Fundsmith LLP Turns Defensive: Trimming Winners, Doubling Down on Quality Cashflows

The biggest “buy” of the quarter is telling precisely because it is so small. Fundsmith opened a new position in Badger Meter at 0.17% of the book, committing about $21.7M into a niche industrial machinery name that sells non-glamorous metering hardware and analytics.

Badger Meter is not a venture moonshot; it’s a regulated, recurring-revenue plumbing play for water infrastructure and measurement. That fits the house style: predictable demand, pricing power, and long-duration cashflows, even if the mark-to-market is currently painful (the position sits roughly -30.1% versus Fundsmith’s average buy).

What’s striking is what they didn’t do: there are no big incremental bets on their existing mega-cap tech or consumer franchises, despite enormous embedded gains in names like Microsoft, Visa, and Alphabet. Rising conviction is being expressed at the margin, in durable industrials, while the flagship positions are allowed to speak for themselves without fresh capital.

If you want to understand Fundsmith’s risk posture, look where they cut hardest. The largest dollar trims were in health care tools and consumer cyclicals that had done their job too well: Idexx Labs was taken down -21.9% by shares, Stryker -17.0%, and Marriott -15.3%, collectively pulling roughly $635M of exposure off the table.

These are still cornerstone holdings — Idexx at 6.42%, Stryker at 7.84%, Marriott at 8.59% — but all three trade massively above Fundsmith’s cost (Idexx around +259.9%, Stryker +134.4%, Marriott +86.8%). The message is simple: keep the compounding engines, but normalize sizing after a multi-year rerating.

The same pattern extends to Philip Morris (-16.5%), Alphabet (-15.5%), Visa (-12.2%), and Waters (-9.7%). Each trim is a tax on success: Visa, for example, still at 7.31% and about +337.8% versus cost, was reduced by about $130.1M — classic profit-harvesting from a crowded, fully acknowledged quality winner.

Where conviction is genuinely fading is in the long tail: high-variance, smaller bets were hacked back aggressively. Vertiv was cut -77.8%, Catalyst Pharmaceuticals -74.9%, Napco Security -78.4%, and a raft of software names (Paycom, Nutanix, Qualys, Doximity, Manhattan Associates, Sabre) saw share count reductions around -58% to -65%. Those look less like trims and more like acknowledgement that the experimental growth sleeve won’t carry the book.

On the surface, sector weights barely moved; under the hood, the book clearly rotated. Technology edged up from 29.07% to 29.34%, but that stability masks two different trades: holding the line in mega-cap platforms like Microsoft, Alphabet, and Meta while gutting a wide array of smaller, more speculative software and infrastructure names.

Health care stepped back from 26.31% to 24.94%, driven by the trims in Idexx, Stryker, Philip Morris, and other tools and biopharma plays. These aren’t exits, but they do rebalance a sector that had quietly grown into one of the portfolio’s dominant risk factors.

Industrials, by contrast, crept up from 17.90% to 19.32%, helped by the new Badger Meter stake and the decision to keep Waters, Mettler Toledo, and ADP near the core of the book. Consumer exposure moved only marginally (18.39% to 18.69%), with Marriott still a top holding and staples-like Church & Dwight and Procter & Gamble barely touched.

Real estate (Visa and MSCI, both in reality financial/analytics plays) slipped from 7.85% to 7.59%, and the solitary telecom/security name Napco shrank to a token 0.12%. The rotation is subtle but consistent: out of expensive health-care and fringe tech, into industrial and service franchises with more straightforward cash generation.

Taken together, 2026 Q1 looks like a risk-control quarter, not a thesis-change quarter. After a -9.66% drawdown, Fundsmith chose to monetize a portion of its biggest winners, prune the experiments, and redirect a sliver of capital into an old-fashioned industrial cash machine.

The core bet is unchanged: large, cash-rich franchises in software, payments, travel, diagnostics, and consumer staples will keep compounding, even from already-elevated bases. Trimming them by low double-digits doesn’t read as doubt; it reads as acknowledging that valuation and position size matter, even for the best businesses.

The real shift is that the “optionality sleeve” — smaller speculative tech and biotech names, many deep in the red versus cost — is being forcibly downsized. That suggests Fundsmith is less interested in lottery tickets and more in repeatable cashflow, even within its growth-biased universe.

Going forward, expect further incremental rotation toward industrials and service businesses like Badger Meter and away from subscale, volatile software. The portfolio remains highly concentrated and unapologetically quality-focused, but the message from this quarter is clear: the era of indiscriminate growth exposure is over; disciplined compounding and position sizing are back in charge.