Fundsmith, an investment management firm based in London, has released its second-quarter 2026 investor letter for its “Fundsmith Equity Fund.” A copy of the letter can be downloaded here. The Fund returned -2.9% in the first half of 2026, underperforming the MSCI World Index by 14.1 percentage points, driven by challenges from a momentum-driven market dominated by passive index funds and AI-related exuberance. The letter discusses the rise of passive investing, noting that index funds now resemble active funds, concentrating heavily in a few sectors and stocks. Due to increased market volatility and a 51% portfolio turnover in the first half of the year, the firm plans to adopt a more active approach, incorporating momentum while maintaining its core mantra: buy good companies, don’t overpay, and do little. In addition, please check the Firm’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, Fundsmith Equity Fund highlighted Netflix, Inc. (NASDAQ:NFLX) as a new addition. Netflix, Inc. (NASDAQ:NFLX) is a leading subscription-based streaming entertainment platform. On July 31, 2026, Netflix, Inc. (NASDAQ:NFLX) closed at $71.71 per share. The one-month return for Netflix, Inc. (NASDAQ:NFLX) was -5.67%, and its shares lost 38.76% over the past 52 weeks. Netflix, Inc. (NASDAQ:NFLX) has a market capitalization of $298.59 billion.
Fundsmith Equity Fund stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its Q2 2026 investor update:
“Netflix, Inc. (NASDAQ:NFLX) is the pioneer of subscription-based streaming entertainment. It has a huge subscriber base which funds an annual content budget of over $17bn that smaller competitors simply cannot afford to match without losing money. Netflix now accounts for nearly 8% of all television screen time in the US, more than any single traditional broadcast network, but also underscoring its growth potential. Future growth will be driven by its newer advertising tier, cracking down on password sharing, and expanding local content in emerging international markets. The advert supported tier has 250m monthly active users, of whom 45% are in the US. After stopping password sharing in 2024, Netflix added 41m new subscribers (vs 325m total). They are increasingly moving toward live sports with NFL games on Christmas Day and ‘boxing’ matches like Mike Tyson vs Jake Paul. Why now? When Netflix was growing, there were many competitors (Hulu, Discovery+, Tubi, Disney+, HBO Max, etc.), so the network effects of streaming and content production did not work as well, as it had to compete for both customers and content. Now, many of these rivals have failed or are losing users, which highlights the quality of Netflix’s ‘moat’ but also presents an opportunity as those customers return to Netflix. ROIC: >30%, FCF yield: 3.8%.”
Netflix, Inc. (NASDAQ:NFLX) ranks 13th on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 144 hedge fund portfolios held Netflix, Inc. (NASDAQ:NFLX) at the end of the first quarter, compared to 146 in the previous quarter. While we acknowledge the risk and potential of Netflix, Inc. (NASDAQ:NFLX) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Netflix, Inc. (NASDAQ:NFLX) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Netflix, Inc. (NASDAQ:NFLX) and shared Alger Capital Appreciation Fund’s views on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
