2022

Following a 2018 Minneapolis episode and its legal aftermath, Richard Liu indicated he would devote a greater share of his time to JD.com's long-term strategy and to identifying the company's future growth drivers, a shift that preceded his later formal step-back from CEO duties.

Didi conducted an NYSE IPO on June 30, 2021; days later, Chinese regulators (the Cyberspace Administration of China) opened a cybersecurity investigation citing data-security and privacy concerns, and Didi's apps were subsequently removed from domestic app stores.

Buffett opened the 2022 annual meeting against the backdrop of a first quarter in which Berkshire had deployed approximately $51 billion of cash into the equity market, including the disclosure of a 14.6 percent stake in Occidental Petroleum and the material build-out of the Chevron position to approximately $26 billion. Buffett and Munger told shareholders that the energy sector deployments reflected the underlying unit economics of the Permian unconventional resource base and the discipline of the Chevron capital allocation framework, and that the Occidental stake reflected the structural value of the underlying Permian resource base plus the optionality on the preferred shares acquired in 2019. Buffett walked shareholders through the partial reduction in the BYD position, indicating that Berkshire had sold approximately 5 million BYD H-shares during August at approximately HK$277 per share, while continuing to hold the bulk of the 225 million shares acquired in 2008. He framed the partial reduction as the natural outcome of position-size discipline after a position that had grown from the original $232 million cost basis to a market value in the multiple billions of dollars, while continuing to express admiration for the BYD management and the long-term trajectory of the Chinese EV industry. Munger, who had championed the original BYD investment, declined to add detail beyond defending the underlying franchise. On the Q&A, shareholders pressed on whether the energy sector deployments represented a fundamental shift in Berkshire's sectoral concentration. Buffett responded that the deployments reflected the underlying unit economics and the capital allocation discipline of the specific companies rather than a thematic bet on the energy sector, and that the long-term equity portfolio continued to be anchored on the consumer brand and the financial services franchises that had defined it for decades. Munger added that the energy sector was one of the few sectors where the underlying business economics and the capital allocation discipline of the specific companies were both attractive at the prevailing prices. The meeting closed with Buffett and Munger reiterating the long-term framework of compounding intrinsic value per share, anchored on the insurance float, the wholly-owned operating businesses, the concentrated long-term equity portfolio and the willingness to deploy large amounts of capital rapidly when the market presented attractive opportunities.

On January 3, 2022, Forbes reported the last big step of Bridgewater's long succession: chief executive David McCormick resigned to shift his focus to a likely campaign for Pennsylvania's vacant Senate seat. Bridgewater, still the largest hedge fund in the world with more than 150 billion dollars of assets under management, named two new co-chief executives. Mark Bertolini, former chief executive and chairman of insurer Aetna, would become co-CEO after serving as Bridgewater's co-chairman, joined by Nir Bar Dea, a retired major in the Israel Defense Forces who had been the firm's deputy CEO. Dalio, the billionaire founder who started Bridgewater out of his modest apartment in 1975 and was worth an estimated 20 billion dollars, remained the firm's co-chairman and co-chief investment officer. McCormick, who had been deputy national security advisor for international economic affairs during the Bush Administration, faced a surprising Republican primary challenger in the television surgeon Mehmet Oz. The announcement came weeks after Dalio's November warning that no empire lasts forever as financial instability and the possibility of civil war loomed.

Richard Liu's JD.com apr 7, 2022 — JD.com's billionaire founder Richard Liu has stepped down as chief executive of the Chinese e-commerce giant. Xu Lei, the president of JD.com .

Pershing Square Capital Management, L.P. Releases Le8er to Investors January 26, 2022, New York - // Pershing Square Capital Management, L.P. (“PSCM”) today released the following leIer from Bill Ackman to investors: Dear Pershing Square Investor, Beginning on Friday and over the last several days, we acquired more than 3.1 million shares of NeTlix, Inc. (NASDAQ:NFLX), making us a top-20 shareholder in the company. The opportunity to acquire NeTlix at an aIracYve valuaYon emerged when investors reacted negaYvely to the recent quarter’s subscriber growth and management’s short-term guidance. NeTlix’s substanYal stock price decline was further exacerbated by recent market volaYlity. We have greatly admired NeTlix both as consumers and as investors, but have never previously owned a stake in the company. NeTlix is a primary beneficiary of the growth in streaming and the decline in linear TV driven by its superior customer experience, a vast and diverse amount of superb, constantly refreshed content, global improvements in bandwidth, and the proliferaYon and conYnuous improvement and convenience of devices on which one can watch.

Wang opened the 2022 annual results briefing against the backdrop of a year in which BYD had sold approximately 1.86 million new energy vehicles, exceeding Tesla's global deliveries and becoming the world's largest manufacturer of new energy vehicles by volume. Management told analysts that net profit had grown to approximately RMB 16.6 billion on revenue of approximately RMB 424 billion, with the automotive business contributing the majority of both revenue and operating profit, the rechargeable battery and the photovoltaic businesses contributing a stable second-leg earnings stream and the mobile phone components and assembly business providing the third leg. Wang walked analysts through the cessation of the pure internal combustion engine passenger vehicle production in March 2022, indicating that the Company had moved to an exclusively new energy vehicle model range ahead of the regulatory schedule and that the transition had been driven by the unit economics of the captive battery supply chain, the regulatory environment and the consumer demand for new energy vehicles. He flagged that the DM-i hybrid platform had become the dominant growth driver of the passenger model range, that the Han, the Seal and the Atto 3 had been positioned as the flagship pure EV models and that the Company had launched the international expansion with the Atto 3 entering the Australian, the Thai and the European markets during the back half of the year. On the Q&A, analysts pressed on whether the international expansion would dilute the near-term earnings given the cost of establishing the overseas distribution and the manufacturing footprint. Wang responded that the international expansion was being executed gradually, that the local manufacturing footprint in Thailand and in the planned European sites would be the long-term structural anchor and that the underlying unit economics of the captive battery supply chain provided the cost advantage required to compete in the international markets. He also defended the company's vertical integration strategy as the central advantage of the franchise in the international expansion. The briefing closed with management reiterating the long-term ambition of being the world's largest manufacturer of new energy vehicles and the leading manufacturer of new energy solutions, anchored on the captive battery supply chain, the DM-i hybrid platform and the international expansion.

Fundsmith LLP is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales: OC354233. Regist ered office: 33 Cavendish Square, London, W1G 0PW. January 2023 Dear Fellow Investor, This is the thirteenth annual letter to owners of the Fundsmith Equity Fund (‘Fund’). Our Fund’s performance in 2022 will give credence to those who suffer from triskaidekaphobia. The table below shows performance figures for the last calendar year and the cumulative and annualised performance since inception on 1st November 2010 and various comparators. % Total Return 1st Jan to 31st Dec 2022 Inception to 31st Dec 2022 Sortino Ratio Cumulative Annualised Fundsmith Equity Fund1 -13.8 +478.2 +15.5 0.84 Equities2 -7.8 +256.8 +11.0 0.36 UK Bonds3 -15.0 +19.8 +1.5 n/a Cash4 +1.4 +7.8 +0.6 n/a The Fund is not managed with reference to any benchmark, the above comparators are provided for information purposes only. 1 T Class Accumulation shares, net of fees, priced at noon UK time, source: Bloomberg. 2 MSCI World Index, £ net, priced at US market close, source: Bloomberg. 3 Bloomberg/Barclays Bond Indices UK Gov. 5–10 year, source: Bloomberg. 4 £ Interest Rate, source: Bloomberg. 5 Sortino ratio is since inception to 31.12.22, 3.5% risk free rate, source: Financial Express Analytics. The table shows the performance of the T Class Accumulation shares, the most commonly held share class and one in which I am invested, which fell by 13.8% in 2022 and compares with a fall of 7.

At the 2022 Daily Journal annual meeting, I told the audience that the discipline of staying within the circle of competence had been, over my seven decades of investing, the single most valuable discipline I had acquired. The discipline required is to refuse to act on the things outside the circle, even at the cost of looking unfashionable during the boom, and even at the cost of being told, repeatedly, that I am missing the opportunity of a lifetime. The mistakes-and-learning point I tried to convey was that the boom, in its broad patterns, is the product of investors acting outside their circles on the assumption that they understand the new things, and the investor who recognises the assumption, and who refuses to act outside his circle, has a long-run advantage over the investor who chases the new things. The discipline required is honesty about the boundary of the circle, and the willingness to admit that the boundary is smaller. The circle-of-competence element was the one I had most wanted to convey. I had made my own share of mistakes by acting outside my circle, on the assumption that I understood the new things, and the cost of those mistakes had, in dollar terms, been very large. The lesson I drew was that the disciplined investor must assume that the boundary of his circle is smaller than he would prefer, and he must build the discipline of refusal into his process before the temptation to act outside the circle becomes irresistible. The 2022 meeting was, in this sense, a confession. I told the audience that the framework had been built, in large part, from my own mistakes, and that the discipline I had extracted was to refuse to act on the things outside the circle, even at the cost of looking unfashionable during the boom. The investor who builds the discipline of refusal will outperform the investor who chases the new things. The mistakes-and-learning lesson I tried to convey was that the investor who is honest about the boundary of his circle, and who refuses to act outside it, has an enormous advantage over the investor who pretends to understand more than he does. The 2022 meeting was, in some ways, the most candid I had ever given. I told the audience that the framework had been built, in large part, from my own mistakes, and that the discipline I had extracted was to refuse to act outside the circle, and to expand the circle only by deliberate study. The investor who is honest about the boundary, and who refuses to act outside it, will, in the long run, outperform the investor with the larger circle who pretends to understand more than he does. That single discipline, applied over a working life, has been more valuable than any other I have learned, and it is the one I have tried hardest to convey to the students who visit Pasadena each spring.

Firstpost reports that the 82-year-old Ramesh Chauhan was in 2022 in the process of divesting Bisleri International to Tata Consumer Products Ltd (TCPL) for an estimated Rs 6,000-7,000 crore. After owning the brand for more than 50 years — having bought it back in 1969 for Rs 4 lakh — the deal represented a near-complete exit from the category Chauhan had built.

By June 2022, since for-profit private tutoring had been banned the previous year, Yu had pivoted New Oriental into live streaming, which he termed the 'third revolution of business'; a live stream featuring the New Oriental chairman and an English-speaking host selling agricultural goods ranked among the top 10 in sales on Douyin on the Friday referenced in the report.

The HBS case frames Sriharsha, Nandan and Rahul Jaimini as a trio whose first venture — Bundl Technologies, a logistics platform connecting businesses to courier providers — failed before they pivoted into food; the love for logistics, however, became Swiggy's distinguishing moat as it built one of India's most efficient hyperlocal logistics networks.

Business Insider reported on Klarman's 2022 year-end letter to Baupost clients, in which he warned that markets had entered a phase of speculative excess unlike anything since the late 1990s and arguably unlike anything in the prior history of the modern asset-management industry. He pointed to meme stocks, special purpose acquisition vehicles, and non-fungible tokens as evidence that prices had become unhinged from any disciplined process of valuation, and that the participants in those markets had begun to treat the absence of any conventional valuation framework as a virtue rather than as a warning. The letter argued that the post-pandemic bull market had encouraged an entire generation of investors to confuse rising prices with durable wealth creation, a confusion that history suggested would unwind painfully when the speculative phase ended and the underlying businesses reasserted their claim on the prices. Klarman's central concern was that the speculative phase had been funded by zero-rate policy and excess savings accumulated during the pandemic, and that the unwinding, once it began, would expose how thin the foundation of those gains had been and how much of the apparent wealth was a function of leverage extended against inflated collateral. He warned that inflation, having returned after a long absence, would force a structural repricing of risk that would catch leveraged investors offside and that would also expose the fragility of business models that had been built on the assumption that capital would remain nearly free indefinitely. He described the situation as one in which the apparent real returns of the prior two years had been an illusion sustained by monetary stimulus rather than genuine business progress across the economy, and as one in which the unwinding would be neither gentle nor predictable. The letter also took aim at the cultural infrastructure that had formed around speculation, including online forums that treated investing as a kind of multiplayer game and that rewarded participants for theatrical commitment rather than for analytical discipline. Klarman argued that the moment a market becomes a venue for entertainment, the discipline required to avoid permanent loss of capital erodes quickly, and that the cultural shift becomes difficult to reverse even after the speculative phase itself ends. He warned clients that Baupost would continue to underperform during speculative phases and asked them to remain patient, reminding them that the same posture had allowed the firm to act decisively in 2008 and 2020 when forced sellers emerged from the wreckage of those cycles and when the assets that had been unobtainable during the euphoria became available at prices that finally reflected a margin of safety.

Born on 10 June 1938 in Kolkata, Rahul Bajaj inherited a family business that his grandfather Jamnalal Bajaj had founded in 1926 and his father Kamalnayan had diversified into scooters, cement and electrical equipment. The succession plan put Rahul at the helm of Bajaj Auto in 1968 as CEO, when he was thirty years old, well before the formal 1970s restructuring of the group.

The board's decision to commission and publish a summary of the external review represented a break from the Indian norm of resolving founder disputes privately, and is treated as a marker of how venture-backed governance norms diverge from traditional promoter-house practice.

Richard Liu's JD.com apr 7, 2022 — SINGAPORE (AP) — Chinese e-commerce company JD.com Thursday that its founder Richard Liu has left his position as CEO , the latest .

Born 10 June 1938 in Calcutta, Rahul Bajaj inherited a business lineage as the grandson of Jamnalal Bajaj, the merchant-philanthropist who was a close confidant of Mahatma Gandhi. His father Kamalnayan had already diversified the family enterprise into scooters, cement and electrical equipment, handing Rahul a portfolio rather than a single-product firm. The Gandhi connection and the family's nationalist legacy would shape his public posture as an industrialist who openly defied state controls.

At the 2022 Berkshire annual meeting - Munger's last before his death in November 2023 - he was characteristically blunt about what he refused to touch. He told the audience that he tried to avoid things that were evil, stupid, and made him look bad relative to someone else. The formulation compressed Munger's lifelong filter into a single line: a thing did not have to be all three to be avoided; any one of the three was sufficient. The investor who internalized the rule would refuse most of the propositions the market pressed on him. He sharpened the point with reference to crypto. Munger had been a public critic of cryptocurrency for years, and at the 2022 meeting he did not soften. He told the audience that he regarded crypto as a disgusting development and that those who promoted it were, in his view, either deluded or self-interested. He did not pretend that the asset class might be a legitimate innovation in payments or a hedge against monetary debasement; he treated it as a speculation that exploited the same incentive biases and psychology of crowds that had produced every previous speculative mania, and he refused to participate in any form. The avoidance principle, in Munger's telling, was not the absence of strategy. It was the strategy. The things he refused to touch - crypto, complex derivatives, structured products, financial engineering generally - defined the perimeter inside which he was willing to operate. The perimeter was deliberately narrow. The great investment decisions inside the perimeter - See's, Coca-Cola, BYD, Costco, the Japanese trading houses - had produced returns that an investor following the broader market could not have matched. The avoidance of the evil and the stupid was, paradoxically, what made the great investments possible.

The Financial Times reported in early 2022 on Klarman's letter blaming the Federal Reserve for encouraging years of speculative behavior that the central bank was now struggling to unwind without producing disorder across the markets it had been trying to support. He argued that the Fed's own communications had created the impression that policy would always stand behind asset prices, which had drawn marginal investors into increasingly risky positions and had conditioned them to treat every dip as a buying opportunity rather than as a warning sign. The coverage noted that Klarman was unusual among large fund managers in being willing to publicly name the central bank as a source of mispricing and as a contributor to the speculative conditions that had built up across the asset markets, and that his willingness reflected the depth of his conviction that the distortion had reached a scale that could no longer be ignored or treated as a transient feature of the policy environment. The FT piece highlighted Klarman's view that the psychology of the prior decade had been distorted by a feedback loop between monetary policy and asset prices, in which each market wobble had been met with intervention that rewarded those who had bought into the wobble and that penalized those who had stepped aside. Each intervention trained investors to buy dips reflexively, which in turn reduced the perceived risk of holding risk assets, which then drew further capital into those assets and compressed the premia further and conditioned market participants to expect that the conditioning itself would continue indefinitely. Klarman argued that this conditioning made the eventual policy reversal more violent, because the reflex that had been rewarded for years would suddenly be the wrong one and because the leverage that had been built on the assumption of perpetual support would be exposed as unsupported by any durable foundation of underlying cash flow. The article also noted that Klarman's letter took aim at the broader culture of speculation, including the use of options by retail investors to amplify directional bets and the spread of derivative overlays across strategies that had been presented to clients as conventional long-only exposures. He warned that the infrastructure built around zero-rate policy, from margin lending to derivative overlays to the structured products that had been marketed as low-risk income generators, would become fragile in a regime of positive real rates and that the fragility would manifest in ways that the prior decade had not prepared investors to anticipate. The FT framed the letter as a signal that even patient investors were growing impatient with the disconnection between prices and the underlying businesses, and that the unwind had likely only just begun its work and would extend across multiple quarters rather than resolving in a single repricing.

A January 2022 essay by Anthony Pompliano on his Pomp Substack framed David Swensen as the greatest institutional investor of all time and used the headline to introduce the Yale model to a general audience. The piece noted that Swensen had pioneered a template for long-term investing that is now widely known as the Yale model, that the model had been mimicked by other institutions, and that the office had produced returns that other universities had sought to replicate. The essay walked through the asset allocation that defined the model, the role of the alternative asset classes, and the philosophy of long-term ownership that underpinned the office's posture toward the portfolio and the broader community it served. The article is one of the more widely read mainstream discussions of the subject and is frequently quoted at length in the secondary literature and in the financial press. The piece stressed that the Yale model was not a tactical allocation but a structural one, in which the office owned a diversified set of asset classes whose return characteristics were less correlated to the public market and in which the willingness to forgo daily liquidity was the source of the premium the office earned. The essay noted that the office had been particularly disciplined during the late-1990s equity bubble, when many institutional peers had been tempted to chase the returns of the public market, and that the discipline during that period had been a defining moment in the model's track record. The piece also noted that the office's published returns had been a major channel by which the model had been propagated across the institutional investment industry and across the broader endowment community. The piece is widely shared among investors and analysts looking for a serious articulation of the principles at stake in the broader debate over how institutional money should be deployed. The essay closed with a section on Swensen's influence beyond Yale, noting that the alumni of his office had gone on to lead the investment offices of dozens of other universities and that the network of his protégés had been a major channel by which the model had been propagated. The piece is paired in the secondary literature with the original Pioneering Portfolio Management and with the broader coverage of Swensen's career that appeared in the wake of his death. The Pomp Substack essay is one of the more widely read general-audience introductions to the Yale model and is frequently cited on social media as a one-stop summary of the office's contribution to the broader institutional investment industry. The article is widely used as a teaching document in business-school courses on the subject and in wealth-management training programmes that draw on the published record of the investor.

After the Erie War the struggle for upstate lines turned physical. Gould and Fisk sought control of the Albany and Susquehanna, a strategically located railroad running through upstate New York toward Boston, originally controlled by Joseph Ramsey, and the fight became one of the most hard-fought corporate takeovers in New York State history. As the raiders accumulated shares, Ramsey's side issued thousands of new ones and at one point hid the company's books in Albany Rural Cemetery. A Tammany-allied judge, George G. Barnard, issued an order for Gould and Fisk; an Albany judge favorable to Ramsey countermanded it, backed by young John Pierpont Morgan, who held a large mortgage on the railroad and, in the almanac's account, threw Gould-Fisk men down a flight of stairs at a corporate meeting. Fisk stormed the Albany offices with thugs, seized the rail station at Binghamton, and took a train toward Albany until railroad men met him with weapons in a tunnel near Harpursville and the militia was called out. Ramsey's side prevailed.

When Schultz returned as interim chief executive in April 2022, following the departure of Kevin Johnson, who had led the company since 2017, he was coming back to a company he had built over three decades from eleven stores and one hundred employees to twenty-eight thousand stores worldwide. He was also returning to the source of his reputation as a socially progressive and generous employer, since Starbucks had made its name extending health coverage, equity grants, and tuition-free college education to part-time as well as full-time workers. The difference in 2022 was that the reputation itself was the asset at risk, as workers across the country banded together to raise grievances and demand more from the company. The homecoming was framed as continuity, but the circumstances made it a referendum: the founder-employer who institutionalized partner benefits was now the executive whose workforce was organizing against the company's labor practices at unprecedented scale.

In this 2022 interview, Varun frames Honasa's expansion into a House of Brands around two structural shifts: a decade-long consumer transition from family-level to individualised consumption, and Honasa's own internally-built capabilities across R&D, innovation, D2C, millennial marketing and content-to-commerce. Together, he argues, these justify the platform strategy as a way to capture a larger share of the Indian consumer wallet.

At a March 2022 book event hosted by the Center for Strategic and International Studies, Dalio explained why he wrote Principles for Dealing with the Changing World Order. The discipline behind it came from a rule he had learned about surprises: most of the surprises in his lifetime came from things that never happened in his lifetime but happened many times before. Three big such things were happening simultaneously. First, the build-up of enormous debt and the money printing deployed to service it, spending much more than the country earns, financed by borrowing and money creation. Second, the amount of internal conflict arising from the largest wealth gaps and largest political gaps since 1900. Third, the rising of a great power to challenge an existing great power, in the form of China competing with the United States, a different case from the Soviet Union, which he noted was never a great economic power. He ran the study to handle his own responsibilities; when he learned what he learned, he passed it along, and that became the book.

JD.com reported 2021 operating profit of 4.1 billion yuan, down 66.7% year-on-year, even as net revenue grew 27.6% to 951.6 billion yuan, with layoffs concentrated in its Jingxi group-buying unit that competed with Pinduoduo.

Varun explicitly states Honasa's self-identity: 'At our heart, we are a brand-building company.' That framing — a portfolio of consumer brands run through shared back-end capability — is the strategic justification for acquiring Dr Sheth's and BBlunt and for spawning The Derma Co. and Aqualogica rather than continuing to scale a single Mamaearth brand.

Bajaj studied at Cathedral and John Connon School in Mumbai, read for a BA at St. Stephen's College Delhi, took an LLB at Government Law College Mumbai, and then completed an MBA at Harvard Business School in 1964. The Harvard credential gave him a global management vocabulary rare among Indian industrialists of his generation and shaped his later emphasis on professional management, R&D investment and brand strategy at Bajaj Auto.

Bajaj chose to relocate the company's base from Mumbai to Akurdi, then a rural and underdeveloped area near Pune, in pursuit of government incentives available for setting up factories in backward regions. The decision meant living without basic urban amenities for years, but it turned Akurdi into one of India's most prominent industrial corridors and seeded a locally-rooted manufacturing culture.

Swiggy's earliest challenge in a 2014 market dominated by two large rivals was winning restaurants: it used data sciences and machine learning to map demand to restaurant presence, expanded delivery capacity with significant buffer, and committed to 30–40 minute delivery windows that the incumbents were not reliably hitting.

Chauhan told the Economic Times his reasons for the sale were poor health and the lack of a successor. His daughter Jayanti, although active at Bisleri for years and credited with restructuring HR, sales and marketing at the Delhi and Mumbai offices and modernizing factory automation, had decided not to take over the business. Her refusal sent shock waves through corporate India and left Chauhan with no family successor —.

Munger used the 2022 platform to restate his view of derivatives, the asset class he and Buffett had been warning about publicly since the 2003 meeting. He told the audience that the world had become more complex, more leveraged, and more interconnected since the original warning, and that the derivatives web had grown rather than shrunk in the intervening two decades. The systemic fragility had, in his view, become worse, not better. He did not predict a specific crisis; he predicted the pattern - that the next serious credit event would, as in 2008, propagate through the derivatives counterparty web faster than the regulators could contain it. The prescription was unchanged: stay simple, stay liquid, stay out of contracts whose payoff depended on a counterparty's solvency in a crisis. He told the room that Berkshire itself held a large cash position precisely because Buffett and Munger believed that the optionality of being able to act in a crisis was worth more than the small incremental return they would have earned by deploying that cash in calm markets. The cash was not a waste; it was insurance on the franchise. He closed with a callback to the avoidance principle. The investor who stayed out of the derivatives web, out of the crypto speculation, and out of the structured products would, in the next crisis, be one of the few people with both the capital and the courage to act. That was the actual content of risk management, in Munger's view - not the elaborate value-at-risk models that the banks ran, but the simple discipline of refusing to own assets whose behavior in a crisis could not be underwritten. The simple discipline, repeated over decades, was what produced the long-run record.

NeTlix’s business has highly favorable characterisYcs which include: • its subscripYon-based, highly recurring revenues, which have enormous future growth potenYal • a truly best-in-class management team and unique high-performance culture (consider NeTlix’s remarkable pivot from DVD rental by mail, to video streaming, to becoming one of the greatest producers of beloved content ever) • economies of scale and superb quality in its industry-leading content, which should conYnue to drive future growth and widen the company’s powerful compeYYve moat • pricing power derived from the enormous value it delivers to consumers compared with other alternaYves • substanYal margin expansion, with the opportunity for conYnued improvement due to economies of scale and the company’s rapidly growing, global subscriber base • an improving free cash flow profile which should allow for conYnued investments in growth as well as the return of cash to shareholders We began analyzing NeTlix in connecYon with our investment in Universal Music Group, so we were prepared when the stock price declined sharply last Friday.all-

Yu's live-streaming pivot combined his company's core competency (English-language education) with e-commerce, bringing back English teaching content as a differentiator within his agricultural-goods livestreaming sessions.

Since the previous year, a wave of union organizing that started in Buffalo had swept stores across the country. Close to 190 stores had petitioned for union elections, and ten had voted to join Workers United, half of them in Buffalo and the others in New York City, Mesa, Knoxville, and Starbucks' hometown of Seattle. Employees wanted higher wages, reworked scheduling, and a different approach to the handling of tips, among other demands. Some voiced frustration that pandemic benefits like hazard pay and daily food and drink allowances had been taken away even as sales rebounded and profits soared early in the pandemic; the company said it had replaced some benefits with others, such as paid isolation leave, as the pandemic evolved. At organizing stores, employees said their hours had been cut and unusual numbers of new hires added, and they argued that the company's anti-union activities were only fueling the campaign.

The Fund therefore underperformed this comparator in 2022 but is still the best performer since its inception in November 2010 in the Investment Association Global sector with a return 299 percentage points above the sector average which has delivered just 179.1% over the same timeframe. Whilst a period of underperformance against the index is never welcome it is nonetheless inevitable. We have consistently warned that no investment strategy will outperform in every reporting period and every type of market condition. So, as much as we may not like it, we can expect some periods of underperformance. Underperforming the MSCI World Index is one issue, registering a fall in value is another. In 2022 unless you restricted your equity investments to the energy sector you were almost certain to have experienced a drop in value: Performance of S&P 500 Sectors in 2022 Energy +59% Utilities -1% Consumer Staples -3% Health Care -4% Industrials -7% Materials -14% Banks -22% Software & Services -27% Real Estate -28% Consumer Discretionary -38% Communication Services -40% Source: Bloomberg Why has this happened? We have exited a long period of ‘easy money’: a period of large fiscal deficits, where government spending significantly exceeds revenues, and low interest rates.

In July 2022 the Cyberspace Administration of China imposed an 8.026 billion yuan (approximately $1.2 billion) fine on Didi Global for data violations, ending the year-long probe; senior executives Cheng Wei and Jean Liu Qing were each personally fined 1 million yuan.

The legal aftermath — including clawback claims and the founder's counter-litigation — left the underlying financial questions legally unresolved, and the case is most useful as a study of process rather than as a closed outcome.

To see the pattern, Dalio went back 500 years, studying the rise and declines of empires and their currencies, particularly the Dutch, the British, and the American, and separately the dynasties of China since the Tang dynasty, starting a little after the year 600. The same big cycle appeared in both lines of evidence. Henry Kissinger, who joined the Washington conversation, said he had enjoyed conversations with Dalio over several years and that their thinking was very parallel though built on different evidence, geopolitics for Kissinger and markets for Dalio, with rises and declines that correspond even when the years do not align precisely. Kissinger noted that Dalio had discovered rises and declines in countries he himself had not studied from the point of view of geopolitics, the Dutch in particular. CSIS president John Hamre framed the session as a first for the institution: never before had it paired a strategic thinker who lives in the world of finance with one who lives in the world of geopolitics on the transcending issues of the day.

Since 2020, Pan and Zhang had attempted to sell their controlling SOHO China stake to the Blackstone Group; Blackstone walked away from the deal (which had valued SOHO China at HK$5 per share, or US$3.3 billion) in September 2021, and the aborted transaction triggered a probe involving SOHO China's chief financial officer over possible insider trading.

On the day his return was announced, Schultz said he had not planned to come back but knew the company was at a point where it had to transform once again, insisting that success was not an entitlement and that the company must continue to earn the trust of its people and customers every day. He then made his first concrete decision: Starbucks would immediately suspend its stock repurchasing program, with the stated logic that the decision would allow more investment in people and stores, which he described as the only way to create long-term value for all stakeholders. The reversal was material, since the previous October the company had said it would spend twenty billion dollars on dividends and buybacks over three years. Suspending repurchases meant less immediate support for the share price and more money for operations, a deliberate statement of capital-allocation priorities from a chief executive whose second stint had been defined by exactly this kind of rebalancing.

Asked whether America can remain a global leader given its current path, Dalio answered with a balance-sheet frame. History shows that staying power is a function of strengths, most fundamentally whether a nation earns more than it spends; creating a lot of debt forces the printing of money to monetize it, which demeans the currency, and a currency's strength comes from the value of its money. Alongside the financial question sits the internal one: financial problems plus polarity breed increased populism of the left and the right, and populists by nature are not compromisers, so growing polarity under problematic conditions can produce periods of disorder verging on types of civil war. The third variable is relative strength, and here the arithmetic of China dominated his answer: a population more than four times America's means that at half the per-capita income China's economy would be twice as large, with resources available for everything including the military. Managing the confrontation toward a win-win relationship rather than war, he argued, is paramount.

in on streaming as we love the business models, the industry contexts, and the management teams leading these remarkable organizaYons. In order to fund our purchase of NeTlix, beginning on Friday and over the last few days, we unwound the substanYal majority of our interest rate hedge generaYng proceeds of $1.25 billion. We retained interest rate swapYons that are currently out-of-the-money, and also purchased some addiYonal longer-dated, out-of-the-money swapYons. The result of all of the above is that the noYonal size of our interest rate hedge has been reduced by 80%, the term of a substanYal porYon of the hedge we retain has been extended, and our dollar investment in hedges has been reduced by more than 90%. Had we not sold the hedge, we could have likely realized more gains based on the increase in rates, largely today, since our sale. That said, we believed the opportunity to invest in NeTlix at current prices offered a more compelling risk/reward and likely greater, long-term profits for the funds. We invest in hedges not to protect the funds from a short-term mark-to-market loss, but rather because they can become a large source of potenYal liquidity at precisely the Yme stocks become cheap. We invest in asymmetric hedges as they offer the opportunity for large gains without exposing the porTolio to meaningful losses in the event the potenYal risk does not transpire.

Tencent grew into a major technology, gaming, entertainment, and financial-services conglomerate; as of November 2025 Forbes estimated Ma's net worth at $63 billion, per Wikipedia's citation, and Ma continues to serve as Tencent's chairman and CEO.

The case highlights the twin-sided market structure — restaurants on one side, delivery partners on the other — combined with a seamless app UX, 24x7 customer service, no minimum order policy and digital payment integrations as the engine of exponential growth, with revenue drawn from delivery charges, advertising, restaurant commissions and cloud kitchens.

Rahul Bajaj took charge of the Bajaj Group in 1965 at the age of 27, inheriting an auto operation throttled by License-Raj capacity permits. Over the next five decades he scaled the flagship Bajaj Auto from roughly ₹7.5 crore in turnover to ₹12,000 crore, with the Chetak scooter carrying the lion's share of that growth during the 1970s and 1980s when waiting lists stretched for years.

In the 1950s the Italian Piaggio Vespa became a cult two-wheeler in India, assembled and distributed under license by several Indian firms including the Bajaj Group. As an undergraduate at St. Stephen's College in Delhi, Rahul Bajaj himself rode a Vespa to campus — a personal detail that underscores how the eventual Chetak was a domestic successor to a foreign icon he had grown up using.

Chauhan is quoted saying the sale decision was 'painful' but he chose Tata Consumer because they would 'nurture and take care of it even better'. He added that since he had no intention of running the company he would not keep a minority stake, choosing instead to invest the proceeds in environmental and charitable causes.

We can probably trace the era of low interest rates back to the so- called Greenspan Put which became evident in the 1990s as low interest rates were utilised as the palliative in periods of market volatility such as the Asian Crisis of 1997 and the Russian default and LTCM collapse in 1998. As the new millennium arrived so did new crises which seemed to warrant even easier money. It started with the Dotcom meltdown in 2000 and was followed by the Credit Crunch of 2008–09 which started in the US housing market and quickly became a full-blown international banking crisis.rates:

On the offline-versus-online split, Varun acknowledges that the larger share of category transactions still occurs in physical retail. He announced plans to add roughly 40,000 stores to the offline footprint in that year, having just opened exclusive brand outlets in Delhi, Gurgaon, Noida and Mumbai. Online contributed roughly 70% of revenue and offline 30% at the time — a ratio that would later feed the IPO-era critique that Mamaearth was no longer truly a D2C brand.

Firstpost traces Bisleri's Italian roots — entrepreneur Felice Bisleri's alcohol remedy drink made of cinchona, herbs and iron salts, sourced from a spring called Angelica in the Italian town of Nocera Umbra. After Felice's death in 1921, family doctor Dr Rossi took over, and in 1965 Rossi and Khushroo Suntook set up the first Bisleri water plant in Thane.

AI is applied across the operating stack — a food intelligence platform learns user preferences over space and time, while on the delivery-partner side it tracks movement patterns, forecasts demand-supply matching and routes — a deliberate investment in tech that allowed Swiggy to scale without proportionally scaling operations headcount.

Schultz's posture toward the union drive was already well established before his return. In a speech to Starbucks workers in Buffalo the previous November, shortly before the union elections there, he had appealed to workers to consider everything the company had done and would continue to do to make Starbucks a great place to work, and he wrote in an accompanying letter that no partner had ever needed a representative to obtain what partners already had. The company fought the drive on multiple fronts, from mandatory meetings where employees were urged to vote no to repeated attempts to delay elections or vote counts by arguing that stores must vote together as districts, an argument the National Labor Relations Board rejected multiple times. Investors, including Trillium Asset Management's Jonas Kron, called the legal strategy a waste of resources and warned that customers could easily go elsewhere, while Harvard business historian Nancy Koehn expected the return to last months, not years.

On China, Dalio urged seeing the system from the inside. He described a top-down, Confucian, hierarchical approach working at odds with America's bottom-up democratic one, and warned against hearing the words Communist Party and picturing the old Mao era: the improvement in living standards came from the movement from the first phase of the revolution into Deng Xiaoping's pragmatism, captured in the maxim about cats of any color so long as they catch mice. He traced Chinese anxieties to sovereignty and the hundred years of humiliation that began around 1840 with foreign incursions and the opium wars, and to Japan's 1895 seizure of Taiwan, calling these existential issues for Beijing. His taxonomy of escalation lists five types of war, trade, technology, geopolitical influence, capital, and military, progressively more difficult and liable to run together. A military war between the two powers, he warned, would be the worst the world has ever had, given how far the technologies have advanced. His prescription echoed Kissinger's call for defining red lines: worry now, so you do not have to worry later.

Quantitative Easing (‘QE’), so-called ‘printing money’ in which central banks created money to purchase assets, starting with government debt but eventually ranging into corporate debt and equities. As an aside, quite how it aided the economy of either Japan or Switzerland for their central banks to buy international equities is beyond my grasp. This was combined with low, no (Zero Interest Rate Policy — ZIRP) or even negative interest rates (NIRP). These measures I have collectively christened with the generic term ‘easy money’. Attempts to suppress volatility will only exacerbate it in the long term. If you count the current events, we have now had three economic and financial crises this century and it is still in its first quarter. This would seem to illustrate that attempts to expunge volatility from the financial system are actually producing the opposite of the desired effect. They breach the rule for what you should do if you find yourself in a hole. This is hardly surprising given that the central banks were aiming at the wrong targets. Central banks were attempting to maintain a benign level of consumer price inflation but ignored asset price inflation caused by their actions. Some also adopted employment targets that were not or should not be part of their remit. One of the problems of easy money is that it leads to bad capital allocation or investment decisions which are exposed as the tide goes out.

Tier-II and beyond markets emerge as a central growth axis: Varun reports that more than 50% of total sales come from these towns, served across roughly 19,000 pincodes, with active offline expansion targeting the same geographies. This refutes the assumption that premium D2C beauty was metro-only and explains Honasa's broad-based reach claim.

In 1971 the Indira Gandhi government declined to extend the international collaboration agreement between Piaggio and Bajaj, abruptly severing Bajaj's access to Vespa technology and tooling. The forced decoupling pushed Bajaj Auto to design and manufacture an indigenous scooter — a geopolitical shock that unintentionally seeded the Chetak and the 'Hamara Bajaj' brand identity.

In 2005 Bajaj stepped down from his executive role at Bajaj Auto and handed the managing director's seat to his son Rajiv Bajaj, marking one of the cleanest generational transitions in Indian family business. The handover was unusual because Rajiv, then in his late thirties, was given operational autonomy to drive the Pulsar-led motorcycle pivot even as Rahul remained on the board as non-executive chairman.

We invested in out-of-the-money interest rate swapYons in December 2020 and early 2021 because we believed that it was likely that the combinaYon of aggressive fiscal policy, monetary policy, and the reopening of the economy due to vaccines would cause non-transitory inflaYon, which would require the Federal Reserve to raise rates. We believed that an unexpected rise in rates could cause a market correcYon. We viewed this outcome to be a likely one, yet the opYons we purchased implied that this scenario was very unlikely. Highly differenYated perspecYves on future outcomes can yield aIracYve payoffs for investors, parYcularly when structured in an asymmetric format. Fortunately, all of our porTolio companies are extremely high-quality businesses that can withstand inflaYon as they have the ability to price their highly desirable products, services, and assets to preserve their profitability in an inflaYonary environment. We do not believe that the recent move in rates has had any meaningful impact on our companies’ intrinsic values. As such, we believe that our porTolio companies trade at an even more material discount to their intrinsic values, parYcularly in light of recent, market-driven, price declines. While we do not know what the stock market will do tomorrow, next month or even over the next year or two, we believe that our companies will conYnue to compound their intrinsic values at high rates for the long term. We are pleased to add NeTlix to our porTolio.

Effective September 7, 2022, Pan resigned as chairman of SOHO China 'to focus on supporting the arts and philanthropic pursuits,' per the company's stock exchange filing, while remaining an executive director; SOHO China named Huang Jingsheng as non-executive chairman and promoted company veterans Xu Jin and Qian Ting as co-chief executive officers.

Instamart, launched in 2020, is presented as the next-stage growth driver: it reached the same GMV in 17 months that the food-delivery platform took 40 months to achieve — a comparison that suggests the logistics and customer-acquisition infrastructure built for food was directly leveraged to compress the ramp for quick commerce.

The very next year, 1972, brought a second shock: the sudden death of Kamalnayan Bajaj placed the entire industrial conglomerate's responsibility on thirty-four-year-old Rahul's shoulders. He had to consolidate operational control across auto, electricals and cement businesses at exactly the moment the Piaggio tie-up had ended — a crucible that defined his leadership style.

In 2008 Bajaj engineered a strategic demerger of Bajaj Auto into three separate listed entities — Bajaj Auto (the vehicles business), Bajaj Finserv (the financial services arm) and a holding company — unlocking independent capital-allocation stories and setting up the later rise of Bajaj Finance as India's largest consumer-lending NBFC. The restructuring deliberately separated manufacturing risk from financial-services growth.

Varun positions data and technology as the differentiator at the core of Honasa's model, claiming consumer data on more than 10 million individuals for targeting and engagement. The thesis is that the D2C relationship generates first-party data that improves marketing efficiency and new-product hit rate — a self-reinforcing loop that traditional FMCG cannot replicate.

In 1969 the Chauhan brothers Ramesh and Prakash acquired the brand for Rs 4 lakh and launched it in India in glass bottles in Bubbly and Still variants. Chauhan later told Business Today that selling packaged drinking water was never in his business plans — Bisleri Soda had demand from five-star hotels, which is why he bought out the company.

The Cyberspace Administration of China fined Didi Global 8.026 billion yuan (~$1.2 billion) in July 2022 for data-security violations, fined Cheng Wei and Jean Liu Qing 1 million yuan each personally, and the company delisted from the NYSE in June 2022 before regaining permission to resume new user registrations in China in early 2023.

Many of our best investments have emerged when other investors whose Yme horizons are short term, discard great companies at prices that look extraordinarily aIracYve when one has a long-term horizon. Sincerely, William A.Ackman

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

To deliver instant grocery in roughly 15 minutes, Swiggy places seller-managed dark stores closer to the customer using location intelligence and demand-density mapping, with technology deployed to accelerate pick-and-pack operations inside the stores.

With Piaggio out of the picture, Bajaj Auto launched three scooter models in quick succession — the Bajaj 150, the Bajaj Chetak and the Bajaj Super — each engineered and produced domestically. The Chetak, named after Maharana Pratap's legendary horse from Mewar, became the breakout hit, embedding itself so deeply in middle-class aspiration that even second-hand units commanded a premium.

In 1995 Chauhan introduced a small 500 ml Bisleri bottle priced at just Rs 5 — the move that took the brand to the masses. The small format reduced price and solved portability, achieving 400% growth and capturing 40% of the packaged water bottle market. The pricing-and-pack-size decision is the textbook case of an Indian consumer brand unlocking category demand by trading down from premium hotel formats to mass affordability.

About Pershing Square Capital Management, L.P. Pershing Square Capital Management, L.P. (“Pershing Square”), based in New York City, is a SEC- registered investment advisor to investment funds. Media Pershing Square Capital Management, L.P. Francis McGill McGill@persq.com 212-909-2455

Bajaj progressively transitioned to non-executive and emeritus roles in his final years: stepping down as chairman of Bajaj Finserv in March 2019 to become chairman emeritus, and then in April 2021 ceding the non-executive chairmanship of Bajaj Auto to his cousin Niraj Bajaj while retaining the chairman emeritus title. The staged exit — cousin rather than son in the auto chair — was a deliberate signal of family-business governance beyond primogeniture.

triple A credits when they were really triple Z. You can’t improve the quality or liquidity of an asset by putting it into a structure. The other problem with the policy of easy money was that it had to end eventually, but not before it had one last hurrah. There were half-hearted attempts to reverse QE in particular by lowering central banks’ bond purchases but when the stock market unsurprisingly reacted badly in the so-called ‘taper tantrum’ in 2013, these were abandoned. Then in 2020 came the pandemic and central banks reacted to this by enacting that good old saying ‘To a man with a hammer, everything looks like a nail’. They decided that they should double down with their new toy, QE, which seemed to work so well in the Credit Crisis without any nasty side effects, well none that had yet become apparent, and apply an almighty stimulus. This was applied when there was no problem with demand or the banking system. It was just that people were locked up in their homes and unable to spend on bricks & mortar shopping, travel and entertainment and the global supply chain was malfunctioning, leaving consumers with pent-up savings waiting to be spent. What happened next may be an example of Sod’s Corollary to Murphy’s Law: • Murphy’s Law: What can go wrong will go wrong. • Sod’s Corollary: Murphy was an optimist.

On financial trajectory, Varun reports Honasa hit a ₹500 crore run rate in FY21 and doubled that in FY22, with the explicit ambition to keep growing 'disruptively' in subsequent years. He sets a long-term vision of building a beauty and personal care company larger than some existing incumbents by the end of the decade — a goal that framed the IPO as a milestone, not an endpoint.

The Blackstone sale collapsed in September 2021 amid an insider-trading probe involving SOHO China's CFO; Pan formally resigned as chairman a year later (September 2022), remaining an executive director while relocating primarily to the United States.

Under the License Raj regime a company was permitted to produce only up to 25 percent above its licensed capacity; Bajaj Auto hit this ceiling even as orders stacked up to a ten-year delivery backlog. Rahul Bajaj was summoned by the Monopolies and Restrictive Trade Commission for the 'crime' of producing more scooters than his industrial license allowed, a moment he later recounted in the book Business Maharajas by Gita Piramal.

To combat multihoming — customers using both Swiggy and a rival in parallel — the firm runs the Swiggy One loyalty programme, which bundles free delivery on food, free Instamart deliveries above ₹99, and Genie discounts into a ₹899 annual membership recoverable in three to four weeks of average use.

Sod’s Corollary gave us the February 2022 Russian invasion of Ukraine which affected the prices of oil, gas and other minerals, such as nickel, and cereals following the central banks’ stimulus. The net result of the further stimulus and this invasion has been an upsurge in inflation and as a consequence a rapid and painful end to easy money. This final round of easy money post the pandemic led to all the usual poor investments which people make when they are led to assume that money is endlessly available and costs zero to borrow or raise. We can see the unwinding of these unwise investments, for example, in the collapse of FTX, the cryptocurrency ‘exchange’ (sic) and the meltdown in the share prices of those tech companies with no profits, cash flows or even revenues.suffering

Within five years of founding, Honasa had built a product portfolio of more than 120 products sold across 500-plus Indian cities — figures Varun uses to validate the speed of the playbook. The breadth underscores how the platform was designed for fast SKU expansion rather than a single hero product.

Bajaj was elected to the Rajya Sabha, India's upper house of Parliament, for the 2006–2010 term, filling the seat vacated by the death of BJP leader Pramod Mahajan. The move positioned him as an industry voice inside the legislature at a time when the UPA government was drafting key manufacturing and FDI policy, and he remained an outspoken commentator on policy even after his term ended.

Eleven years after the Rs 5 bottle, Firstpost notes Bisleri's rebranding exercise: switching the bottle colour from blue to green and changing the conical bottle shape to a rounder one, paired with the 'Har Paani Ki Bottle Bisleri Nahin' campaign to combat counterfeits. The packaging and marketing shift delivered strong results —.

The case positions Swiggy's cross-platform loyalty programme as a value-capture device: the firm uses its market power on the restaurant side to extract value, then transfers part of it back to consumers via One — a structure that simultaneously retains users and disciplines the restaurant side, the classic two-sided-market monetisation lever.

more in the downturn than lowly rated or so-called value stocks. This effect can be seen in the bottom five detractors from the Fund’s performance in 2022: Stock Attribution Meta Platforms -3.3% PayPal -2.5% Microsoft -1.8% IDEXX -1.7% Amazon -1.5% Source: State Street Four of the five stocks are in what might loosely be termed the Technology sector (although Meta is actually in the MSCI Communication Services sector and MSCI has Amazon as a Consumer Discretionary stock) and at least two — PayPal and IDEXX — started the period with valuations which were particularly vulnerable to the effect of rising rates. In some cases these share price falls have become more pronounced because of events surrounding the business. Meta has its well-publicised problems with the regulatory and competition authorities and has announced a large spend on developing the so- called metaverse which it changed its name from Facebook to reflect. PayPal seems intent on snatching defeat from the jaws of victory. It has taken a leading position in online payments and parlayed that into a lamentable share price performance. The elements in this would appear to be a disregard for engagement with the customers newly acquired during the pandemic and no obvious attention to or control of costs. This is hardly surprising given the attention devoted to pursuing some clearly over-priced acquisitions. That is what happens when management start to conclude that investments do not need to earn an adequate return.

On the marketing playbook, Varun is emphatic that purpose, sustainability and being toxin-free drive brand conversations, and that millennials trust other millennials — making influencer marketing the most important channel for the company. Honasa works with thousands of influencers each month and intends to keep doubling down on that channel, an approach that subsequently drew scrutiny for its high advertising-to-revenue ratio.

Bajaj served as president of the Confederation of Indian Industry (CII) twice — in 1979–1980 and again in 1999–2000 — making him one of the few industrialists to lead the apex lobby group across two distinct economic eras, the late License Raj and the post-1991 reform phase. In 2017, then President Pranab Mukherjee presented him with the CII President's Award for Lifetime Achievement.

At the MRTP hearing, a competing manufacturer — Automobile Products of India's chairman M.A. Chidambaram — tried to disparage the Bajaj scooter by noting that his Lambretta weighed 100 kg versus Bajaj's 94 kg. Rahul Bajaj, defending himself without counsel, reportedly replied that 'the Lambretta is 100 kg of silver but the Bajaj scooter is 94 kg of gold,' turning the comparison into a branding coup; the commission permitted the expansion.

By the time of the case, Swiggy's Instamart had crossed more than 500 brands and 5,000 products; the strategic priority was increasing cross-pollination between the food-delivery user base and Instamart — a single-customer, multi-vertical thesis that mirrors how large consumer platforms globally compound engagement.

Varun hints at strategic inorganic growth as a deliberate lever — acquisition as a faster route to brand portfolio expansion than organic launches. The Dr Sheth's and BBLUNT deals are described as the start of this M&A-led approach, suggesting the House of Brands thesis is intended to compound both through new launches and through tuck-in acquisitions.

Rahul Bajaj was conferred the Padma Bhushan, India's third-highest civilian honour, in 2001, recognising decades of building Bajaj Auto into a household name during a period when two-wheelers were the dominant mode of Indian middle-class mobility. The award coincided with the year he faced the post-liberalization motorcycle transition and the early signs of Chetak's decline.

Over the decades that followed, Rahul Bajaj scaled Bajaj Auto from roughly ₹7.5 crore in turnover to about ₹12,000 crore — a 1,600x expansion that turned a License-Raj-era scooter licensee into India's largest two-wheeler exporter by the early 2000s. The Chetak remained the principal growth engine through the 1970s and 1980s, with the Pulsar franchise taking over post-2001.

We are not aware of any major fundamental problems with either IDEXX or Microsoft. Our highly valued and technology holdings did not fare as poorly as some of the companies which had significant market values but no profits, cash flows or in some cases even revenues.Research/Bloomberg

In April 2021, after roughly five decades at Bajaj Auto, Rahul Bajaj stepped down as non-executive chairman on grounds of age, handing the role to his cousin Niraj Bajaj while retaining the chairman emeritus title. The choice of a cousin rather than a son signalled a maturing family-governance model in which the next generation's CEOs (Rajiv and Sanjiv) operated under separate non-family chair oversight.

This may seem cold comfort and to quote an old adage, ‘When the police raid the bawdy house even the nice girls get arrested’. But looking back to the example of Amazon over the Dotcom meltdown and its aftermath, it is a lot more comforting to own businesses which are performing well fundamentally when the share price goes down than to be found playing Greater Fool Theory in the shares of a company with no cash flows, profits or even revenues. For the year the top five contributors to the Fund’s performance were: Stock Attribution Novo Nordisk +2.1% Philip Morris +1.1% PepsiCo +0.7% ADP +0.5% Mettler-Toledo +0.4% Source: State Street If one word had to be used to describe last year’s winners it would be ‘defensive’. Two of them are fast-moving consumer goods companies and one is a drug company. However, it is worth pointing out that ADP is actually in the MSCI Technology sector. Which brings me to another point. You may have read that the Fundsmith Equity Fund is becoming a ‘Tech fund’ based upon recent purchases: ‘Terry Smith tech-buying spree continues with Apple purchase’, Interactive Investor, November 2022. Here is the MSCI sector breakdown of the portfolio: As at 31st December 2022 % Consumer Staples 33.8 Health Care 26.0 Technology 20.7 Consumer Discretionary 9.4 Communication Services 4.5 Industrials 1.7 Cash 3.9 Source: Fundsmith Research/MSCI GICS® Categories 20.7% of the portfolio is defined as Technology by MSCI. This compares with 23.2% on 31.12.14.

On the Forbes 2016 list of the world's billionaires, Bajaj was ranked No. 722 with a net worth of about US$2.4 billion, reflecting the value created by the 2008 demerger and the rise of Bajaj Finance. He also held external roles including chairman of Indian Airlines, board chairmanship at IIT Bombay, and membership of Harvard Business School's South Asia advisory board and the Brookings Institution's International Advisory Council.

The interview also reveals Honasa's app play, with more than 10 million downloads on its own D2C channel — a not-insignificant direct-owned audience that, when combined with first-party data, gives Honasa a relatively defensible position independent of marketplace platforms. This owned-channel ownership is a quiet but material part of the long-term moat claim.

The case identifies the central strategic tension going forward: ensure user stickiness in an increasingly competitive food-delivery market while fueling growth through Instamart — a dual challenge that framed the firm's IPO thesis and its subsequent resource allocation choices.

I can’t see a ‘spree’. I am not that keen on relying upon sector classifications to define a business and you may note that 4.5% is in the Communication Services sector. As these are Alphabet (the former Google) and Meta, I regard them as technology stocks and Amazon is classified as a Consumer Discretionary stock, although how this fits Amazon Web Services is difficult to see.until

The image of an Indian family of four balanced on a Bajaj scooter became the defining visual of the 1980s and 1990s urban middle class, used for school runs, commutes and weekend outings. The scooter was less a vehicle than a household asset class, treated as a prize possession and sometimes a dowry item, with resale values sustained by the unmet decade-long demand.

Rahul Bajaj died of pneumonia on 12 February 2022 at the age of 83 in Pune's Ruby Hall Clinic, where he had been under treatment; he had also been living with cancer and cardiac conditions in his final years. His death drew tributes from across the political and industrial spectrum, closing a five-decade stewardship of one of India's oldest family-owned conglomerates.

Varun's stated long-term ambition — to be 'the first choice of evolving Indian millennials and GenZ' in beauty and personal care — frames Honasa as positioning around demographic capture, not product category. The strategic target is a generation, and the portfolio is built backward from that consumer, not forward from a single product idea.

His sons Rajiv and Sanjiv Bajaj continued to lead separate arms of the group after his death — Rajiv as managing director of Bajaj Auto and Sanjiv as chairman of Bajaj Finserv — while daughter Sunaina Kejriwal (who died of cancer in 2024) directed the Kamalnayan Bajaj Hall and Art Gallery. The sibling split mirrored the 2008 demerger logic, with each heir holding a vertically-defined operating brief.

The 'Buland Bharat, Buland Bajaj' advertising tagline — popularised as 'Hamara Bajaj' — embedded the brand into the nationalist imaginary of the License-Raj era, positioning a scooter as a symbol of self-reliant India. The campaign became one of the most durable pieces of Indian advertising, surviving even as the product portfolio pivoted from scooters to motorcycles after 2001.

recently, in our portfolio are not in my view primarily technology companies but rather they use technology to deliver differing services, namely: • ADP — payroll, employee insurance and HR. • Amadeus — airline and hotel reservations and operations. • Intuit — tax and accounting services. • PayPal — payment processing. • Visa — payment processing. Moreover, commentators tend to take an all or nothing approach to reporting our holdings — as in the reference to Apple already noted — without any mention of the size of the holding, which is hardly surprising as this is only disclosed semi-annually. But to put this in context, our combined holdings of Alphabet, Amazon, Apple, Adobe and Meta amount to just 9.0% of the portfolio, compared to our holding in Microsoft of 7.6%. I would therefore suggest that the Fund’s exposure to technology is a lot more subtle and nuanced, as well as smaller and more widely spread than the headlines sometimes suggest. However, as well as the lower valuations caused by higher rates, technology stocks are facing some fundamental headwinds. A slowdown in the growth of tech spending is hardly surprising after the massive growth caused by digitalisation during the pandemic. Moreover, the cyclicality of tech spending and online advertising is probably about to become evident as the economy slows and maybe falls into recession.

It may be greater than in the past simply because tech spending has become a much larger proportion of overall corporate and personal spending. However, there may be a silver lining in this cloud (no pun intended) as this pressure on revenue growth may cause some of the tech companies we invest in to stop behaving as though money is free and halt some of the less promising projects outside their core business, such as: • Alphabet — Its hugely loss-making ‘Other Bets’. Lightning does not strike twice. It has a good core online search and advertising business. • Amazon — It has already withdrawn from food delivery and technical education in India (who knew?) It has a highly successful ecommerce and cloud computing business on which to focus. • Meta — Stopping or cutting spending on the metaverse?communications

and digital advertising business on a single-figure Price/Earnings ratio (P/E). We continue to apply a simple three step investment strategy: • Buy good companies • Don’t overpay • Do nothing I will review how we are doing against each of those in turn. As usual we seek to give some insight into the first and most important of these — whether we own good companies — by giving you the following table which shows what Fundsmith Equity Fund would be like if instead of being a fund it was a company and accounted for the stakes which it owns in the portfolio on a ‘look- through’ basis, and compares this with the market, in this case the FTSE 100 and the S&P 500. This shows you how the portfolio compares with the major indices and how it has evolved over time. Year ended Fundsmith Equity Fund Portfolio S&P FTSE 2015 2016 2017 2018 2019 2020 2021 2022 2022 2022 ROCE 26% 27% 28% 29% 29% 25% 28% 32% 18% 16% Gross Margin 61% 62% 63% 65% 66% 65% 64% 64% 45% 42% Operating Margin 25% 26% 26% 28% 27% 23% 26% 28% 18% 18% Cash Conversion 98% 99% 102% 95% 97% 101% 95% 88% 88% 66% Interest Cover 16x 17x 17x 17x 16x 16x 23x 20x 10x 11x Source: Fundsmith LLP/Bloomberg. ROCE, Gross Margin, Operating Margin and Cash Conversion are the weighted mean of the underlying companies invested in by the Fundsmith Equity Fund and mean for the FTSE 100 and S&P 500 Indices. The FTSE 100 and S&P 500 numbers exclude financial stocks. Interest Cover is median.

2015–2019 ratios are based on last reported fiscal year accounts as of 31st December and for 2020–22 are Trailing Twelve Months and as defined by Bloomberg. Cash Conversion compares Free Cash Flow per Share with Net Income per Share. In 2022 returns on capital and profit margins were significantly higher in the portfolio companies than in 2020 and 2021. Gross margins were steady. Importantly all of these metrics remain significantly better than the companies in the main indices (which include our companies). Moreover, if you own shares in companies during a period of inflation it is better to own those with high returns and gross margins. Consistently high returns on capital are one sign we look for when seeking companies to invest in. Another is a source of growth — high returns are not much use if the business is not able to grow and deploy more capital at these high rates. So how did our companies fare in that respect in 2022? The weighted average free cash flow (the cash the companies generate after paying for everything except the dividend, and our preferred measure) grew by 1% in 2022.This

is the lowest growth rate we have recorded to date in our portfolio and probably says far more about the levelling off in demand in some sectors post the pandemic surge and macro-economic conditions than it does about the long-term growth potential of the businesses. You may recall that the free cash flow for our companies surged 20% in 2021, significantly above the more normal 9% growth in 2019 and 8% in 2020. Moreover, the free cash flow of the S&P 500 fell by 4% last year. Frankly we are pleasantly surprised that there was any growth at all in our portfolio companies, and if 1% growth worries you it may be wise not to read next year’s letter. Cash conversion remains depressed for our portfolio companies but is currently based upon some unusually volatile conditions caused by the pandemic’s disruption to supply chains leading to stockouts and subsequent hoarding of stocks by some companies. Cash flow is an acid test of a business but it is also a more volatile measure than profits which are based on accrual accounting and spread some cash flows between periods. We will have to wait a year or two before something approaching normality is restored and we can gauge how well our companies are doing on this measure. The average year of foundation of our portfolio companies at the year-end was 1922. They are just over a century old collectively. The second leg of our strategy is about valuation.

The weighted average free cash flow (‘FCF’) yield (the free cash flow generated as a percentage of the market value) of the portfolio at the outset of the year was 2.7% and ended it at 3.2%. The year-end median FCF yield on the S&P 500 was 3.4%, roughly in line with our portfolio. This is one benefit of the fall in share prices over the period. Our portfolio consists of companies that are fundamentally a lot better than the average of those in either index and are valued fractionally higher than the average S&P 500 company. Turning to the third leg of our strategy, which we succinctly describe as ‘Do nothing’, minimising portfolio turnover remains one of our objectives and this was again achieved with a portfolio turnover of 7.4% during the period, a little higher than usual. It is perhaps more helpful to know that we spent a total of just 0.003% (less than a third of a basis point) of the Fund’s average value over the year on voluntary dealing (which excludes dealing costs associated with subscriptions and redemptions as these are involuntary). We sold our stakes in Johnson & Johnson, Starbucks, Kone, Intuit and PayPal and purchased stakes in Mettler-Toledo, Adobe, Otis and Apple.some

cases the size of the holding sold or bought was small. We have held five of our portfolio companies since inception in 2010. Why is this important? It helps to minimise costs and minimising the costs of investment is a vital contribution to achieving a satisfactory outcome as an investor. Too often investors, commentators and advisers focus on, or in some cases obsess about, the Annual Management Charge (‘AMC’) or the Ongoing Charges Figure (‘OCF’), which includes some costs over and above the AMC, which are charged to the Fund. The OCF for 2022 for the T Class Accumulation shares was 1.04%. The trouble is that the OCF does not include an important element of costs — the costs of dealing. When a fund manager deals by buying or selling, the fund typically incurs the cost of commission paid to a broker, the bid-offer spread on the stocks dealt in and, in some cases, transaction taxes such as stamp duty in the UK. This can add significantly to the costs of a fund, yet it is not included in the OCF. We provide our own version of this total cost including dealing costs, which we have termed the Total Cost of Investment (‘TCI’). For the T Class Accumulation shares in 2022 this amounted to a TCI of 1.05%, including all costs of dealing for flows into and out of the Fund, not just our voluntary dealing. We are pleased that our TCI is just 0.01% (1 basis point) above our OCF when transaction costs are taken into account.

However, we would again caution against becoming obsessed with charges to such an extent that you lose focus on the performance of funds. It is worth pointing out that the performance of our Fund tabled at the beginning of this letter is after charging all fees which should surely be the main focus. In the past we have written about activism and our engagement with companies’ management, and this year I want to draw this together with a couple of examples. Last year I wrote about Unilever and attracted a virtual tsunami of comment for my remarks about Unilever, purpose and Hellmann’s mayonnaise. Events soon overtook this commentary insofar as Nelson Peltz’s Trian Partners announced that it had bought a stake in Unilever and he was invited to join the board. We are asked to suspend disbelief that this was in no way linked to the subsequent announcement that Alan Jope will be leaving the CEO role. This explanation sounds like it was lifted from the script of Miracle on 34th Street. As I have previously pointed out, our Fund has held Unilever shares since inception and was about the 12th largest shareholder when these events happened. Yet for the first eight years of our existence as a shareholder we did not hear from Unilever.headquarters

and listing to the Netherlands. As I remarked at the time, it is not a good way to manage relationships to ignore people until you need their support. Once contact had been established with Unilever we then tried to make some points about what we saw as problems with the performance of the business and the focus of the management, which were duly ignored. This is a business making a return on capital in the mid to low teens, below the market average, where you could measure annual growth if you could only count to three, and which missed every target it set out when it summarily rejected the Kraft Heinz bid approach. So it’s not like there weren’t some questions to answer. Then came the near-death experience with the abortive GSK Consumer bid. I don’t know how long Trian held its stake before Mr Peltz was invited to join the board or how big that stake was, but I would guess that they held it for far fewer months than we have held it in terms of years. We have no objection to Mr Peltz’s involvement. He at least seems to have the sense to become involved in good businesses which need some improvement, whereas some activists pick on poor businesses and all they can hope to achieve is a better-run bad business.

Where we have seen him involved in companies we have owned we have sometimes agreed with and admired his contribution — as in the operational improvements which accompanied his time at Procter & Gamble — and sometimes not — as when he promoted the idea of splitting PepsiCo into separate drinks and snacks businesses. What I find questionable is that companies mouth platitudes about wanting to attract long-term shareholders yet based on our experience, we tend to get ignored, whereas an activist who has held shares for fewer months than we have held in years gets invited to board meetings. One example may just represent an outlier. But what about PayPal? We had held PayPal shares since it was spun out from eBay in 2015. We tried to engage with PayPal as we identified, seemingly long before the management, that their lack of engagement with new customers was a problem as was cost control and that their acquisitions were value destroying. In particular, we pointed out that the value destroying acquisitions might be avoided if the management remuneration incentives included some measure of return on capital. A representative of the board kindly told us they would think about that. Whilst they were allegedly thinking about it Elliott Management bought a stake which led to them being given a board seat and an information sharing agreement.

Please don’t misunderstand the criticism I am levelling here. I am not envious. I do not want a seat on the board of Unilever, PayPal or any other listed company. Nor do I want an information sharing agreement. I think our research has been able to identify the problems of PayPal and Unilever better than the management and without any need for access to any unpublished information. In some cases you can determine more from what information is not disclosed. Take Unilever’s acquisition record as an example. Here’s a chart covering Unilever’s acquisitions in just its Beauty & Wellbeing division over the past eight years. Source: Fundsmith Research A few points are noteworthy: 1. Considering this is Unilever’s smallest division outside of ice cream they have been very active. Of course they might say that they are trying to build a wellbeing and beauty business by acquisition, but then all the more reason why we shareholders should know how they are performing. 2. Yet we were only told the cost in just three out of 27 acquisitions. Whilst I am sure Unilever complied with their disclosure obligations, is there some reason why we shareholders can’t know how much of our money they spent? (If anyone is thinking of responding ‘commercial sensitivity’ could you please have the courtesy to check that I don’t have

a mouthful of liquid before you say that?) We are aware from press speculation that Dollar Shave Club cost c.$1 billion and it has sunk without trace. 3. The coloured table shows which of these acquisitions were mentioned in subsequent annual reports. It is clearly a minority — only 10 out of 27 in 2021 and in some years like 2020, just two. We have not heard about the Carver Korea acquisition which cost €2.3bn since 2019 (spoiler alert: purchased from Bain Capital and Goldman Sachs). Now call me cynical if you want but I doubt that mention was omitted because they were all performing embarrassingly well. 4. You can find sources of information other than the company. This chart of Carver Korea’s sales revenue from Statista says it all: Source: Statista.com Shouldn’t we have some idea how Unilever and its management have performed before they are allowed to do any more acquisitions? Unilever’s low return on capital might be a clue. We do not need an information sharing agreement to reach an obvious conclusion. What I am complaining about is the bipolar response some companies have to long-standing shareholders versus newly arrived ‘activists’. As an investor you might reasonably query why if we had identified the problems at PayPal and Unilever we didn’t just sell the shares and avoid any underperformance.

One reason is that we try to be long-term shareholders and when we hold shares in what we consider to be a good business, which we think is underperforming its potential, we like to see if we can help to correct that.Won)

easier to change the management than to change the business. However, when we are continually ignored there is another even easier option to sell the shares which we turn to when all other remedies fail. Returning for a moment to Mayonnaisegate, amongst the outpouring of comments last year were a number of apologists for Unilever who were at pains to point out that the Hellmann’s brand has been growing revenues well and this was proof that ‘purpose’ works. Of course there is no control in that experiment; we don’t know how well it would have grown without the virtue signalling ‘purpose’. It also confuses correlation with cause and effect. There may be a positive correlation between stork sightings and births but that doesn’t prove that one causes the other. Maybe Hellmann’s would be growing as fast or even faster without its ‘purpose’. To further illustrate the point, this year we are moving on to soap. When I last checked it was for washing. However, apparently that is not the purpose of Lux, the Unilever brand, which apparently is all about ‘Inspiring women to rise above everyday sexist judgements and express their beauty and femininity unapologetically’. I am not making this up; you can read it here: https://www.unilever.com/brands/personal-care/lux/ I will leave you to draw your own conclusions about the utility of this.

One other topic which I want to cover this year is share-based compensation and especially its removal from non-GAAP (Generally Accepted Accounting Principles) profit figures. Share-based compensation has become an increasingly prominent part of some companies’ expenses in recent years, especially among companies in the Technology sector. If we take for example the 75 companies in the S&P Dow Jones Technology Select Sector Index, share-based compensation expense expressed as a percentage of revenue has gone from an average of 2.2% in 2011 to 4.1% in 2021. This may not seem like much of an increase, but keep in mind that during this period revenue for this set of companies had almost quintupled on average. There is nothing wrong per se with compensating employees with shares. In fact, there is a legitimate reason for doing so: it may help to align the interests of employees with those of shareholders. I want to focus on how share-based compensation is accounted for or, more accurately, how it is not accounted for in companies’ non-GAAP earnings figures.

Among the 75 companies in the Technology Select Sector Index mentioned above, 45 of them remove share-based compensation from non-GAAP versions of their earnings per share, operating income, or both — in plain English they remove the amount of the debit for share-based compensation which boosts their profits. That is about $26bn of expenses that have been adjusted out in reporting the 2021 profits in the non-GAAP results of these 45 companies. This amounts to about an average of $600m of share-based compensation for each company which is excluded or added back in reaching their non-GAAP earnings. You will find it as no surprise that all of the companies in the index whose share-based compensation represents greater than 5% of revenue remove share-based compensation from non-GAAP measures. What are the justifications for removing share-based compensation from measures of income and earnings? A common excuse that companies give for adjusting profits so that the debit for share-based compensation is removed is because it is a non-cash expense. This argument makes no sense. Plenty of income statement items are partially or entirely non-cash. Depreciation is non-cash, but it still reflects the very real cost associated with a company’s long-lived assets (although many of the same people who adjust out share- based compensation and many others try to get analysts to focus on EBITDA in order to ignore the inconvenient depreciation and amortisation cost).

Deferred income taxes are non-cash but are nevertheless recorded in the P&L account. Parts of revenue can be non-cash as well, but we certainly don’t see many companies removing them from their results. As long as accrual accounting is the standard, the ‘non-cash’ argument simply does not pass muster. If you want to review cash items, then look at the cash flow statement, not an adjusted P&L account. Other reasons given for excluding share-based compensation include the fact that the calculation of the expense may use valuation methodologies that depend on assumptions and that the values of the securities given to employees as compensation may fluctuate and are outside a company’s control. It is true that the expense associated with stock options provided as compensation is calculated using option pricing models, which rely on assumptions for the risk-free interest rate and share price volatility. But other items on a GAAP income statement make significant use of assumptions and estimates as well. Depreciation expense is calculated based on the estimated useful lives of assets, for example.a

company’s operations which can be in the income statement, such as commodity prices which may affect input costs and the value of hedges. The lack of control does not justify their removal from important financial metrics. Yet another reason proffered for excluding share-based compensation is that it results in double-counting because the shares paid to employees are reflected as both an expense item in the income statement and in the share count that is used as the denominator for per share measures such as EPS. First of all, it is important to note that this argument applies only to per share metrics such as earnings per share, and hence, it provides no excuse for excluding share-based compensation from measures of gross margin or operating income, which many companies do. Secondly, by their nature, financial statements have a degree of inter-relation. Many items on the income statement flow back into other parts of the income statement through the balance sheet. If you increase the cash expenses of a company, there will be less cash and/or more debt on the balance sheet. This will in turn affect the income statement by increasing interest expense and/or reducing interest income. Similarly, an increase in share-based compensation expenses will have a secondary impact on the balance sheet in the number of shares outstanding.

We now arrive at a fourth, and perhaps the most nefarious excuse given by companies for removing share-based compensation from their non-GAAP metrics: everybody else does it. This does not make it correct nor is it true. Indeed, it may very well be that the companies that do not adjust their profit numbers from GAAP are put at a disadvantage. Take the example of Microsoft and Intuit. Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share- based compensation, in their estimates.more

apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies. Many investors and analysts, including us, look to cash flow metrics more than accrual profits. Unfortunately, share-based compensation may cause distortions in cash flow metrics as well, even when they follow GAAP. Under GAAP, share-based compensation is added back in the cash flow from operating activities, which in turn is used in the computation of free cash flow. Some researchers and commentators argue that share-based compensation should be reclassified from the operating activities section to the financing activities section of a cash flow statement for analytical purposes. We agree. After all, the decision to fund compensation to employees with shares rather than cash is a financing decision rather than one pertaining to the operations of a company. As such, a measure of cash flow from operating activities that does not benefit from adding back share-based compensation is likely more reflective of the ongoing cash generation of a company.

If we apply this concept to the case of Intuit, it would imply that the company is not in fact trading at a trailing twelve-month free cash flow yield of 3.5% as it seems. Removing $1.5bn of share-based compensation from the $4.1bn of operating cash flow reported in the cash flow statement would leave Intuit’s free cash flow yield much lower, at 2.2%. This example gives a sense of the magnitude of distortion that the accounting for share-based compensation could inflict on free cash flow yields. However, I suspect the most pernicious effect of adjusting profits to exclude the cost of share-based compensation occurs when the management start to believe their own shtick and mis-allocate capital based upon it. Too often management fail to mention expected returns on capital deployed when they make acquisitions and instead rely on statements about earnings dilution or accretion. We have just been living through an era where interest rates were close to zero. Statements about earnings dilution or accretion from an acquisition versus the alternative of interest income forgone on the cash do not reflect anything useful. In a period of such low rates the only acquisitions which could be dilutive are those where the money was literally shredded. Amazingly there are some of those too.

Once people start relying upon this spurious measure of whether an acquisition represents value based upon earnings dilution or accretion and combine this with using earnings adjusted by adding back the significant cost of share-based compensation, they can make some gross errors. We suspect this may be part of the reason for Intuit’s acquisition of the online marketing platform Mailchimp in 2021 for $12 billion, half of it in cash. This represented 12 times Mailchimp’s revenues (not its profits, its sales). As a result Intuit’s return on capital has fallen from 28% in 2020 to just 11% in 2022 but no doubt it is not dilutive to EPS adjusted by adding back share- based compensation. The Intuit CEO described the Mailchimp acquisition as ‘an absolute game changer’. Shareholders must hope he is right and in the way that he meant it. We have coined a phrase at Fundsmith for this practice of relying upon earnings adjusted to take out the cost of share-based compensation and other real and persistent expenses (such as restructuring costs that keep recurring). Instead of the usual phrase of ‘fully diluted earnings per share’ being earnings per share diluted by all the shares which a company has agreed to issue through options and so on, we refer to these heavily adjusted EPS measures as ‘fully deluded earnings per share’. Last year in this letter I said I thought we were probably in for an uncomfortably bumpy ride in terms of valuations.

We have no idea when the current period of inflation and central bank interest rate rises which caused this prediction to come true will end. It is sometimes said that central bank policy is always either too lax or too tight, it is never exactly right. We need not discuss whether it has been too lax in the past. Presumably at some point it will become too tight and quite probably tip the major economies into recession. This holds few fears for us. Our companies should demonstrate a relatively resilient fundamental performance in such circumstances, and the only type of market which ends in a recession is a bear market. What we are clear about is that we continue to own a portfolio of good companies. Where the end of the easy money era has exposed any doubts, and there are always doubts, we have acted upon them and/or aired them in this letter. Our companies are more lowly rated than they were a year ago, now being rated roughly in line with the market. This does not make them cheap and there is no guarantee that they will not become more lowly rated, but our focus is on their fundamental performance, as it should be, because in the long term that will determine the outcome for us as investors.

I will leave you this year with a quote from Winston Churchill: ‘If you are going through hell, keep going’. At Fundsmith we intend to. Finally, may I wish you a happy New Year and thank you for your continued support for our Fund. Yours sincerely, Terry Smith CEO Fundsmith LLP Disclaimer: A Key Investor Information Document and an English language prospectus for the Fundsmith Equity Fund are available via the Fundsmith website or on request and investors should consult these documents before purchasing shares in the fund. Past performance is not necessarily a guide to future performance. The value of investments and the income from them may fall as well as rise and be affected by changes in exchange rates, and you may not get back the amount of your original investment. Fundsmith LLP does not offer investment advice or make any recommendations regarding the suitability of its products. This document is a financial promotion and is communicated by Fundsmith LLP which is authorised and regulated by the Financial Conduct Authority. Sources: Fundsmith LLP & Bloomberg unless otherwise stated. Data is as at 31st December 2022 unless otherwise stated. Portfolio turnover is a measure of the fund's trading activity and has been calculated by taking the total share purchases and sales less total creations and liquidations divided by the average net asset value of the fund.

P/E ratios and Free Cash Flow Yields are based on trailing twelve month data and as at 31st December 2022 unless otherwise stated. Percentage change is not calculated if the TTM period contains a net loss. MSCI World Index is the exclusive property of MSCI Inc. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or final products. This report is not approved, reviewed or produced by MSCI. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard & Poor’s and ‘GICS®’ is a service mark of MSCI and Standard & Poor’s.