Author of this book
The author of “Investing for Growth” is Terry Smith. I previously introduced one of his articles on my blog, titled “Bet on dominant player, don’t predict“
Reasons for recommending this book
There aren’t many books specifically written about growth investing, and even fewer that are of decent quality. This book is above average. I’ve personally compiled a list of several growth stock investing books for readers; those interested can click here for 📚Growth Investment Books.
Book Content
Author’s Investment Performance
The author is the manager of the UK-based Fundsmiths equity fund. The Fundsmiths fund’s performance is as follows:
- From 2010 to 2021, the 10-year internal rate of return (IRR) was 18.4%, while the MSCI’s was 11.6% during the same period—this is the main focus of the book. The fund ranked third in performance over the past five years, according to the Investment Institute’s global equity category, which includes 270 funds.
- My additional notes: As of October 31, 2025, year-to-date return (as of October 31, 2025): +3.3%, full year 2024: +1.0% (Note: slight differences exist between different share classes), annualized return since inception (November 2010) to October 31, 2025: +14.0%.
Investment Strategy and Methodology
The Fundsmith Equity Fund’s “Ten Investment Principles” mentioned by the author in the book are worth reading.
Fundsmith invests only in companies that meet the following criteria:
- High Return on Equity (ROE)
- Some or all of its profits are converted into cash
- Higher profit margins
- A strong track record of economic resilience over decades
Fundsmith’s basic investment steps:
- Invest in excellent companies
- Never pay too high a price
- Wait for opportunities
Portfolio and Focus Areas
Fundsmith’s portfolio is as follows:
- Prefers operating cash flow over price-to-earnings ratio, with an average P/E ratio of 21 compared to 19 for the MSCI World Index
- ROE of 34%, compared to 19% for the S&P 500 non-financial sector
- Yield of 2.3%
- Number of companies invested in is less than 30
Fundsmith focuses on:
- Concentrated investing, with most fund managers in most countries holding no more than 25 companies
- ROE, Gross Margin, Operating Profit Margin
- Cash Conversion Rate (CCR) = Operating Cash Flow / Net Profit or Operating Cash Flow / Interest, Taxes, Depreciation, Amortization, and Earnings (OCF/EBITDA)
- Leverage Ratio = Total liabilities/total equity (his fund’s ratio is 1/4, while the market average is 40%)
- Interest coverage ratio = EBITDA / Interest (his fund’s ratio is 15, while the market average is 10)
Related articles
- “Why I prefer growth stocks instead of value stocks?”
- “Growth vs. Value Investing, Buffett’s view“
- “Tax, inflation and rate are the top three serious killers to investors“
- “Why growth stocks plunge, part two“
- “Why growth stocks plunge, part one“
- “How does Nike make money? The role model of growth stocks in non-tech industry“
- “Discover the possibility of super growth stocks in the civilian production industry“
- “Bet on dominant player, don’t predict“
Disclaimer
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- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
