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Terry Smith made £16m last year. These are the FTSE 100 and 250 shares he’s buying

CORRECTION: This article originally referred to Smithson owning “some unquoted companies… like Israeli cybersecurity group Check Point”. The sentence has since been removed to reflect that Check Point is a quoted company, while Smithson and Fundsmith only invest in quoted companies.

Star fund manager Terry Smith has significantly upped his game in the last 12 months.

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When asked whether he was still buying shares in light of the market panic over the coronavirus outbreak, Smith’s answer was simple: “Yes.”

His FTSE 250-listed Smithson Investment Trust (LSE:SSON) fund launched in late 2018 and contributed heavily to the millions Smith was paid last year.

SSON invests in global firms with market caps between £500m and £15bn. The best-known companies in the fund include FTSE 100 listed estate agent group Rightmove and hazard detection tech firm Halma, along with FTSE 250 pizza chain Domino’s.

The fund is managed by Simon Barnard and follows the same three exact investing principles that made a star out of Terry Smith’s Fundsmith Equity fund. Buy good companies, try not to overpay, and then sit on your hands and wait for the profits to come. As keen investors we all know that last part is the hardest one of all to follow.

Relaxed

Speaking to his company’s annual investor conference about the plunging US and UK markets he said: “We’re frankly pretty relaxed. [Coronavirus is] probably going to have an economic effect, obviously.”

Since the start of the week the FTSE 100 has shed 8.6%.

Smith admitted his flagship Fundsmith Equity fund had lost 4.7% of its value in the past seven days. But he pointed to its defensive characteristics as a reason why it would bounce back.

He told his investors: “Historically crashes occur because inflation takes hold, the banks put interest rates up, the market and the real estate sector fall over, there’s a recession and then we go back.”

People still brush their teeth and feed the dog, and do all those other fine things that we invest in during a downturn,” he said.

It’s quite the controversial opinion. If you read enough headlines you might believe the sky is falling on our heads right now, and the world will never recover. Certainly the Dow Jones Industrial Average has plummeted by record levels, and 90% of companies on the blue-chip FTSE 100 index have lost a portion of their value.

Opinionated

Terry Smith’s £18bn Fundsmith Equity mutual fund was built on the back of booming tech stocks like Microsoft, Facebook, and Visa. While the largest of these US giants have reported they will take an earnings hit from coronavirus, they are stil extremely likely to be standing in 20 to 30 years, which is the investing timeline Smith sticks to.

In my opinion, a little capital allocation away from your riskier stocks and a move into more defensive FTSE 100 options like BAE Systems and GlaxoSmithKline probably wouldn’t be a bad idea.

Follow the money

But if Terry Smith isn’t overly concerned, perhaps investors like you and me should also hold our nerve. There’s nothing to stop you copying the trades of the UK’s richest fund managers.

You wouldn’t take fitness advice from an out of shape and overweight gym trainer. By the same token, I’d follow the investing strategy of asset managers making serious money.

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Tom Rodgers has no position in the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.