cash proportionally across a concentrated book.

A two-year contraction

The trajectory makes the flow story clear.

Fundsmith's reported 13F value has declined steadily from about $24.54 billion in mid-2024 to $12.83 billion in the first quarter of 2026 — nearly halving — with the position count drifting from the high 30s to 34. A concentrated quality fund whose value falls this consistently, while the holdings themselves remain blue-chip compounders, is the signature of redemptions rather than a thesis gone wrong. The businesses did not deteriorate; the capital behind them shrank.

The discipline still shows

Even in contraction, the portfolio's identity is intact.

Fundsmith remains extraordinarily concentrated — just 34 positions, with the top five alone making up nearly 38% of the book. The composition still reads as a Terry Smith portfolio: a tight set of high-quality, predictable businesses with strong returns on capital. The forced selling reduced the size of each position roughly in proportion, preserving the shape of the book even as it shrank. In that sense, the "do nothing" philosophy held where it could — the firm did not abandon names or chase new ones; it simply had less capital to deploy across the same quality core.

What it signals

For investors who track institutional positioning, Fundsmith's first-quarter filing is a case study in not over-reading broad trims. The across-the-board cuts to Marriott, Stryker, and Visa are not bearish calls on those businesses — they are what happens when a concentrated fund meets outflows. The genuine signal is the consistency of the strategy: Fundsmith is still holding the same kind of high-quality compounders, just fewer dollars of each. The actionable lesson echoes a recurring theme in 13F reading — distinguish selling driven by flows from selling driven by conviction before drawing conclusions.

FAQ

Why did Fundsmith trim all its top holdings in Q1 2026?
Its reported value fell 25.1% to $12.83 billion amid a two-year decline from about $24.5 billion, consistent with investor redemptions. When money leaves a concentrated fund, the manager sells across holdings to raise cash, producing uniform trims rather than a change in view.

What is Fundsmith's largest holding?
Marriott, at $1.10 billion or 8.59% of the book, despite a 15% reduction in shares — followed by Stryker ($1.01 billion) and Waters ($956.6 million), all high-quality compounders.

Is Fundsmith bearish on its holdings?
Unlikely. The trimmed names are exactly the durable, high-return franchises the strategy is built on. The broad reductions reflect raising cash for outflows, not a negative view on Visa, Stryker, or Alphabet.

How concentrated is Fundsmith?
Very. It holds just 34 positions, with the top five accounting for nearly 38% of the book — a tight, high-conviction portfolio of quality compounders in the Terry Smith mold.