54 Comments
Feb 25, 2023Liked by Compounding Quality

This is everything I've been wanting to learn, simplified and written with great clarity. Thank you very much, Compounding Quality!

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author

Thank YOU for your kind message!

Any topic you want to see covered in the future?

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Mar 15, 2023Liked by Compounding Quality

Compounding quality can you please cover the topic of retained earnings that created value in the market with each dollar a company retained

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author

Hi Sam,

I'll try to write something about this in the future!

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Feb 28, 2023Liked by Compounding Quality

Thanks, Compounding Quality. You may want to cover investing strategies or wealth strategies of some people like Vanderbilt, Andrew Carnegie, John D. Rockefeller, J. P. Morgan, Henry Ford, or some in-depth insights on companies that handle ETFs like Charles Schwab, Blackrock, Invesco etc. It's your call, actually. Anyway, you always bring along good stuff. Thank you!

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author

These are great ideas, Severino!

We'll take them into account in the future.

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Loved this write-up. Really good information!

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Thank you very much, AlphaPicks!

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Thank you for another insightful gem! Very clear and easy to understand. I always learn something new that I can act on. Please keep it up.

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author

Thank you, Eric! You're one of our most engaged readers. :)

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It's always a pleasure to engage. Cheers!

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Feb 23, 2023Liked by Compounding Quality

Thank you for writing this absolutely fantastic article!

Last night, I shared your website with my teenage son, and told him to read every single piece you had posted. I think you should be teaching this in university! Seriously!

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author

That's funny. As a kid I always wanted to become a teacher. And I actually considered teaching at university for a while. :)

The biggest gift I can ask is that you share our newsletter with other people. Thank you very much for doing this!

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Feb 24, 2023Liked by Compounding Quality

Well, Sir, in my opinion, you were born to be a teacher! The proof is in your newsletter.

I have already recommended subscription to your wonderful website to all my friends and family. I will continue sharing it with anyone who wants to learn about ivalue nvesting.

And one more thing: if at some point down the road, you decide to budle all your posts in a book (which you definitely should do), I will buy several copies for my 3 children and my family members. I promise.

Thank you!

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author

Writing a book is definitely on my 'to do' list. One day, we'll publish one!

Furthermore, in the second half of 2023 we will launch a full Compounding Quality service with weekly stock news, courses, an insight in our portfolio, ...

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Feb 25, 2023Liked by Compounding Quality

I look forward to it!

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Great post! In the formulate to be printed and looked at often, shouldn't it be the shareholder yield? It states buyback yield at the moment.

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author

You spotted that one really well!

Kuddos for you!

You are correct and we edited the article. It's the disadvantage of writing everything on my own without anyone checking the article before publication. :)

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Feb 23, 2023Liked by Compounding Quality

So helpful! I’m finding all your post very insightful. I’m a college student in Louisville, KY about to graduate. Could write about some of your career advice in finance?

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author

Hi Chase!

For our newsletter this topic would be a bit too niche I guess.

However, I've already written a few Twitter threads about the industry and can try to help you by email. Please send me one if you are interested: compoundingquality@gmail.com

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Feb 23, 2023Liked by Compounding Quality

This is pure gold !!

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author

Thank you very much, Slow Dividend!

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Feb 23, 2023Liked by Compounding Quality

Thanks, amazing article - What screeners do you recommend to filter the stock universe?

Thanks in advance

CA

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author

Hi Carlos!

Personally, I use Bloomberg but obviously this tool isn't available for most people.

UncleStock is a good alternative but it isn't free (you can get a free trial though).

I have heard a lot of positive things about Finviz already but didn't try it myself.

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Feb 23, 2023Liked by Compounding Quality

Many thanks for your response and for your great posts!

Maybe in the future you could talk about your investment process and tools (inc Bloomberg)

Many thanks again!

Carlos

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Jan 18Liked by Compounding Quality

As a new subscriber I'm catching up on a lot of awesome articles, they're all awesome! One thing here that I still wanted to clarify a bit: you say that you should not overpay and try to buy stocks at a discount. However, since I'm a long term investor, and in the long term earnings growth matters much more, should I really care that I don't buy at a discount or even overpay a little bit? Suppose I buy at a p/e of 30 and it might go to 20 in 10 years, but yearly earnings growth is 15% average. In such a case the 3% contraction will still leave me with a return of 12%, not even including dividends/buybacks. Of course it's still better to buy at a discount but sometimes you don't want to wait for the price to be at a discount?

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author

Fair question.

Quality investing = Buying wonderful companies at a fair price

1. Buy wonderful companies

2. Led by outstanding managers

3. Trading at fair valuation levels

So far quality investors it's first about finding great businesses and second you look at the valuation.

The longer your investment horizon, the less important valuation becomes. However, the cheaper you can buy a great business, the better.

That's why I always use a reverse DCF and earnings growth model to value companies.

Hope this helps!

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I want to greet you from the bottom of my heart

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author

If you want me to write about a certain topic in the future, let me know!

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Mar 15, 2023Liked by Compounding Quality

Pleased the way you explained everything with ease and simplicity amazing !

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author

Thank you, Sam!

The best is yet to come. :)

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Feb 25, 2023Liked by Compounding Quality

Hey James! Thanks a lot for this awesome write up. Super helpful. Btw can you share some resources, that you found to be the most reliable, for a beginner who wishes to learn in depth about valuation? Thanks

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author

Hi Aditya,

Thank you for your message. The book Measuring and Managing the Value of Companies might help you a lot!

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Feb 25, 2023Liked by Compounding Quality

Thanks for sharing!

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Another winner write-up. Thanks, CQ!

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author

Thank you!

Next articles will cover:

- How to analyze a 10K

- How to analyze a balance sheet

- How to analyze an income statement

- How to analyze a statement of cash flows

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Have been considerably discouraged .... My dialogue with you you has been compromised ... Sorry ... Would be my greatest wish to know that I have consulted with a extremely blessed investor like you .... Please ... If GOD LIVES IN .... corybattcorp@yahoo.com .... I believe in you

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author

I have sent you an email. Let's get in touch!

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In the formula, Your expected yearly return = FCF per share growth + shareholder yield +/- multiple expansion (multiple contraction), I have a question about the FCF per share growth.

Is this the FCF after paying dividends and buybacks? I mean, since dividends and buybacks come out of FCF, it would seem like you're counting them twice, which would obviously not make sense and I'm sure is not what is meant. So, can you please clarify what you mean by FCF? Thank you!

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author

Fair question once again, Patrick!

FCF = all the cash that enters the company within a year minus all the cash that exists a company in a given year.

Dividends and share buybacks are cash outflows which means that they deduct the company's FCF. As a result, we add them again

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Hi CQ, thanks for the article. I have a question: If FCF yield is the preferred metric, then why does the PEG ratio use the EPS growth in the denominator? Wouldn't it be better to use FCF growth per year rather than EPS growth per year?

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author

More than fair question, Patrick!

I tend to keep things as simple as possible which is why I'm still often using earnings/EPS.

But calculating a PEG-ratio based on the P/FCF and expected FCF is indeed better if you ask me!

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