The Motley Fool

Alert: top fund manager Terry Smith just bought this FTSE 100 growth stock

Last month, top-rated fund manager Terry Smith and his team at Fundsmith launched the Smithson Investment Trust – a global investment trust that invests in smaller and medium-sized companies. It was the largest UK investment company IPO ever, and smashed its capital-raising target of £250m to raise £822.5m. Given Smith’s recent Warren Buffett-like performance, this is not so much of a surprise.

In the lead up to the trust launch, Smith kept a lid on the stocks that he would be buying for the new portfolio. However, in the last few days, Smithson has published its first factsheet, meaning that investors can now gain insight into the stocks that are held.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Portfolio holdings 

Looking at the factsheet, UK stocks don’t have a large weighting in the portfolio. At 30 November, nearly half the portfolio was invested in US equities, while UK equities made up just 18.2% of the fund. Similarly, analysing the top 10 holdings of Smithson, there are a lot of international names. However, there are a couple of FTSE 100 stocks in the top 10 holdings, and there’s one name in particular that many investors will be familiar with.

Rightmove

The stock I’m referring to is property website specialist Rightmove (LSE: RMV). At 30 November, it was the sixth-largest holding in the Smithson portfolio out of a total of 29 stocks.

I can see why Smith and his team like Rightmove. As I explained in another article, at Fundsmith they have a very specific investment process. They look for companies that are market leaders, have advantages that are difficult to replicate, generate a high return on capital and have low debt. And looking at Rightmove, it ticks all the boxes. For example, the company’s market share of property search traffic, across both desktop and mobile, is over 70%, meaning it’s the dominant player in its industry. Furthermore, the return it generates on capital employed is astronomical (1,020% last year) and it has no debt. In short, it looks to be a super growth stock.

Spectacular performance

With revenues and profits soaring over the last decade, shares in Rightmove have performed exceptionally well in this time. Ten years ago, you could have picked the shares up for around 18p, yet today they are changing hands for 450p, meaning that the stock has risen around 2,400%. Is it too late to buy now after such a huge rise? Terry Smith doesn’t seem to think so, and neither do I. In fact, I think Brexit uncertainty may have created a brilliant buying opportunity.

Attractive valuation

Rightmove shares have often traded at a lofty valuation due to the company’s impressive growth story. For example, when I covered the stock back in mid-2016, it was trading on a forward P/E of around 37. However, due to recent Brexit uncertainty, the stock has pulled back around 16% from its June high of 540p, and that means it’s now trading on a P/E ratio of just 22.9 using next year’s forecast earnings figure of 19.6p per share. For a company of Rightmove’s quality, I think that’s a bargain.

Of course, Brexit does add an element of risk here. A property market collapse could impact Rightmove’s profitability in the short term. Yet Britons’ love affair with property is unlikely to go away any time soon, and I think Rightmove is a great way to get exposure to this theme.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Edward Sheldon owns shares in Rightmove. The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.