Buying our Second Stock
On Monday, Compounding Quality bought its First Stock.
Today, we are announcing the Second Stock we’ll buy.
It’s an Owner-Operator Quality Stock with more than 40% insider ownership.
To remind you, here are the Portfolio Essentials:
✅ The portfolio will invest worldwide (developed countries only)
✅ We’ll own 15-20 stocks
✅ The portfolio is aiming to invest in the best companies in the world
✅ We won’t trade a lot. Activity and costs harm our results
✅ We won’t try to time the market (We are way too dumb for that)
✅ The characteristics of companies in the portfolio:
Sustainable competitive advantage
Integer management with skin in the game
Healthy balance sheet
Low capital intensity
Good capital allocation
Plenty of reinvestment opportunities
Trading at fair valuation levels
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” - Warren Buffett.
After buying a Quality Cannibal Stock earlier this week, we’ll now buy an Owner-Operator Stock.
Owner-Operator stocks will make up more than 60% of the Portfolio.
Here are some of the essentials of the Second Stock we’ll buy for 5% of the portfolio:
More than 40% insider ownership
Market leader in a niche
More than 80% of sales are recurring in nature
Net cash position (6% of market cap = cash)
Compounding Machine: low capital intensity with great capital allocation skills (ROIC > 50%,), high profitability (profit margin > 20%) and plenty of reinvestment opportunities
The company compounded at more than 20% per year since 2007
Let’s dive into the Investment Case and prepare our transaction for Monday.