20 Comments

With CAGRs this high, how can we expect to generate similar returns into the future? That would require either inflated prices or astronomical market caps in real dollars or some combination of both...I’m curious what your thoughts are on realistic projections considering the productivity growth of many of these companies was largely based on conquering new territory quickly. Not saying these won’t be profitable in the future, by and large they most likely will, but as an author who wants to fully educate their audience on these types of opportunities I’d like to see some honest caveats for these companies.

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Hi sir,

This is a VERY good question and remark.

Please note that this list contains the 15 most owned quality stocks of superinvestors (I screened for it via Bloomberg).

The 15 companies mentioned in this list are very large companies and I can guarantee you that the return over the next decade for these 15 companies won't be as high as the return of the past decade.

However, these companies remain great businesses and I am quite comfortable to say that they will perform well compared to the S&P500 over the next 10 and 20 years.

Currently, I am working very hard on launching a Compounding Quality portfolio. This portfolio will consist of 3 parts:

- Owner-operator stocks

- Monopolistic / Oligopolistic stocks

- Cannibals (quality stocks which heavily buy back their own shares)

In this portfolio, a lot of smaller companies will be found because these companies have more upside potential and don't suffer from the law of large numbers. Think about a company like Medpace or SS&C for example.

Just like Buffett said: Berkshire Hathaway will never be able to perform as well as they did in the 70s or 80s because they have become too large.

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Thanks for all the sharings! This is extremely valuable for me and the well-being of my family. Do you see the reason of the quick decrease of the ROIC for @SPGI and even @EL compared to previous year. How do you understand these two ROIC decreases and are they somehow alarming?

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Hi sir,

For SPGI, the reason for the decrease of the ROIC is the acquisition of IHS Markit in 2022 for $44 bn.

SPGI is a beautiful business and for me personally the only thing not to like is the current valuation. The decreasing ROIC is not alarming for me for SPGI.

For some companies (like SPGI), it might make more sense to look at the ROCE. In some cases, it also makes sense to exclude the goodwill and cash & cash equivalents out of the invested capital.

Regarding Estée Lauder, ... it's a company I don't follow as closely as S&P Global. Personally, I think there are somewhat more interesting companies within the luxury segment. I am invested in LVMH but I wouldn't buy the stock right now because of valuation.

I hope this helps!

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Thanks for the insights, it helps definitively

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Google's only real success has been the search engine (increasingly useless) aka ad business which they are loosing market share in. Who looks at online ads any more? I use Brave ad blocking browsers on my computers and phones - I NEVER see ads!

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Google has a market share of 92.6% in the search engine business.

I am not a shareholder of Google myself because of their size and valuation concerns, but the fundamentals of the company look great in my opinion.

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I thought it was down to 70% for ads though? Their search engine is increasingly and hopeless broken and full of garbage and ads for anything but the most specific of searches + they are abusive towards content creators (better to use other ad networks) - see https://emergingmarketskeptic.substack.com/p/how-google-ruined-financial-writing-chapgpt-ai

The problem with stocks like it and Facebook etc is that I remember MySpace (And some of the other search engines....) and how quick they can implode w/o radical repositioning or on a change in taste/technology... And dont forget department stores, The Great Atlantic & Pacific Tea Company, Kmart etc... But I concede, the data Google, Facebook etc have already collected will still be valuable even if people stop using their offerings...

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The Chrome browser is a success, especially at retaining some “home territory” where the Google search engine will always be the default setting. A mistake I’ve made many times is discounting an excellent business based on personal preferences, even when it seems they are part of wider trend. Yes, Google isn’t as dominant as it used to be, but it’s holding strong (not dropping out precipitously like Nokia or Blackberry). I was suspicious of Alphabets business model since the early days because the ads seemed useless, irrelevant, and annoying. I was right about the ads, but couldn’t have been more wrong about the business. Likewise for McDonalds. I don’t enjoy fast food, rarely eat it, and believe ACA and Medicare should be partially funded by taxes on processed foods. However, my opinion doesn’t stop McDonalds from being the most popular and well operated fast food restaurant by a wide margin. I don’t use Google much either but I’m just one person. Most people don’t even know what search engine they use, but it’s probably Google.

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It's not even clear what, beyond ads, Google has that makes or has the ability to make any real $ for it (certainly nothing with a moat)... The big tech players have all generally been one hit wonders if not for acquisitions (Facebook, Microsoft etc) or blatant copying (Facebook) with everything else they come up with on their own being complete failures (Google+, Metaverse etc) - meaning I question Google's abilities to come up with AI like ChatGPT...

And tech changes very very fast e.g. the rise of ChatGPT... Right now the cash rich Chinese and not so cash rich SE Asian etc eCommerce and delivery players are battling it out e.g. PDD's Temu cuts out the middlemen and is starting to disrupt everyone's business model. Sure, they may not unseat Amazon in the USA given it's delivery footprint and they control the govt (WAPO ownership), but they can definitely be overtaken abroad...

McDonalds, Pizza Hut etc are all solid businesses even if they loose US market share - I have been writing about such businesses https://emergingmarketskeptic.substack.com/t/restaurant-stocks b/c they are definitely not going away (much bigger internationally & often better food e.g. PH is more casual dining in EMs...), you have franchiesees with their own listings, and they are easy to understand where and how they make money...

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The fund manager graph is inaccurate- Druckenmiller has a 30 yr record and Jim Rogers didn’t have trigger pulling authority

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Thanks for letting me know! The graph is made by CLSA.

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Ex US?

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I can definitely make an ex US list in the future!

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Yes, please 🙏

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While we mostly hunt for value in the US, this would be interesting to see.

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Are you based in the US? I am very curious about how people in the US think about investing in Europe and Australia.

Would it add value to you?

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We are US based. Our investments outside the US are mainly via OTC. As a learning point, and comparison, learning about European and Australian comps is helpful.

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Good to hear. Thank you very much, Six Bravo!

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