Best Buys March 2024
Hi Partner 👋
I’m Pieter and welcome to a 🔒 subscriber-only edition 🔒 of Compounding Quality.
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A new month, a new Best Buys List.
Each month, I’ll give an overview of my favorite stocks of the month.
Let’s dive into the update and show you my favorite stocks right now.
February 2024
In February, the S&P 500 increased by 3.9%.
The Fear & Greed Index indicates that we’re currently in ‘Extreme Greed’ Mode.
A lot of wonderful companies we would love to buy at the right price look too expensive right now.
Best & Worst Performers
Here’s an overview of the top 5 best and worst performers within our investable universe last month.
Worst performers
The cheaper great businesses get, the more we like it.
Best Performers
The best of the best
Here’s a list of companies that match the following criteria:
Within the investable universe of Compounding Quality
ROIC > 25%
Profit Margin > 20%
Expected to grow their FCF by more than 10% per year over the next 5 years
Best Buys March 2024
Now let’s dive into our favorite stocks for March 2024.
Let’s make it a bit more interesting and only write about stocks that can’t be found within our Portfolio.
We love the companies within our Portfolio and we think most are still (significantly) undervalued.
You can read last week’s Portfolio Update here:
5. Judges Scientific ($JDG)
Judges Scientific is a great company that we would love to own at the right price. I met the founder and CEO David Cicurel after the Berkshire Hathaway meeting last year. He’s an excellent example of an Owner-Operator.
Judges Scientific acquires and operates businesses in the scientific instruments sector. They own and manage a portfolio of companies that design, manufacture, and sell specialized scientific instruments and equipment used in research and industry.
Judges Scientific makes money by growing these acquired companies, which serve various scientific fields, such as physics, chemistry, and materials science.
Today, the company trades at a forward PE of 29.3x. This is not cheap and it’s the key reason why we don’t own the company (yet).
Investment rationale:
Serial acquirer with a decentralized business model (‘The Outsiders’ stock)
Judges Scientific can be seen as a ‘mini Danaher’
Excellent fundamentals and great capital allocation skills
4. The Ensign Group ($ENSG)
I don’t think we ever mentioned this company before.
The Ensign Group is a healthcare company that provides services in the post-acute care continuum and other ancillary businesses. It offers home care, home health, assisted living, independent living, transitional, hospice, outpatient, rehabilitation, skilled nursing, and acute care services.
Investment rationale:
The end market is very attractive (hospitals usually aren’t too price-sensitive and very sticky)
The founder is still active within the company
Attractive growth (> 10%) per year and strong track record in creating shareholder value (CAGR since IPO in 2007: 18.1%)
Ensign Group currently trades at a forward PE of 23.0x.
Now let’s dive into our 3 favorite stocks.