Adam Levy, The Motley Fool

Mon, Jun 16, 2025, 3:45 AM6 min read

• Terry Smith likes to buy and hold companies for a long time, but sometimes it makes sense to free up capital.

• Despite trimming positions in Microsoft and Meta Platforms, they both remain sizable parts of the portfolio.

• The latest addition is actually a previous holding that could grow to become a big piece of the portfolio.

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Terry Smith built his hedge fund Fundsmith with a simple three-step strategy: "Invest in good companies, don't overpay, and do nothing." It's the simplicity, patience, and long-term thinking that has earned Smith the moniker, "The English Warren Buffett."

But doing absolutely nothing is harder than it looks. Even Warren Buffett tweaks a few things in Berkshire Hathaway's equity portfolio most quarters. And while Smith prefers to hold on to his top investments forever, sometimes he has a good reason to sell. Most of the time, though, he's able to find another great business to buy at a fair price. Then comes the tough part of doing nothing.

The first quarter of 2025 pushed Smith to sell off portions of two of his largest holdings in the fund: Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT). With some of the capital raised from the sales, he reestablished a position in a stock that's been trouncing the market in 2025.

Smith is a big fan of letting his winners ride. In fact, he often makes light of the saying, "No one ever got poor by taking profits" in his letters to shareholders. "We continue to pursue a policy of trying to run our winners," he wrote in his 2021 letter.

While he's sold some of Fundsmith's stake in Microsoft since he published those words, it's remained a double-digit percentage worth of the fund's publicly traded portfolio. Last quarter, however, Smith sold over half a billion dollars worth of the stock, about 13% of the fund's shares. He took a similar approach with Meta, but sold off about 15% of the fund's shares last quarter.

Both Meta and Microsoft remain the fund's two largest holdings as of the end of the first quarter. But Smith's decision to take some shares off the table suggests he sees better opportunities for growth elsewhere.

Indeed, Meta reached a new all-time high in the first quarter. That was largely a result of multiple expansion. Its forward P/E climbed from around 24 to over 28 at one point during the quarter. While the stock dropped from February through April, it's once again climbing toward that high valuation.