In this series, we will teach you 5 things about the stock market in less than 5 minutes. We would like to welcome the more than 500 subscribers who joined our Substack since last week. If you are reading this and are not subscribed yet, feel free to do this via the button hereunder:
1️⃣ How to deal with market downturns
In 2009, Berkshire Hathaway was down 50%. A reporter asked Charlie Munger whether he was worried about this. His response:
2️⃣ Compounding can be beautiful
When you become 1% better every day, you will become a learning machine. The same is applicable in the stock market. Most people overestimate what they can do in a year and underestimate what they can do in a decade.
3️⃣ One simple investment quote
Do you want to become rich in the stock market? The big money is not in the buying and the selling, but in the waiting.
"Investing is where you find a few great companies and then sit on your ass" - Charlie Munger
4️⃣ Read as much as you can
Do you know what J.K. Rowling, Jeff Bezos and Warren Buffett have in common? They became billionaires thanks to writing, selling, and reading books.
Reading is crucial to become the best possible version of yourself.
5️⃣ Example of a quality company
Pool Corporation ($POOL) is trading at it's cheapest valuation since 2010. Great company with great capital allocation:
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About the author
Compounding Quality is a professional investor which manages a worldwide equity fund with more than $125 million in Assets Under Management. We have read over 500 investment books and spend more than 50 hours per week researching stocks.
I would like to learn to be peaceful when my POrtfolio is down 50 percent
$POOL seems a simple, wonderful business, with excellent traction and margins.
A couple of questions (sorry couldn't dig deeper for want of time — too many stones to turn over)
1. What are the specific levers for topline growth? Isn't the pool supplies market kind of saturated already I might be totally wrong on this one.
2. POOL doesn't seem to have a presence in Asia. China and India in particular are two sizable markets with a favourable demographic.
3. POOL has guided deployment of far more capital in share buybacks and dividend payments, than in capital expenditures and M&A. Does this indicate a restricted growth runway?
4. Under longer term outlook, it says organic topline growth of 6-9%. Again this indicates modest organic revenue growth. If M&A doesn't pan out as expected, overall revenue growth might come in stunted.
Always happy to hear contradictory views!