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🏰 Bullsh*t earnings

#QualityTuesday

Compounding Quality
Mar 21, 2023
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🏰 Bullsh*t earnings

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Quality Tuesday

It’s #QualityTuesday!

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

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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.

Image
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.

No alternative text description for this image
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

Peter Lynch, 25 years later: it's not just 'invest in what you know' -  MarketWatch

4️⃣ TED Talks

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

Here are 8 great TED Talks about money and investing:

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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:
1:34 PM ∙ Mar 14, 2023
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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%

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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.

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🏰 Bullsh*t earnings

www.compoundingquality.net
AlphaPicks
Writes AlphaPicks on Wall Street
Mar 21Liked by Compounding Quality

“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Always a great quote

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1 reply by Compounding Quality
Tobias Elkjær
Writes Tobias’ Substack
Mar 21Liked by Compounding Quality

Great once again. What’s the second largest bullsh*t term, then? 😉

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