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.

Portfolio

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

• High profitability

• 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.

Second Stock

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.