Jan 27, 2023·edited Jan 27, 2023Liked by Compounding Quality
In our opinion, one of these companies stands out as different-Old Dominion Freight Line. Its crazy and fascinating that a trucking company makes the top 10 on the list. Speaks to the company's management over the years.
I don't know if this is possible, but it would be very interesting to me to see what the performance of the S&P 500 index would be if you removed the highest quality names. I would bet that even over the long term it would be quite unimpressive.
First, congratulations on this amazing place that you share with everybody.
Just I would ask a simple question (maybe to basic?) For the Net Debt over the FCF, what are you using to discount to the total liabilities, cash and cash equivalents or total current assets?
In our opinion, one of these companies stands out as different-Old Dominion Freight Line. Its crazy and fascinating that a trucking company makes the top 10 on the list. Speaks to the company's management over the years.
Boring can be beautiful. :)
I don't know if this is possible, but it would be very interesting to me to see what the performance of the S&P 500 index would be if you removed the highest quality names. I would bet that even over the long term it would be quite unimpressive.
But why would you remove the best names?
If you're investing, you only need a few very big winners to beat the market.
The rule of three from François Rochon is fantastic in this regard:
- One year out of three, the stock market will go down at least 10%
- One stock out of three that we buy will be a disappointment
- One year out of three, we will underperform the index
My point is that I would love to see how much better a thoughtful, quality focused approach would be compared to the broad index.
Quality companies outperform the market over time.
Just take the MSCI World Quality Index for example which outperform the MSCI World with 3.4% per year since 1994.
My investable universe outperformed the S&P500 with more than 7% since 2011.
Great post! Very insightful.
It's an honor, Preston!
Link for the list. I always struggle when is a good time to buy a stock so that I don't overpay.
I hear you.
You can start your journey here - Everything you need to know about valuation: https://qualitycompounding.substack.com/p/everything-you-need-to-know-about
Next week I'll write an article about reverse DCFs - the best way to value companies. Stay tuned!
Thanks alot. I wasn't expecting a response, but I do read and enjoy your content.
It's an honor, LRH.
I am here to help other investors as it is very hard to find great investment content online. As a result, I'll always try to respond.
Have a lovely day!
any particular screeners to use for criteria above ?
It's hard to find a free screener to match these criteria.
However, you can take a one week free trial on Uncle Stock to screen for these parameters.
great, thanks.
Sir you are great
First, congratulations on this amazing place that you share with everybody.
Just I would ask a simple question (maybe to basic?) For the Net Debt over the FCF, what are you using to discount to the total liabilities, cash and cash equivalents or total current assets?
Thank you.
Hi Enrique,
Thank you very much!
Net debt = Total debt (LT debt + ST debt) - cash & cash equivalents
Agree with you on all of them except Inmode. The RF technology is everything except novel.
Curious about that. Do you have some more information?
Hi Freddy,
That's indeed an article of us. Thank you very much for this kind message!