Terry Smith · 2022 · Fundsmith LLP (via Internet Archive)
Fundsmith Equity Fund 2022 Annual Letter to Shareholders
We saw this in Japan in the late 1980s in a bull market when the Emperor’s garden was valued more than the state of California and the Tokyo Stock Exchange was on a P/E of about 100. The aftermath has been prolonged and worsened by a penchant for not admitting failure. So-called zombie companies that should have been allowed to fail have been propped up with continued funding and allowed to survive. Sending good money after bad is never a recipe for success. However, before we leap to the conclusion that this is in any way a uniquely Japanese trait let us bear in mind that other than Lehman no other major company was allowed to go bust in 2008, despite it being the largest financial crisis for 75 years. Japan’s bubble was followed by the Dotcom era in which money could be raised for an idea. The resulting meltdown was painful and especially for investors who had bought a business plan rather than a business. It is worth bearing in mind that real businesses survived and prospered. Amazon’s stock declined by about 95% during the Dotcom bust. It has since risen about 600 fold to its peak.like