Why Terry Smith's Recent Moves in Meta, Microsoft, and Intuit Signal a Shift in Long-Term Value Investing Strategy

Terry Smith, the founder of Fundsmith LLP, has long been a stalwart of value investing, emphasizing disciplined, long-term ownership of high-quality companies. However, recent adjustments to his portfolio-particularly in Meta Platforms (now Meta), Microsoft, and Intuit-suggest a recalibration of his approach in response to a rapidly evolving market environment. These moves reflect a strategic pivot toward defensive, cash-generative businesses with durable competitive advantages, even as they diverge from the traditional tech giants that have driven global equity markets in recent years.

A Reassessment of Tech Exposure

Smith's Fundsmith Equity Fund has faced persistent underperformance since 2022, with the fund lagging its benchmark and global peers for four consecutive years. A key factor has been its underweight exposure to large U.S. technology stocks, including Meta, Microsoft, and Amazon, which have outperformed the broader market according to analysis. By September 2025, Smith had significantly reduced his positions in these companies. Meta's stake was cut by 56.32%, while Microsoft's was reduced by 47.72% in Q3 2025 according to the fund's 13F filing. This de-risking from advertising-driven tech giants signals a growing skepticism about their long-term growth trajectories amid shifting macroeconomic conditions and regulatory pressures.

The decision to pare back on Microsoft, a top holding representing 6.76% of the portfolio as of September 2025 according to portfolio data, underscores Smith's focus on quality over momentum. While Microsoft remains a dominant force in cloud computing and AI, Smith's reduced exposure suggests a preference for companies with more predictable cash flows and narrower, defensible market niches.

The Rise of Niche Software and Healthcare

Concurrently, Smith has expanded his holdings in specialized software and healthcare companies, which now anchor his portfolio. Intuit, the financial software giant behind TurboTax and QuickBooks, saw its position grow by 64.01% in Q3 2025. This aligns with Smith's emphasis on recurring revenue models and high switching costs-characteristics that make Intuit a compelling long-term investment. Similarly, Paycom Software and NAPCO Security Technologies, both niche software leaders, were aggressively added to the portfolio, reflecting a strategic shift toward businesses with strong moats and less exposure to macroeconomic volatility.

Healthcare stocks have also gained prominence. Stryker and IDEXX Laboratories now represent nearly 8.5% of the portfolio each according to portfolio analysis, highlighting Smith's pivot to sectors with stable demand and less cyclicality. This reallocation mirrors broader market trends, as investors increasingly favor healthcare and consumer staples over speculative tech plays in an era of tighter monetary policy and geopolitical uncertainty.

Strategic Rationale in a Changing Market

Smith's adjustments are not merely tactical but reflect a deeper reassessment of what constitutes "quality growth" in today's environment. The fund's total value dropped from $23 billion in Q2 2025 to $19.8 billion in Q3 2025, a deliberate rebalancing to prioritize companies with robust balance sheets and predictable earnings. This approach contrasts with the high-growth, high-volatility bets that defined the 2020s, particularly in AI and generative technology.

The shift also aligns with Smith's long-standing aversion to speculative trends. For instance, while Microsoft's Azure division is a key player in AI infrastructure, Smith's reduced stake suggests a focus on companies with more immediate, tangible cash flows rather than those relying on future monetization of emerging technologies. This is further evidenced by the fund's new positions in Clorox and Doximity, which offer exposure to consumer staples and healthcare technology without the volatility of tech-heavy portfolios according to portfolio updates.

Conclusion: A New Paradigm for Value Investing

Terry Smith's recent portfolio changes in Meta, Microsoft, and Intuit illustrate a strategic evolution in his value investing philosophy. By reducing exposure to dominant but increasingly mature tech stocks and increasing stakes in niche software and healthcare, Smith is adapting to a market environment where durability and defensiveness outweigh speculative growth. This shift underscores a broader industry trend: as interest rates stabilize and economic growth moderates, investors are prioritizing companies with strong cash generation, low debt, and resilient business models.

For long-term investors, Smith's moves offer a blueprint for navigating uncertainty. While the Fundsmith Equity Fund's underperformance has been painful, its strategic rebalancing may position it to outperform in a market where quality-rather than momentum-becomes the defining factor.