Screen stocks the Terry Smith way
Terry Smith, founder of Fundsmith, buys high-quality businesses with strong returns on capital and never sells. He looks for companies with high ROIC, excellent cash conversion, and durable competitive advantages. No leverage, no cyclicals, no turnarounds.
How this screen is built
Every result passes all filters
This screen applies all criteria simultaneously across 100,000+ stocks. Every result must pass all filters — not just one or two.
High Return on Invested Capital
ROIC above 15% is Terry Smith's primary quality filter. He believes that over time, a stock's return will approximate the return on capital of the underlying business. High ROIC means the business compounds value without needing constant reinvestment.
Exceptional Cash Conversion
Smith requires that reported profits convert to real cash — a cash conversion ratio above 0.9. This is his earnings quality test. Companies that report profits but don't generate cash are a red flag. Real cash is what pays dividends and funds buybacks.
Durable Operating Margins
Operating margins above 20% signal a business with pricing power and low competition. Smith calls this a 'moat' — a structural advantage that prevents rivals from eroding profitability. He holds these businesses forever because the moat compounds over time.
No Leverage, No Cyclicals
Smith explicitly avoids capital-intensive businesses, banks, utilities, oil & gas, and highly cyclical sectors. He wants businesses that thrive without debt and don't depend on the economic cycle. This screen enforces that by excluding those sectors entirely.
What Swalex adds on top
Owner Earnings Yield confirms the business is actually returning cash to shareholders — not just reporting profits. Combined with 15-year revenue CAGR, this shows whether the quality has persisted over a full business cycle, not just recently.
Last screen results
What the Terry Smith screen surfaced
Results based on latest available data. Run the live screen for current results.
| Ticker | Name | Country | Quality | ROIC | Cash Conversion | EBIT Margin | OE Yield | Debt Ratio |
|---|---|---|---|---|---|---|---|---|
| HACK.ST | Hacksaw | Sweden | 94% | 596% | 0.98 | 77% | 6% | 12% |
| GUBRA.CO | Gubra | Denmark | 93% | 1039% | 1.01 | 82% | 30% | 13% |
| HRMY | Harmony Biosciences | USA | 89% | 34% | 2.35 | 24% | 16% | 28% |
| 4194.T | Visional | Japan | 89% | 91% | 1.09 | 28% | 6% | 28% |
| 2124.T | JAC Recruitment | Japan | 87% | 245% | 1.06 | 26% | 7% | 24% |
| 603444.SS | G-bits Network | China | 87% | 88% | 1.34 | 41% | 9% | 22% |
| EVO.ST | Evolution AB | Sweden | 85% | 33% | 1.17 | 59% | 9% | 26% |
| DOCS | Doximity | USA | 84% | 75% | 1.66 | 39% | 5% | 15% |
| 600809.SS | Shanxi Fen Wine | China | 83% | 69% | 0.96 | 40% | 5% | 29% |
| EXEL | Exelixis | USA | 82% | 50% | 1.11 | 42% | 6% | 25% |
This screen is inspired by publicly known investment principles attributed to Terry Smith and Fundsmith. Not affiliated with or endorsed by Terry Smith or Fundsmith Equity Fund. Not investment advice.