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2 min read Terry Smith

The Jockey and the Horse: Is Novo Nordisk a Fundsmith Scapegoat?

Terry Smith blames Novo Nordisk for Fundsmith's 0.8% return in 2025. But with 41% obesity growth and a 15% sales surge, is the problem the horse or the jockey?

In the world of quality investing, there is a simple rule: if a business performs, the stock eventually follows. But in his January 2026 Shareholder Letter, veteran manager Terry Smith suggested that even the finest businesses can be undone by "poor management."

In 2025, the Fundsmith Equity Fund returned a meagre +0.8%. To put that in perspective, the MSCI World Index rose by +12.8%, and even simple Cash deposits yielded approximately +4.2%. To explain this gap, Smith pointed to several "culprits"—but he reserved his sharpest criticism for Novo Nordisk, claiming a "glitch" in management quality cost the fund - 3% in performance.

Is the Horse Stalling?

Smith’s critique of "poor management" is hard to reconcile with the company's actual business results. Institutional data from the first nine months of 2025 shows a business compounding at an exceptional rate:

  • Total Sales Growth: +15% (at constant exchange rates).
  • Obesity Care Revenue: +41% growth (reaching DKK 59.9 billion).
  • Operating Profit: +10% growth, despite massive restructuring.
  • Shareholder Returns: DKK 53.2 billion returned via dividends.

A business that grows its core obesity segment by 41% and increases total sales by 15% is not "stalling." It is a fortress. If the stock price did not reflect these fundamentals in 2025, a Buffett-style investor would view it as a market "glitch," not a management one.

The Strategic Pivot

Management was blamed for inefficiency, yet they took the exact type of decisive action long-term owners should applaud. Novo Nordisk announced a workforce reduction of 9,000 positions to save DKK 8 billion annually.

These savings are not a sign of weakness; they are being redirected into manufacturing to serve the 99% of global obesity patients who currently remain untreated. They are clearing administrative bloat to fund what looks like a ten-year duopoly.

The Bottom Line: Look at the Jockey

The "momentum" excuse—that it is impossible to keep up without owning all of the "Magnificent Seven"—is equally thin. Fundsmith actually did own three of them: Alphabet, Meta, and Microsoft.

If you own a racehorse that is doubling its profits and growing its lead in the most important medical market on earth—and you also own three of the fastest horses in the world—and you still cannot beat cash? You don’t blame the horse. You look at the jockey.

As an investor, the data suggests the "Novo cow" is still producing record amounts of milk. The question is whether you want to pay a premium fee to be told why the cow isn't fast enough.

References

  • Fundsmith LLP (2026): Annual Letter to Shareholders (Performance to 31 Dec 2025).
  • Novo Nordisk A/S (2025): Investor Presentation: First Nine Months of 2025.
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Disclosure: This post is for informational and educational purposes only, based on primary sources including Novo Nordisk’s 9M 2025 Investor Presentation. This is not professional investment advice. All investments carry risk. Readers should consult an authorised professional before making financial or medical decisions. As of 11 January 2026, the author holds no position in Novo Nordisk A/S or Fundsmith LLP.

Published by:

Eric Rutanga