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 Yum! Brands, Inc. (NYSE:YUM). Yum! Brands, Inc. (NYSE:YUM), a leading restaurant operator under famous brands like KFC, Taco Bell, and Pizza Hut, was added to the portfolio during the quarter. On July 31, 2026, Yum! Brands, Inc. (NYSE:YUM) closed at $153.28 per share, reflecting a market capitalization of $41.85 billion. Yum! Brands, Inc. (NYSE:YUM) posted a one-month return of -7.66%, while its shares gained 4.27% over the past 52 weeks.
Fundsmith Equity Fund stated the following regarding Yum! Brands, Inc. (NYSE:YUM) in its Q2 2026 investor update:
“Yum! Brands, Inc. (NYSE:YUM) – Yum! Brands is the parent company of major fast food franchises, including KFC, Taco Bell, and Pizza Hut. However, it is finally selling Pizza Hut, which has been a significant drag on overall results. It has global brand recognition, franchising, and economies of scale in marketing and food purchasing, which independent restaurants cannot match. The speed of its global expansion is a key selling point: Yum! Brands opens a new restaurant somewhere in the world roughly every two hours, 365 days a year. Future growth depends on continuing this aggressive franchise expansion in emerging markets and on improving the digital ordering and delivery systems. There are also significant near-term opportunities for KFC in the US, where it has been underperforming, and for Taco Bell outside the US. ROIC: 50%, FCF yield: 4.0%.”
Yum! Brands, Inc. (NYSE:YUM) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 57 hedge fund portfolios held Yum! Brands, Inc. (NYSE:YUM) at the end of the first quarter, up from 47 in the previous quarter. While we acknowledge the risk and potential of Yum! Brands, Inc. (NYSE:YUM) 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 Yum! Brands, Inc. (NYSE:YUM) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Yum! Brands, Inc. (NYSE:YUM) and shared the list of stocks Jim Cramer discussed. 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.
