🏰 Bullsh*t earnings

#QualityTuesday

Quality Tuesday

It’s #QualityTuesday!

In this series, we will teach you 5 things about the stock market in less than 5 minutes.

1️⃣ Wonderful companies at a fair price

As a quality investor, you want to buy wonderful companies at a fair price.

Does this strategy work? YES.

Between 1990 and 2021, QARP (Quality At Reasonable Price) managed to outperform the index by 7.4% (!) per year.

Source: Schroders

2️⃣ Bullsh*t earnings

Never look at the adjusted EBITDA of a company. Management can fool you with this metric.

Charlie Munger even goes one step further. He stated that every time you see the word EBITDA, you should replace it with bullsh*t earnings.

In the end, free cash flow per share growth is all what matters.

Source: SecretCFO

3️⃣ One simple investment quote

As an investor, you are the owner of the companies you invest in. Act like it.

“Stocks aren’t lottery tickets. There’s a company attached to every share.” – Peter Lynch

4️⃣ TED Talks

TED Talks are a great way to learn about any subject.

Here are 8 great TED Talks about money and investing:

Compounding Quality @QCompounding

TED Talks are free education. But 99% don't know the best ones to watch. Here are 8 TED Talks about money you should watch:

5️⃣ Example of a Quality Company

Garmin provides navigation, communications, and information devices. The company’s key focus is on GPS-enblad products. Think about GPS products for marine, aviation and fitness markets.

• Profit Margin: 21.7%

• ROIC: 16.9%

• Earnings Yield: 5.1%

• Exp. yearly EPS Growth (3 yr): 4.8%

• Insider ownership: 20.0%

More articles from Compounding Quality

Do you want to read more? Here are our 5 latest articles:

• How to analyze an Income Statement

• How to analyze a Balance Sheet

• How to analyze a 10-K

• Everything you need to know about valuation

• 15 owner-operator quality stocks

• How to outperform the market by Joel Greenblatt

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About the author

Compounding Quality is a professional investor which manages a worldwide equity fund with more than $150 million in Assets Under Management. We have read over 500 investment books and spend more than 50 hours per week researching stocks.