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 Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as a newly added technology position. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s leading contract chip manufacturer, producing advanced semiconductors for major global technology companies. On July 31, 2026, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) closed at $404.25 per share. The one-month return of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was -10.52%, and its shares gained 69.14% over the past 52 weeks. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has a market capitalization of $2.09 trillion.
Fundsmith Equity Fund stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2026 investor update:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) – Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest contract chipmaker, physically manufacturing the semiconductors designed by companies like Apple, Broadcom and Nvidia. Its ‘moat’ is an unmatched technological lead in making the smallest chips, protected by the capital barrier of the $20bn it costs to build just one advanced factory. TSMC manufactures roughly 90% of the world’s most advanced semiconductors. Future growth stems from global demand for computing power, particularly the chips needed to train and run AI models. ROIC: 33%, FCF yield: 2.7%.”
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is in 6th position on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 234 hedge fund portfolios held Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of the first quarter, up from 224 in the previous quarter. In Q1 2026, Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) revenue increased 6.4% (in U.S. dollar terms) sequentially to $35.9 billion, exceeding the guidance. While we acknowledge the risk and potential of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) 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 Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and shared Giverny Capital Asset Management’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.
