Terry Smith: Long-Term Investing vs. Chasing Hot Sectors: A Data-Driven Comparison

During this interview with Killik & Co, Terry Smith discusses the difficulty of being able to consistently time the market based on short-term trends, highlighting the challenge of predicting which sectors will perform well in the future. Here’s an excerpt from the interview:

But it’s a bit dangerous really because if you take even a slightly longer perspective we did this search where we did at any company over about 10 billion market caps, so big enough for us to own.

And we looked at those companies of that size which had produced 20% over the last two years, not just one year, but two years.

And there were 241 companies that qualified and that had done 20%, which is 9.5% per annum, which is what the index does over long periods of time.

And therefore if we don’t then we’d have done better yeah.

And boy what a weird bunch they are. 45 energy companies. They are dominated by insurance companies, banks, energy companies and so on.

And in fact… and this comes back to the Magnificent 7, only one of the Magnificent 7 qualified, Nvidia, the other six didn’t have a two-year performance that even equal the index right.

It’s a very short-term phenomenon. and really if you said Terry how could you have performed during 2022 and 2023?

The answer is I should have been in energy stocks in 2022, because nothing else performed, and then switched into the Magnificent 7 in 2023.

Well I don’t think I’m ever going to be able to do that basically. And in fact I don’t know any other human being saying they can either.

You can listen to the entire interview here: